Pax8 president Nick Heddy on P2P sales, monetising AI agents & SMB sales

From door-to-door sales to cloud marketplaces – Nick Heddy knows a thing or two about the way selling IT has changed.

Over a decade ago, before the Pax8 president and chief commerce officer joined the now 40,000-partner cloud marketplace, he was dropped off at business parks to try and sell SMB technology bundles.

“Voice over IP and bandwidth was the core and then we would bundle that with your email box, basic security, basic backup,” Heddy remembers. “I would have to go door-to-door, and nothing teaches you sales or how to break ice like getting thrown out if you're not good enough in 30 seconds to get more time with somebody.”

Cold sales calls remain, but digital marketplaces have grown – by a compound annual growth rate of 84 percent in the five years to July 2024, Canalys reported last year.

And marketplaces continue to evolve, with cross-sell and up-sell tools, customer analytics, ways to monetise AI agents, and embedding into RMM platforms.

Heddy sat down with us this week in Sydney during a visit to Australia to talk about challenges for SMB technology partners and what’s next in the cloud marketplace story.

Question: What is the biggest challenge you are hearing about from SMB technology partners?

I think buying behavior is changing from SMB customers. They're behaving much more like consumers and so selling to them in a B2B way is absolutely going to be one of the challenges. If you do not have a digital journey for prospects and existing customers, for them to engage with you in that way, I do feel like you are going to have challenges. You are relying on either yourself as the small business owner and biz dev and sales for your small organisation to touch all of your customers and all the prospects that are out there. That is the biggest challenge I'm hearing – how do I scale biz dev inside of my organisation?

If you do not have a digital journey for prospects and existing customers...you are going to have challenges.

Last year Pax8 introduced Storefronts. How do they fit into partners’ sales process?

We believe that sending somebody a PDF of a recommendation about what they should buy is very old school. New school would be ‘Here's a link, Mr Customer. Why don’t you come in and interact with this storefront that I have curated for you.’ It has some of those recommendations, but also the whole line of products that are supported by that managed service provider. You as an MSP get to choose the products that you have on your shelves and you invite that customer into your digital storefront and allow them to, while they're looking for a CrowdStrike or a SentinelOne, also see a Dropsuite on the shelf, which maybe the customer wants in their IT stack as well.

If you buy into half of what Jay McBain says about the 28 steps that are in a digital buyer's journey, I believe that the first 11 steps in his journey, as he maps it out, should be digital. It is hard for a human being to take a customer on that 28-step journey if 11 of those steps should be ‘Let me research on my own. Let me go ask people. Let me see how others rate this.’ The first 11 steps should be digital and we should send a notification to a managed service provider when those digital triggers have been signalled, saying now it's time for a human interaction. Storefronts is the way to automate those first 11 steps in that digital journey, or that sales process.

Demand for AI solutions created lots of technology consulting work last year, but some SMB technology partners weren’t geared for that sort of work. Some argue that the opportunity will be more straightforward for these businesses once more “AI-ified” products reach the market. What do you think?

It is certainly one option to sit and wait for someone else to deliver it to you.

When I think about AI, I think that what lean manufacturing did to industry, AI is going to do for every industry. Copilot is an example – it is the UI for AI, but then you can build it to do anything you want it to. And so I think what it's going to do for managed service providers who lean in and are early adopters, it's going to allow them to harvest their IP like never before for the problems that they are solving every day. But if you treat it like a fancier search engine instead of a new employee, then you get out of it what you get from Googling something.

you've got an opportunity to not only monetise [IP] with your customers, but other partners.

Microsoft has developed a framework for how MSPs should be thinking about it. Data retrieval is the most simple. The next stage is ‘if A then B, if C then D or E’. The last phase is allowing for digital signals to kick off an agent to solve a problem it's never seen before, because you have established a logic for it to solve that problem. And when you get to that stage you're unlocking productivity.

