The introduction of Cloud and Software as a Service has revolutionised the delivery of IT. No longer do customers expect to buy technology. What they want is an outcome.
Customer appetite for these outcomes is only growing year-on-year. Australian spending on technology products is forecast to grow by 2.6%, to hit $84.8 billion in 2018, according to Gartner. Among devices, data centre systems, enterprise software, IT services and communications services, it is software that is slated for the highest percentage of growth, at 11.7%.
Driven by the push for digital transformation in business and the enabling technology that it demands, CIOs and IT managers are under pressure to do more with their IT budgets. Flexibility, scalability and rapid acceleration are the order of the day. Increasingly, businesses expect the way they pay for their outcomes to have the same flexibility as the technology they’re investing in.
Resellers face vendor rigidity
But what hasn’t changed — until now — are the consumption models which vendors can offer to channel partners reselling these technology solutions. Keen to meet demand for ITaaS, resellers are being left in a bit of a financial predicament when it comes to meeting that need for flexible need/usage-based monthly payment models demanded by their customers.
Consider this scenario: A mid-range MSP successfully negotiates a $1 million a year contract with a three year term. Over term, the contract in itself has acceptable levels of profitability. But here’s where the fun begins. To facilitate the contract the MSP has to outlay a considerable sum upfront. Any return at all on the contract will not play out until month 27, tying up cash, impacting on the balance sheet, and possibly any other lines of credit the MSP may have.
“A lot of the traditional vendors and distributors are still trying to go to market in a more rigid way, as they have done for many years. But we’re seeing a lot more innovative disruptive partners who are offering more around the solution. Rather than just, ‘Here’s your Software as a Service’, a lot of partners are sitting down with customers and asking, ‘What do you want, how do you want to get there?’,” says Mike Sheeran, Managing Director at Orbus, a NEXTGEN company which is offering flexible payment solutions for IT purchases across software, hardware, cloud, PaaS and SaaS.
“MSP’s need the ability to supply to their end users under a flexible, variable services type contract without having to carry all of this risk that can negatively impact on their business either short or long term. With the right payment solutions,the provider gets a really unique selling point, where they can tailor something to a customer’s needs,” adds Sheeran.
The problem with vendor finance and commercial options
Some technology vendors have sought to make life easier for their reseller partners by offering vendor finance that takes away some of the financial risk. With this avenue, however, comes the risk of a reseller being cut out of the deal; an outcome that has left some resellers reeling from the experience. Equally, where regular commercial banks are involved, finance deals can fall through given the difficulty some have with financing intangible products.
Flexible finance that adds value for resellers
As an innovative distributor pursuing the delivery of Distribution Reinvented, NEXTGEN identified a gap in the market and strategised a way to meet customer, reseller and vendor needs. Orbus represents the fulfillment of that thought leadership. By allowing both vendors and resellers to offset their upfront costs immediately, even as customers receive the benefit of a simple monthly payment program, Orbus’ unique payment solutions for IT bridges the current distance between customer expectations and vendors’ capacity to help resellers deliver on them. It’s all the flexibility, with none of the risk.