Vendor, Disti and MSP Execs on How to Define the Modern Channel Partner

A couple of decades ago, the channel was easy to define. Vendors sold a product to a distributor, the distributor passed it on to a reseller and finally, the reseller offloaded it to the end user. Everyone’s rolls were clear-cut.

Today, everything in the channel is changing, and there are a lot of blurred lines. There are managed service providers (MSPs) with their own IPs that act as both partner and provider. There are professionals like marketers and accountants that wrap their technological service offerings inside line-of-business expertise, serving both as an agency and an MSP. Highly specialized partners sell their services to end users as a traditional partner but also maintain their own channel of MSPs they partner with to deliver full solutions to customers.

At DattoCon 2018 in Austin, Texas, last week, I asked executives from a vendor, distributor and MSP exactly how they would define the modern MSP. All three had to stop and think. Between emerging channel partners, cloud applications and SaaS providers, what are the criteria to be a channel partner in 2018?

“I guess it would be hard to define the channel today,” said Eric Peterson, CEO of MSP Simple Communications. “How would I define the channel? Now you’ve got me stumped here.”

Eric Peterson

Eric Peterson

Peterson’s business leverages a diverse set of revenue streams. He spends most of his energy on his contract clients, providing IT infrastructure services on a recurring basis, which is a business model that’s prevalent in the modern channel. He still services break-fix clients, too, as well as reselling traditional telco products and using them as an “in” to eventually sell clients on using him for managed IT.

These three revenue streams are representative of the channel’s evolution over the last decade, as well as exemplifying the “channel partner definition” problem. Is Peterson a value-added reseller (VAR)? An MSP? A telco agent?

Not that long ago, many partners operated very vendor-loyal channel businesses, identifying as an IBM or a Cisco shop, for example. Craig Donovan, vice president of product development for cloud distributor Pax8, sees diversification and growth of partners’ line cards as an important shift to understand when trying to describe the modern channel.

“Early on, a lot of [conversations with partners] were questions about selling a particular product,” Donovan said. “They’re getting to be much more open to how to serve the whole stack. Now the questions we’re getting is not so much how do you sell that first product and how do we sell this one thing, but more about how do we structure a solution?”

The questions, said Donovan, are more about the growth of MSPs’ service portfolios. Where are the holes that need filling? How can I attach the next product layer? How do I sell and support new offerings?

From Pax8’s perspective, the classic channel of vendors to distributors to partners is still its route to market. Every channel customer the disty has, no matter what they call themselves or how their offering is structured, that buys a product or service offering from a distributor and makes profit margins off of providing it for an end user is a partner. Though the business conversations with partners have changed, everyone agreed that at the end of the day, the definition of the channel partner of 2018 is pretty similar the traditional definition. The difference today is that those offerings come with business-centric advice.

“I remember like 2004 I’m at a show, and they had this panel of vendors up there that were product guys talking about what managed services is,” said Len DiCostanza, senior vice president of channel development at Autotask and then Datto after the two companies’ merger last year. “I kinda got up and said, ‘It’s the same crap we’ve been doing for 20 years. It’s just automated.’”

Len DiCostanzo

Len DiCostanzo

You better be good at solving business problems and dropping in a good solution, whether it’s a marketing application or infrastructure or whatever you’re good at. You better have some recurring services to bolt on when you’re done built on actual expertise in a service area or vertical.

“I think the industry calls you an MSP because they call it managed services,” says DiCostanza. “That’s okay, it’s a common language like a best practice. Call yourself whatever you want.”