On March 3, 2019, during a break at XCHANGE taking place at the Red Rock Casino Resort & Spa in Las Vegas, Dropsuite’s head of marketing, Jon Samsel, met with Pax8’s CCO, Ryan Walsh to talk about how Pax8 got it’s start as a cloud distributor, what makes them unique and why MSPs are clamoring to work with them.
Here is a transcript of that interview in its entirety.
We formed Pax8 to reinvent how distribution works for the cloud. We believed traditional distribution was broken and that we needed to solve a myriad of problems we were hearing about. It was a visceral belief that came out of recognizing that traditional distribution was really good at dealing with on-premise technologies. So much so that those partners who were seeking a different solution — such as a cloud product — needed to be managed and treated differently.
In the cloud, you don’t order it, ship it and you’re done. It’s, “I want two, I want one more, I want to take away two.” And partners want to do this any day, at any time of the day. In this scenario, you can’t have anniversary billing. You’ve got to have flexible recurring billing instead. In the cloud, ordering and billing needs to be streamlined, consistent and easy. Pax8 wanted to not only remove the friction from selling, buying, managing and billing cloud services — but we wanted to create a great user experience as well.
The answer to the billing problem is really derived by the complexity of pricing cloud products. Many cloud vendors like to provide incentives to partners who sell to a larger customer versus a smaller customer. This tiered pricing is just one billing challenge. When you consider all the different cloud products on the market today, you can see how hard it is to know what the right price is.
To deal with billing complexity, Pax8 had to build a rating engine into our platform. That rating engine took the complexity out of SaaS billing by normalizing the vendor’s pricing model in the background. For consumption-based products, the billing complexity goes through the roof. Azure alone has more than 6,000 SKUs — so knowing what I am billing one customer at any point in time is tough. Billing was a theme were heard partners say they needed help with.
“Billing complexity increases my costs and it’s a nightmare to handle — so I have to weigh whether it’s even worth my time to offer a new product.”
A lot of partners were not embracing the cloud because of billing issues. It’s not something that was sexy to solve, but we did it because it had to be done. Today, Pax8 speeds up cloud adoption for our partners by eliminating many of the previous billing pain points and costs that were eating into the partner ecosystem.
I would say it’s our Wingman experience. Being our partner’s Wingman is a differentiator. When I think about companies we compete with — our line card can be copied, a similar cloud marketplace can be built — but ultimately it’s the partner experience that matters most. We take that to heart, and we want our partners to talk about the great experience they had working with us.
Everyone in our company participates in the Wingman experience. It’s not just a support thing. It’s not just a sales thing. Everyone’s involved. The benefit of thinking about the Wingman experience this way is that partners feel it. It’s authentic. We really do care about making our partners successful. No deal is too small for us. We know that one sale can lead to many.
A lot of traditional distributors don’t want to service smaller customers, and that’s understandable if you examine their business models. Pax8’s distribution model allows us to offer the same quality experience to our partners, regardless of size. It’s a blend of high automation and high touch.
We hire a blend of people — a multi-generational and diverse skillset team. On the sales side, we hire people who know how to sell. Feedback we commonly hear from MSPs is: “Tech savvy, get that.” Our team understands technology really well and what that means to the MSP business. But certain new hires at Pax8 may not always be well versed in selling technique — so we teach them how to do that. Training is part of our secret sauce. We take young, hungry, focused sellers and train them to focus on helping our partners. On the back end, we hire people that are service and support oriented and who want to troubleshoot and figure out how to solve problems. We even have team members who come from MSP backgrounds with years of IT solution provider experience who understand the market that we’re serving.
One thing that runs through the core of the people we hire is the desire to create and be part of something new. Pax8 has been identified as one of the best places to work by publications like ComputerWorld and OUTSIDE Magazine. There is a certain persona that is attracted to a start-up culture where employees can influence the outcome, and Pax8 is attracting these types of personas. As a business, we know we have to be agile to compete. If we fall short in any area of our business, we need to quickly find a solution and communicate that to our partners. This really gets their attention, “Did you just do that?” Yes we did. We try to listen well, act fast and remove friction from the process. These quick hits really help our reputation.
This sounds like consultative selling.
That’s right. If you look at a traditional distributor, you’d hear the term, funded head. The is somebody who is paid to represent a product, working within the distribution company. At Pax8, our sales reps are focused on helping the MSP. They are not there is sell product A or product B, they are there to focus on the MSP. “What is your unique technology stack? What are you doing for archiving and backup? Here is a unique solutions from Dropsuite. No other vendor is offering this combination.” If our sales reps sense that an MSP’s needs center around a particular solution, we’re going to recommend it. This helpful approach builds trust with the partner because we’re not trying to push product that’s not really needed. We align our partners with solutions that fit.
