As we see it, software vendors simply can’t afford to go after low volume sales. The cost per customer has to be worth the marketing and sales efforts. Conversely, the MSP-to-be can’t commit at high levels to every product that interests them, so something has to give.

VirtualAdministrator was born as a way to bridge the gap between the MSP’s need to afford ALL of the tools they might find useful for their clients and the software vendors need to ensure that their sales and marketing dollars were well spent. We supply the commitment levels, and allow our partners to, as you say, pay as you grow.

In truth, it’s a much more time intensive and somewhat expensive way to develop a market, but that’s where variety comes in. Having several different SaaS options makes it so that the MSP can provide a wide variety of services, while not being force to be more concerned with paying off their vendor than serving their clients. And the variety of services helps us recover some of the cost of time / training / marketing / advertising.

It’s just not fair to expect a 1-3 man shop to fully buy into a managed backup solution, a firewall management solution, an e-mail filtering solution, an RMM tool, etc., etc., etc. if there are high volume requirements for all.

I believe, and frankly, we’re banking on the belief, that it isn’t even so much the cost savings provided by companies like ours (in fact, in sufficient quantity, all SaaS apps ultimately cost more), but it’s the CHOICE and ability to provide new and useful services on demand that will ultimately cement the Master MSP as a key component of the market. As larger companies like telcos get more involved in outsourced IT, it will be more and more important that service providers repeatedly and routinely demonstrate real understanding of their clients’ businesses and their value in applying the right mix of tools to those businesses. They can’t effectively demonstrate the right focus on their clients if their agenda is to use up licenses.

I appreciate the forum. I never like to pass up an opportunity to espouse the value of keeping the focus on the eventual end user. Ultimately this is what has caused the Apples and Googles of the world to flourish.

Thanks.

Rich Forsen
VirtualAdministrator.com

We can buy essentially the exact quantity we need of anti-virus, operating systems, router features, office suites, SPAM filtering, mailboxes, desktop applications and server databases either through the very wide & efficient existing channel, or directly from the manufacturer. There is no reason to believe the same distribution model won’t also apply to “MSP tools”.

One vendor will break, the others will follow to preserve market share. Wholesalers existing only to add value around licensing pain points become irrelevant. Soon after, the consolidation you have previously discussed begins.

However, the SaaS vs. on-premise inflection point has caused MSPs to take a step back and really look at licensing models, costs, etc. MSPs only want to pay for the licenses they use. SaaS is forcing the issue, because SaaS often involves pay-as-you-go.

May the best model (and licensing deal) for each individual MSP win.

Fantastic comment, and very timely.

I guess, for the very reasons you outline, we’ve more than doubled our MSP customers in the last year, and our new customers often relate your position (above) as being one of the chief reasons.

Chris Martin
HoundDog Technology
Easy, Affordable Tools for IT Support

Software companies will hold firm to their existing MSP licensing models until some disruptive, pure SaaS-centric companies (pay as you go) get a little stronger and a bit more prominent.

At that point, some MSP software companies that sold shelfware will need to decide whether to (A) lose to a disruptive SaaS rival with a better price model or (B) compete with the SaaS rival by cannibalizing existing software licensing models. Either way, anyone who currently forces MSPs to buy more licenses than they need will face some pain down the road…

Some of our larest clients went belly up with the recession and we are paying the maintenance for a large number of licenses we are not using. In our most recent evaluation, it appears that it may very well be cheaper to move on to another vendor with our existing clients than continue investing in the ongoing maintenance we are currently paying. We are currently testing the SAAZ model with a few clients to evaluate whether it’s worthwhile to change.

Don’t you think these MSP software vendors would rather keep the clients they have, than to loose us to their competitor because of their pricing models.

Oh well… business is business. The funny thing is is that it’s the same mentality that our clients have these days. Clients don’t care what backup solution a vendor uses… as long as the backups are good! So, wy should we care what MSP software vendor we use as long as the pricing is fair and the tools allow us to do our job effeciently

Thanks for jumping in using your full name on a touchy subject. Please keep me posted as you evaluate various directions you may potential go.

Of course, many MSPs feel loyal to their current software providers because of the key issues you mentioned (investment, learning curve, completed training, and “the software works”). But even if the MSPs remain loyal, software vendors that push shelfware will hit a wall.

Great topic! This has been one of the few sore points with me since I entered into the MSP arena in 2002. I like the term “shelfware”, it really sums up the reality of some of the licenses I have purchased. And those licenses erode profits.

I remember purchasing licenses when I first started on an annual basis and having many go unused for the entire term. Perpetual licensing models helped, but I still pay support annually on unused inventory.

I have lived through the two purchasing examples you listed above and for smaller MSP’s those purchases, no matter the discount, can truly be a challenge. MSP’s like most businesses fight the good fight daily around cash flow, and those licensing models often don’t make financial sense.

So why not change platforms (maybe to a SAAS provider as your described above)? Generally it is the combination of the investment for both the platform and the learning curve for my staff. There is true opportunity for those that offer MSP’s simplicity and act less like traditional vendors and more like partners.

Brian Doyle

Thanks for the comment. I’ve received seven “off the record” emails today, all expressing similar shelfware concerns. Five of the emails were from MSPs, two were from mid-level managers within software suppliers who are concerned that their executive teams are out of touch on licensing models.

So the problem seems real but most people don’t want to go on the record. If people would simply break their silence on the issue, it would force the industry to take the medicine now and kill the shelfware problem before it gets even larger.

Regardless, I’ll keep poking around and trying to determine where the shelfware problems are real, and where the claimed problems are nothing more than rivals trying to poke holes in competitor business models…

Mike, you also mentioned we met at Breakaway. I will be back there again this year, moderating a couple of sessions and blogging live. Feel free to email me (joe [at] ninelivesmediainc.com) if you’re going to attend.