Subscription model forces rethink of channel roles

There’s an awful lot more to distribution than logistics, says Billy MacInnes

Blogs

25 February 2021

If you were looking for more evidence of how well the subscription-model was working, Exclusive Networks provided an interesting perspective this month when it announced it had extended its X-OD service to several countries, including Ireland.

Launched in October 2020, the as-a-service platform was originally available in the UK, Netherlands and France. At the time of the launch, Exclusive Networks said it would expand the service into Ireland, Belgium, Spain, Germany, Finland and Austria from 1 November 2020.

Speaking back in October, CEO Jesper Trolle described X-OD as “the platform for partners to solidify their position as strategic IT advisors to their customers rather than merely suppliers. It starts with being relevant to market needs, and that means being fully enabled to sell and deliver on a subscription basis.”

The service launched with three vendors signed up: Palo Alto Networks, Proofpoint and Google Chronicle. Fortinet has just joined the platform. Exclusive Networks is believed to be in talks with other vendor on its roster to add more to the platform in due course.

As an aside, it’s interesting to observe that of the four use cases cited in the subscriptions section of the X-OD website, three are headlined “Deliver SMB offers at scale”.

Looking back on the performance of X-OD from the vantage point of February 2021, Exclusive Networks revealed it was growing subscription revenues five times faster than traditional Capex-based sales.

With the obvious caveat that it’s easier to grow something that’s small at a faster rate than something that’s big, that still sounds quite impressive. It suggests that the argument in favour of subscription-based IT (aka as-a-service) is not an especially difficult one to make to customers, partners or vendors.

If anything, it suggests that the discussion shouldn’t really be about whether customers should opt for as-a-service over outright purchase but more about how easily and effectively it can delivered.

Simplifying the conversion to as-a-service for channel partners and their customers is an important consideration. Too often, they can be squeezed in the middle of the vendor or distributor and the customer as they shift to a subscription-based model.

No wonder one of the X-OD use cases covers the challenge for resellers in moving to an annuity-based model and the “high cash upfront investment to package vendor offers”. Not forgetting the longer sales process and the “higher volume of operational tasks to order, provision and invoice” customers.

Distribution redefined

Despite the initial belief in the early days that as-a-service could cut out distribution altogether or diminish its role, distributors are busy defining their role and justifying their space in the subscription-based model.

This points to something that has nearly always been true for many many years in the IT industry, namely that vendors (and analysts for that matter) can often be unappreciative of the role distributors play in getting a product or service to the customer.

Old thinking was too focused on the physical logistics of distribution – something which, nevertheless, was far more complicated than many thought. With the shift to as-a-service, people have realised there’s an awful lot more to it than that.

It’s really not that simple to deliver an on-demand platform that takes account of the reseller’s perspective, understands how it affects their operations and how they fit into the process without diminishing their role. That’s not something that comes naturally to vendors.

In fact, it can be easy to overlook the role that resellers and service providers fulfil for vendors and their customers. But the continuing resilience of distribution in the face of so many changes in the IT world shows not only how important they are but also reinforces the significance of resellers and service providers to the supply chain – and the customer.

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