That’s a great question. In general, what we look for are MSPs who are trying to build a cloud practice. They can be new to the game or deep into the game and want to keep going. Some of our most successful partners came to us as a single shingle shop just starting their own MSP, and through the cloud, we helped them grow fast. We’ve taken many MSPs with less than 15% of their revenue originating from the cloud and moved them up to 75%. We don’t spend a lot of time with MSPs who say they’re not sure they want to focus on the cloud. We will take the time to explain why it makes sense that they do so, but if they say they are still not sure, that’s not an MSP we’ll spend too much time with.
Explain the Pax8 stack and how you help MSPs optimize this stack to benefit their business.
The easiest onboarding correlates to the highest adoptive product. We added Microsoft Office 365 as our lead product because it starts the dialog. It’s easy to recommend a product that’s being adopted the most because what that does is bring in multiple customers for an MSP — and that’s just the starting point. You can say, okay you just bought a business productivity solution, now let’s talk about the whole experience of what it was like working with Pax8 to set everything up. Assuming that goes smoothly, now let’s talk about growing your stack. What industry or vertical do you focus on? What are your customer’s needs? The journey of this dialog inevitably leads to discussions around security or business continuity. We’re either going to go down one of these two paths or go down both of them.
Companies like Dropsuite do a great job in pointing out misconceptions around what services Microsoft provides in the area of data backup. Because Microsoft is not responsible for customer data within Office 365, products like backup and archiving are logical additions to an MSP stack. That’s a great conversation for a Pax8 sales rep to have with an MSP because it demonstrates value. Our rep can say, here’s a near-term opportunity, let’s take advantage of it.
Many partners still don’t understand the need for a blended security solution. I think it’s an awareness issue. Defense in depth is the background I came from — are you protecting the email inbox, the endpoint, the browser and the network from a security perspective? It’s a good business practice to have a strong security stack — and most MSPs get this.
However, recent threats such as ransomware have introduced the need for business continuity products in conjunction with security, of which backup products are a key part of that protection suite. Since threat prevention products are not foolproof and the sophistication of external threats are growing, MSPs need to protect their client’s data with both security and business continuity stacks.
When you look at who many of our partners serve — SMBs — many of these businesses were not feeling vulnerable to cyberattacks. “What data do I have that you would want?” But now cyber criminals are using AI to find exploits. Stories of partners and their customers getting attacked, infiltrated and exploited are increasing daily — and this is changing the dialog.
We attend at a lot of industry events and we always ask ourselves, “Who’s not on our line card?” We gather a lot of feedback this way. We pay attention to partner needs, trending categories, high quality products and channel centric suppliers that offer good margins. Office 365 backup is one product type that was front and center on our radar. Personally, I have always been a big fan of archiving because of my background. The combination of archiving plus backup is one of the stickiest products out there. When partners embrace them, they incorporate data protection routines into everything they do.
The other thing we need to have is automation. We deliver products the way the market is demanding it. You have to have APIs to enable this. We have to have support for automatic provisioning. Along this line, we look for vendors who are committed to what we’re trying to do — a commitment to our model to change things. We expect more from our vendor partners — so we are very selective with whom we work with. We don’t want to have too many vendor options within a category. That’s why we keep an eye on differentiation as well. This helps us because then we can add our value. We can say, “If you want quote to cash support, we recommend the following combination of products and services to meet your needs.”
We need to be talking about archiving in a different way because there is an underappreciation for what archiving can do for customers. Archiving plus backup are essential components to protecting information. Take Office 365 — data backup protects data in Exchange, SharePoint, OneDrive, Teams, Groups — all of the business productivity apps. Archiving shifts the conversation to the utility of data – things like GDPR, compliance, legal discovery. Archiving isn’t just for regulated industries — every business has to deal with data storage, retention and access to that data on demand for a variety of reasons. Many businesses are not yet aware of the importance of being able to access email data via discovery to protect themselves from litigation. Retention policies are also important to many businesses but they lack the tools to manage these policies.
Dropsuite eliminates many retention headaches for MSPs. By offering Office 365 backup and archiving together with unlimited storage while offering control over how long users can keep this data, you empower businesses to better manage their data. Sometimes organizations need to purge certain data at specific times to eliminate vulnerabilities. Or they receive a GDPR request, an audit notification or preservation order from a client for a pending litigation. If you have a flexible tool like email archiving that allows you to quickly find what you’re looking for and implement the required actions, you have a winning combination. The power of discovery cannot be overstated.
Does Pax8 have any plans for geographic expansion?