When is it wise to outsource to other partners?

It took a long time for the naysayers to recognise the momentous nature of the shift from on-premise to cloud. I’ve lost count of the times I’ve heard, “The cloud is just a remote server, it’s nothing new”.

However, I have to concede that the revolution may have had less of an impact on the channel than I had first expected. More than ever, small and medium businesses still need someone to translate the world of technology – which is expanding at a greater rate than ever before. 

Cloud milestones have been coming thick and fast in the past couple of years. The launch of Microsoft Office 365, the sunsetting of Small Business Server, the launch of an Australian data centre for Amazon Web Services, mobile services and payments, online accounting software, Apple Watch and wearables, sensors and the Internet of Things.

Yes, hardware margins have fallen off a cliff. Resellers now sell services instead. But the most important aspect is still the same as before – the ability to choose partners wisely. In fact, you could argue that it’s more important now that partners are supplying even more of the stack. 

Take Microsoft. Small Business Server required so much set-up and hand holding to get it to work. Now with Office 365, the skills are still in support but the emphasis is on the quality of your help desk. 

The questions are still the same, although the answers may have changed. How can you get Microsoft’s cloud suite to work best with other line of business applications? Now it’s about SaaS integration, APIs and so on. 

One question that is definitely new – how much should I hand off to partners? How much should I still do in-house? Recently I spoke to Hosted Network, a Sydney-based outsourcing outfit that is doing well supplying desktop-as-a-service, VoIP and IaaS to SMB resellers. 

Hosted Network gives resellers a white-label service to move on-premise applications to virtual servers and to move faster into a managed services provider model than they could by doing it themselves. 

The reseller still controls the billing and most importantly the customer relationship. Once you outsource the back-end of the business – product and service delivery – you’re really only as good as your front house operations. Sales, marketing and customer service are areas in which resellers haven’t always been that strong. 

This is where resellers will need to focus their efforts to differentiate and to grow quickly. In fact, a strong sales organisation with the right partners behind it could pick up a lot of customers. A reseller who still insists on providing all services in-house faces a bigger challenge scaling the business. They have to add people to front office and back office, which places more strain on management to maintain a deep bench of highly skilled employees. 

There’s nothing like a large payroll to keep you up at night.

Compare that to a highly outsourced reseller who resells cloud services from vendors, distributors and specialists (there’s a lot to choose from these days…). The most important metrics become the ratio of account managers and help desk staff to customers.

Maybe they make lower margins with outsourcing but there’s a lot less stress, and the most important part in any business is that customer relationship. Some of the biggest factors in valuations are the number of customers and their level of happiness with the business. 

The outsourced model is not perfect. Running a help desk these days is a bigger challenge than ever because the reseller has so little control of a customer’s tech environment. Employees are working on non-standard equipment thanks to BYOD; the proliferation of SaaS means company data can be siloed all over the place. 

That difficulty is also opportunity. It means increased churn in customers looking for someone who can do it right. Double down on customer service, sharpen your sales compensation and step up the marketing – it’s a good time to grow. 

Sholto Macpherson is a journalist and commentator who covers emerging technology in cloud.