Last year saw growth in the subscription economy, particularly in the technology space with some big names in IT – including Cisco, Dell, and IBM – announcing that they were moving to ‘everything-as-a-service' models. Analysts expect hundreds more large vendors to commit to this model moving forward.
Importantly for the channel, the subscription model strengthens the relationship between partner and customer. As opposed to transactional business, subscriptions create ‘stickiness’ between the partner and customer, enabling them to become an ongoing and integral part of the organisation’s IT landscape. This is according to René Klein, Senior Vice President of Westcon Europe.
Partners will be integral to helping their customers navigate the complexities of adopting an as-a-service approach. This is because subscription may be an easier model from an IT management perspective, but it is much more complex under the surface. Cloud, and IT-as-a-service, doesn’t necessarily mean ‘instant-on’ for everything.
For example, moving to the cloud is often positioned as the ‘easier’ IT option for customers, but there are many factors at play when considering private, public, hybrid or multi-cloud possibilities. The partner is central to that decision-making process, particularly when faced with integration challenges with their data, devices and other existing or legacy technologies.
For the partner, the subscription model is key to providing regular recurring revenues. The link between subscription business and customer loyalty is crucial here. This is because when the customer experience is positive, it reinforces and strengthens the vendor-partner relationship and drives loyalty. It leads to repeat business and more potential upsell opportunities. As well as spending significantly more than one-off customers, loyal customers are more likely to champion the partners’ services to others.
Strengthening relationships with distribution
But what are the steps that channel partners need to take to ensure that the transition to subscription-based pricing models brings more value-driven and sustained business opportunities? The answer, in many ways, lies with distribution.
Firstly, for traditional resale partners, providing subscription-based IT will require an overhaul of their existing business model. It may also call for changes to business capabilities, operating models, and enabling technology platforms.
Partners will call on the guidance and resources of distribution to help them transition to the new model. While the channel partner will position themself as a ‘trusted advisor’ to their customers, distribution itself now takes up that role within the relationship with the partner, guiding them on the best solutions and services for the customer.
Secondly and importantly, this relationship continues as the partner looks to grow their business with a subscription model. In response to the increasingly complex demands of partner relationships and new modes of consumption, distribution today aggregates multi-vendor solutions to meet the requirements of the partner and customers.
Moreover, distribution provides training, enablement, technical support, and robust services offerings. Beyond filling in the gaps in the partner’s knowledge or resources, distribution provides an additional layer of value and trust to the partner relationship.
The subscription-based model also facilitates a recurrent connection between partner and distributor in other ways. A monthly or quarterly touchpoint allows partners to constantly evaluate the quality of the products or services they are receiving and to continually assess whether such offerings are fit for purpose.
Over time needs change, so this reassessment of solutions forces the distributor to become more attuned to the changing needs of the customer.
Aggregate, facilitate, and orchestrate
This paradigm shift has profoundly influenced the distributor-end user equation. Analyst Forrester comments, “to be relevant in the new world of digital natives, subscription models, and direct-to-consumer businesses, distributors with deep industry expertise must reorganize themselves to aggregate, facilitate, and orchestrate ecosystems of value creation. The move from transactional technology sales to nonlinear ecosystems is measurable value creation for the customer, leveraging network effects, incubation, and co-innovation.”
For channel partners, the subscription model can prove extremely valuable – and not just monetarily. It reinforces the importance of customer relationships, retention, renewals, and the way both vendors and their partners define customer service and success.