Retail VARs Face Big Questions — But Find Bigger Value — Switching To As-A-Service
The transition to the as-a-Service business model is gaining momentum with IT solutions providers working in the retail vertical. The evolution of a break-fix businesses into one based on recurring revenue, however, requires overcoming challenges and looking for opportunities, some specific to this vertical market.
Industry leaders shared their insights on this topic during the View From The Top: Leadership Panel Discussion moderated by Jim Roddy, president of Business Solutions magazine, at this year’s Retail Solutions Providers Association’s RetailNOW.
Arnie Bellini, CEO of ConnectWise, says, “What we’ve seen in the IT solutions industry in general is everything is moving towards as-a-Service. There’s a reason for that …. The benefit is a predictable revenue stream.”
“The great news is history repeats itself, so you can learn from those who went before you … There’s an evolutionary model in it that you can follow,” Bellini adds, “but the as a service model is here to stay.”
One driver for retail VARs to make the transition is increasing the value of their businesses. Businesses surviving from project to project do not compare in value to those with predictable, recurring revenue streams. “Some of you may be the third- or fourth-generation of owning your business, and there may be a reason why you haven’t been able to sell that business. Or maybe you want to keep that business. When you really create value in your business is with recurring revenue.”
Executives from distributors in the channel also weighed in on the topic. Mike Baur, CEO of ScanSource, says because the business model is relatively new to the vertical, resellers — as well as distributors and vendors — need to find a place to start. “I think the idea of starting with a project and turning that into a recurring revenue steam makes a lot of sense. I think for the distributor, we’re still trying to figure out how to enable our channel partners to do that.”
“There’s a question about who owns the asset, if you're doing a recurring revenue stream,” Baur points out. “But it’s something that we want to be involved with as a distributor, and our customers are asking us to get started.”
Steve Cuntz, CEO and chairman of Blue Star, comments that, with more hosted services, some legacy solutions are being replaced. “But from a distributor’s point of view, it still takes hard work for the input and output of data. Where that data is managed is almost irrelevant, if the customer can buy it as a service. I don’t think the hardware is going anywhere, because humans need that interface for data management.”
Cuntz sees retail VARs currently in a “hybrid situation,” establishing recurring revenue, as well as making one-time sales.
Jay Miley, Ingram Micro’s vice president and general management of its advanced technology division in the United States, agrees that a hybrid approach — adding services, but not totally abandoning your break-fix business — can be a good strategy. “You actually see a very, very tight stickiness. When you start offering services to your end client, they'll trust you more, they'll start buying more from you. We actually see partners who have managed services and as-a-Service models integrated in their go-to-market,” Miley says. He points out as recurring revenue streams build, “their break-fix business accelerates alongside of it.”
Ray Carlin, vice president and general manager for HP’s retail solutions global business unit, points out retailers’ frustrations with the complexity of mobility can be an opportunity for VARs to add services to their portfolios. Retailers, accustomed to the lifecycle of traditional point of sale (POS) systems, aren’t used to replacing hardware and devices every three years, as they will with tablet POS. “We see customers that are interested in as-a-Service, because they don't want to deal with that,” Carlin says. “You could provide a managed service around mobility to deal with complexity — and not just IT, but the overall ability for the retailers to grapple with these challenges. I think as-a-Service delivery model is going to help from that perspective as well.”
Bellini adds, “The place where you will always find the opportunity to transition existing customers to as-a-Service is any time there’s a major refresh …We’ve got a major refresh on our hands here with EMV.”
EMV is a global standard for debit and credit cards that leverages chip card technology. In October 2015, liability for transactions made with counterfeit cards will shift to acquirers and merchants — and the least compliant party will be responsible for covering the full cost of the fraudulent transaction.
“That’s going to be the opportunity,” Bellini says. “Focus on EMV and, using that as a refresh point, and have your as-a-Service model in place and ready to be offered at that point in time.”
RetailNOW 2014, hosted by the Retail Solutions Providers Association (RSPA), was conducted Aug. 3-6 at the Gaylord Palms Resort and Convention Center in Orlando, FL. For more information on the event, go to www.BSMinfo.com/solution/InsideRSPA.