Sales and billing models have been top of mind for me recently, particularly as Datagate is in the process of expanding into the North American market and getting an understanding the dynamics of the service re-sellers and vendors who operate there.
In the ICT industry – in particular, business computing and communications – we have seen a huge shift towards the “as-a-Service” model and a shift away from the earlier model of selling hardware and desktop software solutions. This has brought about what we refer to as the age of the service re-seller. Service re-sellers are everywhere at this time – you just need to know how to recognize them.
Service Re-sellers
Within the ICT industry, service re-sellers are businesses that sell on-line services that are built, owned and supplied by another another party – a service vendor. Typically in the ICT Industry, service re-seller are Managed Service Providers (MSPs), Business Solution Providers, Value-Added Re-sellers (VARs) and Telecommunications specialists.
Often, service re-sellers have the advantage of being able to offer a closer, more personalized service than what the large service vendors can offer. MSPs can often position themselves as a single point of contact for all ICT services to their end-customers. Service re-sellers will often combine and bundle services together from different vendors to create unique value offerings – which are more difficult for competitors to displace.
With any online service sold by re-sellers, such as cloud solutions, telecommunication and data services there are a number of different marketing, sales, billing and support models that are possible. Each is model is significant as to who “owns” the customer relationship.
Who “owns” the customer relationship?
Any relationship has at least two parties and obviously the customer owns one side of the relationship. But on the the other side, the ongoing supplier relationship; who “owns” it will depend on who controls it and who is more visible to and engaged with the customer. Most important is the flow of money; who bills the customer and under what brand?
If the re-seller sells, bills and supports the service under the re-seller’s brand and also holds the supply agreement with the customer, then clearly the re-seller fronts and owns the supplier side of the customer relationship. If the re-seller allows the service vendor to perform any of these functions under the vendor’s brand (particularly billing and the flow of money), then it cannot be said that the re-seller owns the relationship. If the service vendor performs all or nearly all of these functions under their brand, then the service vendor owns the relationship.
Why is owning the customer relationship so important?
The “owner” ultimately gets the most business value from customer relationship, in terms of control of the service and also the boost in valuation of their own business.
If the re-seller is the relationship owner, then the re-seller has more power in negotiations with service vendors and is often able to change or re-negotiate service contracts or change vendors in the background to the customer relationship.
Business valuations are most often calculated on multiples of revenue. Locked-in monthly recurring revenue (MRR), such as what you have with contracted on-line services, is valued significantly higher than other types of revenue. This is because MRR is the best quality revenue – in that it is regular, ongoing and largely predictable – a solid cash platform for building valuable businesses on.
How to own customer relationships in the service re-selling model
For a service re-seller to “own” a service relationship (such as telecoms, Cloud software & services etc), those services must be named, billed and supported under the re-seller’s name and/or brand.
This typically requires a white-label service-billing solution, such as Datagate that can plug into usage data supplied by service vendors, apply pricing plans created by the re-seller and the automatically create & distribute re-seller-branded bills to the end-customers. Datagate also provides re-seller branded portals where the end-customer can view invoices, reports and analysis of their service consumption.
Datagate’s mission is to enable service re-sellers (who are typically MSPs in the ICT industry) to maximize the value of their business and “own” their customer relationships in the areas of telephony and other on-line utility services.
We are also committed to helping service vendors maximize their sales channel growth through service re-sellers.
Mark Loveys 