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Hardware as a Service – Resellers Becoming Managed Service Providers

In an effort to mimic the cloud, vendors, as well as resellers, are switching to subscription-based sales models for hardware and, according to the end users I spoke to, it sounds like it’s working out very well.

Last week Infinidat announced its – all-inclusive – pay-as-you-go subscription option for their Infinibox. They are not the first to do something like this. The Pure Storage Evergreen program was probably the first to hit the market a while back and has been praised for its characteristics and flexibility, but it’s definitely a good thing for Infinidat’s customers.

These kinds of programs are truly all-inclusive. In fact, they not only include hardware and maintenance but also unlimited system upgrades, migration services and so on. At the end of the day, it simplifies the procurement process, improves financial aspects of HW infrastructure management by reducing CAPEX (capital expenditure) in favor of OPEX (operating expenses), and provisioning is simplified as well.

Now that we live in an era of hybrid cloud infrastructures, this kind of approach helps organizations of all sizes to limit the friction between on-prem and cloud as well as traditional and next-gen IT environments.

Resellers are Becoming MSPs

What struck me the most about this idea of Hardware as a Service (HaaS) is that resellers in the field, here in Europe at least, are embracing this idea and making it theirs. More and more resellers are transforming their business and becoming MSPs (managed service providers), packaging their solutions in a cloud-like fashion and selling them as subscriptions.

To get a better understanding of this phenomenon, there are two questions that need to be addressed: Why? and How?

Why?

It’s actually quite simple. End users are finally understanding the cloud and they like the idea. Even the most conservative end users are experimenting with it. At the same time, small and medium enterprises love their relationship with local partners, however, the risk of resellers losing customers to the cloud is becoming higher by the day. Resellers are becoming more aware of this situation and are reacting accordingly.

How?

Many resellers are starting to propose solutions which come very close to what you can get from the vendors, taking advantage of their position and the flexibility they can get from it. You can think of them as cloud and hardware brokers. While most do not own a data center, they can access colocation facilities, cloud providers and whatever is necessary to build personalized solutions for their customers. They then are able to sell the entire package with the added value that comes from integration and the necessary services to make it work. The end user only needs to manage its applications and data, offloading most of the infrastructure issues to their partner.

It’s also very interesting to note that these kinds of solutions are very cost-competitive as well. In fact, resellers (or MSPs if you like) are very careful to purchase at the best price possible to be more competitive and improve their margin. Furthermore, this new subscription-based business model allows them to have more bargaining power with the vendors. In the end, they become the end user from the vendor’s perspective, so the final customer gets a solution and a partner, rather than just a bunch of products. Thus by changing their business model, resellers have access to a different economy of scale for their purchases. For example, a few days ago a reseller told me that he bought 1PB licenses of a SDS (software-defined-storage) solution and his team is now slicing it in 20, 30, and 100TB chunks for its customers. The vendor’s sales representative was happy to close a single 1PB deal, and now the reseller will be able to provide a very good $/GB to small customers while making higher profits.

And it’s not only about HW and SW, sometimes it’s also about the cloud. These reseller-MSPs can buy from large providers like Amazon, Google or Microsoft, but they can also choose to work with other providers like Wasabi, Backblaze or Packet, just to name a few, that can give them raw resources with better prices, more control over the stack, less lock-in and, white labeled solutions. Once again, it’s more about leveraging internal skills and the relationship with the end user to build something that is much more tailored, hybrid, perfectly aligned with users’ needs and very competitive from the economic and financial perspective.

Closing the Circle

The channel is evolving pretty quickly to adapt itself to the cloud era. Here in Europe at least, many resellers are switching to innovative business models to keep up with the times. The feedback I’ve received from the field in the last few months is very positive and end users love the idea of getting a cloud-like experience through their beloved partners.

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