Magazine Article | December 13, 2013

Why SMBs Could Be Your Greatest BDR Sales Opportunities

Sarah's BSM Team Headshots

By Jay McCall

With due diligence and customer education, VARs and MSPs can sell BDR solutions to the underserved SMB market.

Despite a plethora of network breaches and industry compliance issues making news headlines, a majority of organizations are still not properly protecting their information systems. According to research from Pricewaterhouse Coopers, 96 percent of PCs are not adequately backed up. Forrester’s research further reveals that among SMBs, only 5 percent of all businesses are currently employing Backup-as-a-Service, remote backup, or online backup services from a managed services provider (MSP). “Data loss happens every day and can come in all forms, from hardware failures to user error and natural disasters,” says Neal Bradbury, cofounder and vice president of channel development for Intronis. “SMBs and IT service providers should think of cloud BDR (backup disaster recovery) services as insurance for the company’s data — no business should be without it.” To help VARs and MSPs capitalize on this opportunity, industry experts from Datto, GFI MAX, Intronis, and KineticD offer their insights into this lucrative market.

The First Rule In Selling Backup: Don’t Talk About Backup!
If there’s one thing that causes an SMB customer’s ears and wallet to close, it’s a discussion about new IT products — especially if the topic is about backup appliances and software. One of the reasons so many SMBs don’t back up their data (or do so insufficiently) is that they don’t understand the potential danger they’re in. “The best way to start a BDR sales conversation is to talk about business continuity instead of backup products,” advises Rob Rae, VP of business development at Datto. “A business continuity discussion entails asking a client to consider the impact on its business if a server caught on fire and helping the client self-discover the value of its data. Only after you receive a confirmation that the client truly values its data can you start showing how you can offer the client something better.”

Eric Harless, senior product management professional at GFI MAX, adds, “If reliability is a concern, ask the customer to tell you off the top of their head what percentage of backups were successful last night, in the last 7 days, or even in the last 28 days. Then ask how long it would take to identify which systems were successful and which failed and why? Next, ask whose job it is to do that research and fix the problems, and finally, ask why it isn’t already fixed and running with near 100 percent success?”

Bradbury adds, “Here’s a scenario people relate to and service providers use often: You have insurance for your house. If you’re a business owner, you have insurance for your business. If the building burns down in the middle of the night, insurance will come and build you a new building. But all your intellectual property and much of your value is actually in your data, which is now lost without a cloud backup. At the end of the day, if you were to lose a file on your corporate laptop, you’re going to point to IT whether it was your responsibility or not. Without your data, you’re out of business. Forty percent of companies that have a data loss incident and weren’t able to access their data within 24 hours after the event, go out of business. It’s an awful reality, but an easy one to avoid.”

According to Rae, feedback from Datto’s partners reveals that about 55 percent of the SMB market is either using file-based backup only or really old tape technology. Both of these situations present opportunities to sell a hybrid BDR solution that includes local image backup, plus cloud backup. Harless says, “First, perform a site analysis of their current backup environment and pinpoint the holes that your solution and service is going to solve. For example, if the customer is using tape today, point out the benefits of having a local disk recovery copy: the reliability of not having to swap tapes, the speed of local disk for restore, and the convenience of not having to ship and store tapes off-site.” Harless also points out the importance of helping SMB prospects understand the vast difference between cloud file sharing services and true online backup and disaster recovery.

Subscribe to Business Solutions magazine Even if you encounter an SMB that seems to have a BDR solution in place, it’s still worth digging a little deeper to confirm that before moving on to another topic, advises Intronis’ Bradbury. “When small businesses try to figure out off-site backup on their own, there are a number of pitfalls that can happen, such as:

  • Not encrypting their data properly
  • Storing their data in a cloud data center that doesn’t meet the requirements for their industry
  • Not considering how they would actually retrieve their data and get back to work following a disaster

Missing the mark in any of these areas presents a serious compromise to a BDR-as-a-Service offering, which VARs and MSPs can help resolve.

