Kaseya's launch of its software-as-a-service (SaaS) model, announced on Monday in partnership with Ingram Micro, has sparked anger among some of the vendor's resellers.
Kaseya has denied accusations from some Kaseya resellers that the low pricing of its SaaS service - $9.95 for an account and $1.50 per seat per month - has undercut the cost of bulk licences sold directly by the vendor.
At the heart of the debate is a difference over how Kaseya's licences are used. Kaseya intends for its licences to be sold in only one way - to provide a full managed service to an end customer.
However, largely as a consequence of the vendor's insistence on selling large blocks of licences for tens of thousands of dollars, Australian resellers have devised various methods - some unauthorised - to draw extra revenue from unused or underused licences.
These methods and the business models they supported were now threatened by the low-cost SaaS service.
Dan Shapero, Kaseya's senior vice president of business development and channel marketing, SaaS, said there was a "misunderstanding" by some partners who were comparing prices of two different products.
The SaaS service, sold as IT Toolkit, was limited to remote control and troubleshooting.
"There's no automation, there's no backup, there's no anti-virus. It's a fairly finite set of IT services," said Shapero.
By comparison the Master IT Service Edition (MITSE) licence gave resellers access to the entire Kaseya platform, said Shapero.
"That's everything from patch management and help desk, ticketing, full scripting engine with backup and endpoint security, monitoring - remote control is just one of the features," said Shapero.
He added that resellers who bought licences owned them outright, whereas resellers of the SaaS product would need to keep paying for the licences every month they used them.
Kaseya partners also pay an annual maintenance fee for MITSE licences equivalent to 20 percent of their purchased value.
However, some resellers who had been selling Kaseya as a tiered range of services, from basic remote control through to a full managed service, believed the vendor had "devalued" their licences.
"If you purchase a 500-seat licence it costs you $67,000, which means you have to resell at $14 per seat to make a profit," Darren Davis, director of the Consortium Group, told CRN. "But you can now go to Ingram and buy it per seat - something we're not allowed to do - for $1.50."
Davis said he had paid $12,000 for his first block of licences two and a half years ago, spent another $12,000 a year later on a second block and bought his third in August for $23,000.
"But to now say you can get the product for $1.50 is a welcome smack in the face," said Davis.
Paul MacNeill of Pro Integrations said he also offered the licence as a basic or premium service to his customers.
"If I deploy an endpoint from my (MITSE) licence pool to that person, there's no discretion to the type of licence that you deploy. I paid $130,000 for 1250 seats. If I sell them out at $1.50 immediately I'm using a very expensive licence in a low value way."
Next page: Licence resale market under pressure
Another sore point is that some resellers have felt that Kaseya did not give them enough information about the SaaS model and its pricing structure.
Kaseya insisted that it had communicated to partners its intentions throughout last year.
"There was [communication]," said Shapero. "I read a few comms streams [on blogs]. Some people heard it and some people didn't."
Shapero said that enthusiasm for the recently upgraded K2 platform, which contained many new features and extensions, may have "overshadowed information about SaaS. That's always possible."
However, the vendor ran a promotional campaign in October, which was extended through December, to buy extra blocks of seats before prices rose 30 percent with the K2 upgrade.
Pro Integrations and Consortium Group took up the offer and paid for another block of licences late last year.
In October, "we got an email from our [Kaseya] account manager saying you've got seven days to place an order. 'Do it now or miss the cut off period for your licensing,'" said MacNeill. "We took them on their word but that was really a sales technique to get some commitment up front.
"There was never any disclosure around their SaaS model or how aggressively priced that would be. Had we known that that was the case we wouldn't have bought up on K2 licences because we would probably have pursued the licensing through the SaaS model."
MacNeill said he had subsequently invested in $120,000 in server hardware and software, "the principal nature of that upgrade was for K2".
"That's a kick in the guts as well."
"From a reseller's perspective it puts a pretty sour taste in our mouth when a software vendor goes to market below their software licensing costs to deliver the same solution," said MacNeill.
Several Kaseya resellers resell unused licences to other resellers - in effect providing a Kaseya SaaS service themselves. This method has offset the cost of buying licences in bulk by drawing income on licences that would otherwise be idle.
One reseller said the SaaS deal with Ingram would cut off additional revenue "selling system administrator consoles to system administrators", which he said accounted for 15-20 percent of his managed services revenue.
"It's money for jam because we've already bought the licences so it's a sunk cost, but now it's being compromised even further in the space where there's plenty of other SaaS providers," said the reseller.
Sheparo said the reselling of licences was "strictly prohibited in our licence agreement".
"There are three clauses explaining that," he said. He added that he would contact the reseller and suggest entering an affiliate program for referring resellers to the SaaS service.
Sheparo said that partners bought licences to deliver a fully managed service, rather than to offer a range of services. "They don't necessarily buy a licence just to sell one little piece of it and call it remote control."
Kaseya country manager Tim Dickinson said the full licence had greater revenue opportunity. Resellers could earn $50-$100 per month per desktop and $350-500 per month per server and have a very profitable business, he said.
"A guy that doesn't make any money in the first month, if he was savvy he would go sell his first managed services contract and then go buy Kaseya, because one services contract will probably cover the cost of his licences," said Shapero.
"When I talk to our customers, they've got boats and planes and fast cars. They've been building pretty healthy businesses with Kaseya," said Shapero.
Sean Bloch, managing director of managed services provider IT Manager on Demand, said he "wasn't fussed" about the SaaS launch.
"I don't think it's going to change the pricing that much to the end user. You're still going to have to charge $60 or $70 a month per workstation to make money," he said.
Shapero said Kaseya was going to launch two more SaaS services "early next quarter" which would bring more advanced features. IT Workbench would offer simple monitoring, patch management and ticketing, while IT Centre would be similar to the full licence from Kaseya.
However, these SaaS products would be priced relative to the full licence, said Shapero.
"I can assure you that when you look at that price per end point and the value you get when you compare feature to feature, the licence option [bought in blocks direct from the vendor] is always going to be the most affordable option," said Shapero.
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