The March Towards Subscription Pricing Part 2

describe the imageI recently wrote a Guest Blog for Juice Marketing entitled The Argument for Fixed Pricing (Ownership) or Monthly Subscriptions (Rental). This blog spawned many conversations from Value Added Resellers (VAR’s) about how their business could be affected by these pricing changes and what they need to do to ensure that their business does not suffer.

I think there are four aspects that VAR’s need to take into consideration and perhaps apply to their business.

Why are Customers going to Cloud based applications?

Traditional on premise IT Management can prove expensive as well as time consuming for any size organization. Firstly they need servers, back up systems, anti virus software – in fact a whole raft of hardware and software just to boot up their management systems. If companies don’t want the expense of an internal IT department or the expense of a service agreement with an external IT service provider to maintain these systems, then the ‘cloud’ option is a good one. Why? Because if everything is hosted then customers know that they have to pay a fixed monthly fee and that all their internal systems are being properly maintained, backed up, protected from viruses etc and the only thing they have to worry about is a PC, Laptop or Tablet to access the system from and good internet connection to their place of business, plus they have the advantage of being able to access their systems from pretty much anywhere with internet connection.

I know I have simplified the sales pluses of this and not addressed the negatives (I am sure there are plenty – we can leave that for another blog on another day), however for customers the perception is that ‘cloud’ and hosted solutions solves many of their problems, their costs are a known monthly expense plus they don’t have to worry about their system needing to be upgraded or becoming obsolete as this will be taken care of within the subscription they are paying.

Who Owns the Customer?

There is in my opinion no such thing as owning a customer. You either do business with them or you don’t! If you work as a consultant to a customer who through your introduction purchases software from a software vendor they are your customer and it is up to you to make sure that the vendor and you look after their needs.

What will Happen to VAR’s?

VAR stands for VALUE ADDED RESELLER – as such they will look after their customers needs. How? By working with their customers on an ongoing basis to ensure that their systems are performing in the way that ensures their customers can run successful efficient business. They can add VALUE to their customers by informing them about third party products that can benefit the customers. They can add VALUE by informing the customers about the latest technology trends that are relevant to their customers. And most important they can add VALUE by being proactive telling their customers about changes and upgrades to their current systems. Unless a VAR is a box shifter they should already be doing all these things for their customers and their customers should be paying them a ‘consulting fee’ or ‘partner-ship fee’ for these services.

Horror she has suggested that you ask a customer to pay for your expertise. My response would be do you go to a Doctor and not expect to have to pay? If a customer sees no value in the services that you offer they will abuse the VALUE that you give them and you don’t want them as a customer. There is an expression that if you pay peanuts you get monkeys!

Value Added Resellers have years of consulting experience and an inside track into the confusing world of technology that most business would put a VALUE on. They offer VALUE. And if they don’t offer or add VALUE how can they be a VAR.

Are VAR’s middlemen? Yes. But Software vendors need them and their experience to find and work with customers. Otherwise the Software vendor would need a sales force as large as the channel and I doubt they would want to go down that expensive path. And why do they need to when they have that Sales Force in place – they just may pay them revenues differently so the VAR will have to find different additional revenue streams to sustain their business.

Does Subscription pricing from Software Vendors Open or Close Doors?

I think I have pretty much answered this question above. The only thing I would add is that VAR’s can also look at different revenue streams such as working with other third party applications or becoming an ‘expert’ for a particular vertical, thus giving themselves further differentiation from the pack.

Many VAR’s are already taking this path, and I think many more will look to do so, there are many routes still open to ensure the survival of VAR’s and their ecosystem, they can re-invent themselves and enhance their offerings and it will be interesting over the next few years to watch the different paths that are taken.

In Conclusion  

I believe this is an ongoing conversation and nobody has all the answers on how it will finally play out. I do believe that the agile VAR businesses that care for and work with their customers will continue trading successfully and overcome any challenges these changes bring. If being a business Entrepreneur or owner was easy everyone would be one and everyone would be a Billionaire. Life however does not work that way!

Finally, I would like to ask any Value Added Reseller (or Customer) do you agree with me or not? 

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