How Sydney's Hosted Network built its own channel

We all know the Godfather quote: “Just when I thought I was out... they pull me back in.” 

Ben Town no doubt thought something similar. A network engineer who started his own IT business at just 15, he got out of the integration game in 2008 to start Exia, a marketing agency targeting IT companies. Together with his two business partners, also network engineers, Town ran into a problem with early marketing exercises: these former network engineers couldn’t resist responding to clients’ IT requests. 

 “We were helping where we probably shouldn’t as a marketing company,” Town admits. “But we realised that if they weren’t successful, we weren’t going to be successful.”

Seeing that the IT companies in his client base wanted to sell hosted services without worrying about scaling the technology, Town split the services arm away from Exia and launched a separate vehicle, Hosted Network. The company provides productisation and service for SMB to mid-market IT providers. Now three years old, it briefly explored selling direct before moving to a 100 percent channel model

Exia and Hosted Network plug a tricky gap in the market – the transition to cloud business models. Resellers “don’t have the time, money or skillset to transition into a cloud-based business”, Town says. “The smaller guys call us and say what should we do, how should we go about this?”

The full-service model is very different to the self-serve approach of Amazon Web Services. What began as a white-label desktop-as-a-service now includes IaaS, Microsoft Active Directory, file servers, wholesale broadband and VoIP.  Town calls it an office-in-a-box, though resellers aren’t forced to sell the whole package. They can pick and choose. If a reseller finds it needs to match a VoIP proposal from a telco, it can quickly grab the phone service, Town says. “Not everyone is going to buy everything from us, but now they’re not losing out to Telstra or Commander.” 

Hosted Network’s customers can protect their patch in areas outside their comfort zone, and they retain the direct relationship and revenue with the customer. The beauty of the SMB market is that business owners can make a decision and roll out new technology much faster. This attitude can lead to big sales, but it can also put a reseller in a bind when the scope involves technologies outside of their competency.

“Send [SMBs] a proposal and they’re like, right, let’s move everything. As a provider, you have to be across a lot more,” Town says.

The biggest business benefit has nothing to do with technology. Resellers offering Hosted Network-backed services receive payment as recurring revenue, collected monthly. “If you’re dealing with server replacements, you have to do the hard sell at end-of-life. Some SMBs don’t want to do that.”

In the past financial year, Hosted Network jumped from 10 to 40 partners. It also switched from a Citrix framework to VMware. While the take-up of SaaS in accounting and productivity suites is strong, businesses are held back by legacy apps. Consequently, desktop-as-a-service is still going strong, with clients in federal government and corporates as well as small businesses.

Town sees a lot of work in SQL Server, bespoke apps and CRMs, terminal services and Active Directory. “The Australian market is very heavily dominated by Microsoft products.”

Town is bullish on the channel despite the consolidation among vendors. While the entire hosted Exchange industry was wiped out almost overnight with the release of Microsoft Office 365, value-added resellers are poised for growth, he says. There is plenty of unmet demand in cloud software such as Google Apps implementations and the accompanying ecosystem. “With the cloud market constantly growing, there are all these opportunities that weren’t there previously.”