Pax8 Executive: Solution Providers Must Lower Customer Onboarding Costs, Bundle Products To Win In The Cloud

The most successful channel partners in the cloud have minimized customer acquisition costs, bundled offerings together and delivered stupendous post-sales support, according to an upstart distributor.

Ryan Walsh, Pax8's senior vice president of partner solutions, said the moment of truth for a cloud distributor or solution provider occurs when a new customer first comes on board. If that customer experiences delayed provisioning or a lack of support, the channel partners could very well lose out on opportunities for repeat business.

"It's not a one-time purchase," Walsh said during XChange Solution Provider 2017, hosted by CRN parent The Channel Co. "You better be really good at onboarding and support, because you don't want that fish to jump out of the bowl once it gets in."

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Pax8 knows all about onboarding new customers thanks to the company's exponential growth. The Greenwood Village, Colo.-based distributor has grown from 35 employees in October to nearly 100 today, according to Walsh.

A large part of making the economics of cloud computing work for the channel is lowering the cost of new customer acquisition since cloud partners typically have a larger roster of clients carrying out smaller deals, Walsh said during a breakout session at XChange conference at the Gaylord National Resort & Conference Center in National Harbor, Md.

Walsh said solution providers should only acquire cloud customers where the cost of onboarding is less than the amount of recurring revenue the client is projected to deliver within the first 24 months. If acquiring new customers continues to be prohibitively expensive, Walsh said, partners need to better their ability to process small dollar amounts and support for recurring billing and pay-as-you-go models.

"Try to improve how efficient you are in terms of how much money you have to spend to get a dollar of recurring revenue," Walsh said. "New distributors have to do this efficiently to help solution providers on demand."

Once a new customer has been onboarded, Walsh said the channel must personalize the cloud experience to achieve stickiness and high customer retention. One piece of that, Walsh said, is having the capability to bundle and auto-provision two cloud products simultaneously so that the client can immediately log in.

"If you're putting together two solutions, now it's harder to move away from you," Walsh said. "It's all about 'How do I fit into your business?'"

Distributors must leverage APIs for agile development and automatic provisioning, Walsh said, so that, for instance, a solution provider using ConnectWise can have their customer list transferred to a distributor's cloud marketplace without any manual effort.

More recently, Walsh said customers have begun to clamor for customer-sold services, bill-on-behalf-of features and flexible SKUs, and terms ranging from consumption and monthly to annual and multi-year. And on the back-end, Walsh said, distributors must simplify billing and co-termination procedures so that solution providers don't receive a litany of bills every time their customer makes a change.

"You have to think differently and skate to where the puck is going," Walsh said. "And you have to be agile in terms of providing that to the marketplace."

Digital West Networks derives more than half of its revenue from cloud, but currently creates and delivers all cloud services in-house to guarantee the highest level of service for clients, according to Ron Brown, senior vice president of technology for the San Luis Obispo, Calif.-based MSP.

Brown said the downside to the approach, however, has been enduring high costs, meaning that only mid-market and upper mid-market customers are able to pay for Digital West's cloud services. Brown said he's willing to consider a cloud aggregator such as Pax8 to attack the lower end of the client market at a more affordable price.