Some SMBs may have reservations about storing a copy of their data in the cloud, but this is a fairly easy objection to overcome, according to Ben Puzzuoli, director of sales at KineticD, if the partner has already performed its due diligence. “The first thing partners need to do is understand the industry rules and regulations their clients or prospects have to comply with and ensure they’re using a cloud provider that meets those standards. As long as you’re using a cloud provider that’s compliant with SSAE 16 audit standards and you can articulate to a client how its data is protected from inside and outside threats, this should be a fairly easy objection to overcome.”

It’s also helpful if your cloud provider resides in the same country as your customer. Many Canadian companies, for example, have become reluctant to store their data in a U.S. data center for fear of the U.S. government snooping on their data under the guise of the Patriot Act. U.S. customers may likewise have concerns that if their data is being stored in a foreign country, they won’t have control over it. That’s why Datto, GFI MAX, Intronis, and KineticD have established data centers in different countries to help VARs and MSPs overcome these objections and address privacy concerns and regulations.

Create A Recurring Revenue Strategy That Really Works
Besides saving customers from the negative impact of a data disaster, selling BDR as a Service offers the opportunity for VARs and MSPs to earn recurring revenue. “Without a defined service offering to provide ongoing implementation, monitoring, management, maintenance, and recovery, however, you are not selling a complete solution to your customers or increasing their overall peace of mind,” says Harless.

One other challenge resellers need to think through is how much to charge for their monthly service. “It’s essential VARs understand the pricing model, including how it affects their commissions and ultimately their customers’ costs,” says Puzzuoli. “For some customers, paying monthly instead of up front could help with their cash flow needs and could mean the difference between winning their business or not.”

One of the first things VARs and MSPs want to know about BDR before committing to selling it is the earning potential. While it’s difficult to list a precise profit margin earning potential for each BDR solution due to several variables coming into play, 20 percent is the low end of the spectrum, and some MSPs earn up to 70 percent margins on their basic BDR services, which includes software licensing, cloud storage, and remote management. “We have more than 3,000 partners, and we’re constantly polling them to get insights on their selling habits and profit margins,” says Rae. “In addition to the steady recurring revenue from basic BDRas- a-Service subscriptions, MSPs can earn incrementally higher revenue streams by adding in fees for performing data restores. Some partners charge $300 to perform scheduled audits of their customer’s backups to ensure that data backups are working as planned and the data can be restored in the event of an emergency.”

According to the new State of Cloud Backup survey from channel consulting and research firm The 2112 Group and Business Solutions magazine (on behalf of Intronis), 56 percent of the respondents indicated that backup and recovery was their best-selling cloud service. Additionally, 41 percent of respondents reported that the SMB (25-250 employees) market made up at least 30 percent of their BCDR (business continuity and disaster recovery) revenue.

“Only after you receive a confirmation that the client truly values its data can you start showing how you can offer the client something better.”
Rob Rae, Datto

Know When To Walk Away From A BDR Sale
Although it may seem in theory that every SMB is a candidate for your BDR solution and services, the reality is that not all are a fit. Knowing when to pursue an opportunity and when to walk away is very important. “Try to steer clear of environments that are outside of your skill set or comfort zone,” says Harless. “If you don’t have staff who are knowledgeable in Linux, Oracle, or SharePoint, then perhaps those are part of an advanced backup service offering and should be excluded from your basic backup service offering or perhaps excluded all together.” Build your recurring revenue business model slowly and consider how you will bill your customers (up front or following services), including how frequently (e.g. monthly, quarterly, or annually). Each has its own risks and benefits. Be cautious of restrictive contracts that lock your customers in. Even though the prevailing advice used to be in favor of long-term contacts, many MSPs learned the hard way after finding themselves locked in to providing services to a customer that turned out to be a financial and/or emotional drain. Remember: Things don’t always work out, and sometimes you need to fire a problem customer. That said, if you start the process out right, by educating clients about the importance of their data and managing your BDR service to ensure it will be available if anything goes wrong, you’ll virtually eliminate any of the negatives that can otherwise dampen a BDR-as-a-Service sale. “Also, don’t forget that it’s ultimately not the hardware, software, tool, or features that differentiate you and make you successful; rather, it’s the value of the service you can provide that determines your success,” says Harless.