I think one of the mistakes early on when AI came to market is [people] said, ‘All your employees are going to be 20 percent more productive or get 20 percent of their time back’. That doesn't often fall to the bottom line. If you can use it to solve new problems as they're coming up, or solve problems that are the same every time they come in, and you can allow someone to solve another set of challenges, that is a more interesting value proposition. So I think you're going to see an evolution in the next 12 months.

If it were me, I wouldn't sit on my hands and wait for somebody to deliver a SaaS product that has been “AI-ified”. I would harvest my IP and solve the unique challenges that SMBs face every day, that MSPs are more uniquely positioned to solve for and harvest IP for. Because then you've got an opportunity to not only monetise it with your customers, but other partners.

What does the business opportunity for partners with AI agents look like to you?

I think an interesting opportunity for managed service providers who are solving a problem for one of their customers, is to not only think about monetising it with that one customer, but build the best agent to solve a problem in healthcare, legal – pick an industry. There's not many people who are trying to solve problems for SMB customers, I don't think. Publish that agent in a P2P style – put it into Pax8’s agent marketplace, which we hope to have GA this year – and now you have another vehicle in which to monetise that agent, leveraging AI for other partners to consume.

Pax8 announced a partnership with ConnectWise last year. What’s the next step in that partnership?

Our marketplace is geared specifically for managed service providers, but can I take that great marketplace that was built to serve SMBs and activate new ecosystems with it? So if ConnectWise’s CEO Manny Rivelo and new CRO Joe Mercurio want a marketplace – I think they believe themselves to be a security platform – if they would like the best-in-the-world marketplace to be embedded into their platform to serve the SMB customers that their partners are serving downstream, that's right in in my wheelhouse. We are working on activating the marketplace inside of their platform today, it's a current project. You might see them at [Pax8] Beyond in Denver in June, touting that. It’s almost ready.

We are working on activating the marketplace inside of [ConnectWise's] platform today

Pax8 built its reputation as a marketplace made for MSPs. What’s next for Pax8?

One thing to clearly go on the record is we're not a distributor. Pax8 is a marketplace and we're a platform. It's where the ISVs, the MSPs, who consume and then resell to customers, it's where all three of those groups can come together and exchange goods and services.

But we're also a platform, and when Scott Chasin came on board, he describes it as ‘Pax8 needed to decide what they wanted to be when they grew up’. We had been 10 years in market as a commerce marketplace that serves managed service providers, and that's not going away. The managed service provider is always going to be the hero of the Pax8 story. But vendors need to get value from our ecosystem as well. And there are hundreds of thousands of ISVs, and the number of new ISVs emerging is actually growing faster than managed service providers.

So we're trying to define behaviors of stakeholders when they come to our marketplace. They usually want to buy and they usually want to sell, but sometimes they want to buy, wrap services around and resell. So sometimes they're a customer, sometimes they're partners, sometimes they're an ISV. And so when you start defining these user-based roles it allows for them to behave in any of those fashions.

So think about a P2P marketplace where partners can say, ‘Hey, you're amazing at Salesforce. I don't know much about Salesforce’. And a partner can publish an offering for another partner to then consume, gaining conditional access to an AWS or Azure environment. Once that project is done, the keys are handed back to the general contractor, if you will – the managed service provider who's tasked with building a house. The house that this customer wants requires a roofer, an electrician, someone who specialises in Italian marble flooring. So we're trying to define those user edge cases and those behaviors that allow for people to act in those more modern ways.

We've got a long ways to go before we are close to [the market] being saturated.

What does the market opportunity look like for Pax8 and its partners now?

Australia and New Zealand are growing faster than any market that we are in. If you think about the global TAM of SMBs – Pax8 tends to focus on what I would call ‘very SMB’, and I categorise that as the 1 to 25 segment – it’s a market that is wildly under-penetrated. If you look at Microsoft, it does the best job on reporting for the ‘very SMB’, they're saying sub-10 percent penetrate, meaning 90% or greater is white space for the managed service providers that can automate some of that digital journey for their customers. We've got a long ways to go before we are close to being saturated.