Age of the IT Toolsmith
In Actionable Advice, I update an article I first published in Channel Insider back in November 2020 called “The New Software Provider Business Model – Toolsmith.”
The regularly recurring newsletter of Senior Resultant Howard M. Cohen, 40+ year tech channel veteran and creator of compelling content for and about IT and the techChannel.
In this issue of techChannel.Results, we’ll examine the strategy behind the many software developers and hardware manufacturers who have changed their business model to what I call The Toolsmith Model. These progressive thinkers have gone beyond asking techChannel partners to resell their software and hardware products. Instead, they offer them up as tools the partners can use to create, deliver, and significantly profit from new services.
We’ll also learn about one of the many incredible organizations that are supporting the entry, growth, and success of women in the techChannel.
The latest article posted recently to techChannel Marketing:
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Alliance of Channel Women
The Mission
“Our mission is to advance careers and leadership roles for women at the highest levels in the technology channel by providing education, community, advocacy and opportunities for personal growth.”
The History
The Alliance of Channel Women was formed at the 2010 Channel Partners Conference & Expo when channel sales pros Nancy Ridge and Jan Sarro began a conversation over dinner about how few women there were in the tech channel and how few there were in leadership, ownership or revenue-generating roles. They were eager to find a community of like-minded women but found many existing groups for women in tech focused on females in technical roles who could not relate to them — women who generate revenue every month for their businesses or their companies.
The conversation grew to include two more channel sales leaders Karin Fields and Stacy Conrad. The four women agreed that rather than see each other only as competitors, they also could be collaborators. Teamwork began that very night! The Alliance of Channel Women was created.
A decade later, ACW is home to hundreds of women and men in the channel who are focused on helping women to achieve greater success in their channel careers through education, mentoring and collaboration.
IT Community Watch
First and foremost, fifteen years is an impressive run for any association, and the Alliance of Channel Women (ACW) has clearly made the most of the time, creating leadership development programs, mentoring programs, meaningful awards, their own job board, community connect, career coaching programs, and several highly active committees.
Their devotion to the key values of diversity, equity, and inclusion are well illustrated in their highly active participation in programs like Women’s History Month, Juneteenth, Pride Month, Hispanic Heritage Month, Asian-American Pacific, and many others. Currently they are in the process of establishing a philanthropy committee to extend the great work the association does for the community at large.
Their monthly newsletter goes well beyond encouraging young women to consider careers in tech and support the careers of those already in such careers. Webinars are also featured, including June’s session on “INCLUSIVITY: Embracing the Spectrum of LGBTQIA+ in the Workplace.”
Clearly, ACW serves far more than women in the IT and Telecom channels! Their reach extends far further.
Another item featured in their June 2024 newsletter serves to define a focus that is clearly primary, as they announce that “ACW Supports #BeyondCeilings Pledge.” The headline featured on the featured image explains, “From the Moment Girls Start to Dream, They’re Told the Sky Has Limits.” Posting this video to their newsletter serves as a testament to ACW’s commitment alongside global partners including the Women in Tech Global Movement and the UN Women Global Awareness Campaign.
Women, and men, seeking to advance their own tech careers, encourage the next generation to follow them into the industry, and make meaningful contributions to the entire IT and telecom community will find a great home with ACW.
To learn more about ACW and join the organization, click here. Their website can be accessed at https://allianceofchannelwomen.org/engage.
The Age of the IT Toolsmith
In this issue I update an article first published in Channel Insider back in November 2020 called “The New Software Provider Business Model – Toolsmith.” Since then, many more software providers have adopted the model, quickly becoming default mode for MSPs.
When cloud computing became popular, what started out decades before as Value-added resellers (VARs) morphed into managed service providers (MSPs), mainly because a lot of easy revenue simply evaporated. It was no longer easy to sell servers, storage, and other higher-priced products. It became barely possible, and never very profitable.
This created a new imperative for resellers to find new sources of revenue and profit, which motivated the movement to MSP. Services were always far more profitable than products, making them the obvious choice for new business generation.
They then faced another challenge. It was no longer easy to add new revenue simply by adding another vendor product to your lineup. Adding a new service was a far more difficult proposition. Training, tooling, adding new skill sets, developing methodologies, are all long-term projects. They understood all too well that the only two ways to add new revenue were to sell more to existing customers or create new ones, and creating new ones was five times harder.
To sell more to existing customers, you had to find new things to sell to them. Products were no longer an available option, and services would take months to add.
Finding Something New to Sell to Existing Customers
Some MSPs wisely looked to their own technology teams to come up with new services customers would appreciate. But even they eventually came up against the limit of their creativity and all “new” services started looking the same.
Software Providers See the Opportunity, and Seize It
Insightful software providers saw the changing business model as their resellers transitioned to a services-first model. They realized they would want to evolve and adapt their own business models to take fullest advantage of the opportunities presented.
Many software providers produce applications that can be used to measure and improve the performance of various aspects of computing. They also provide optimization software to increase the throughput of networks or the capacity of storage systems. Automation tools reduce the workload on human operators and the likelihood of errors. Security scanning and hunting tools. Workflow automation. Visual “building-block” software development tools that eliminate the need for coding. Anomaly identification and notification. Database process templates. The list goes on.
How should they change their business models to best accommodate the new MSPs their resellers had become?
Stop Selling Our Software!!
Software company executives remembered that what was old often becomes new again. Back in the earliest days of personal computing some of them offered a “consultant’s license” to resellers who wanted to buy their software but use it themselves to help a customer.
Fifteen years ago, the new software selling model emerged, and it was to stop selling.
In 2009, when everybody was struggling to migrate from on-premises infrastructure to the newly emerging cloud, BitTitan introduced MigrationWiz, software designed to make those migrations much faster and much easier. Many channel partners quickly began selling this software to their cloud customers.
Others saw a better opportunity! Instead of selling MigrationWiz licenses to their customers, they bought them for themselves and used them to earn fees migrating those customers’ infrastructures for them. The cost of the software license was simply rolled into the total cost of delivering the service. The rest of that cost recovered the partner’s cost of payroll and produced a larger profit. A much larger profit.
This was among the first perfect examples of the Toolsmith business model in action. A fuller description of this early Toolsmith success is chronicled in “BitTitan: Enabling the Proactive MSP,” another CI article I published in October 2021.
BitTitan had forged the tool, and their partners used it to serve their customers. Some partners charged the same migration fee they had been charging when they performed the entire process manually even though MigrationWiz accelerated the process so significantly that it took far less time. They realized that customers weren’t buying the hours it took to do the job, they were buying the value of having their workloads migrated. Same fee, fewer labor hours. More profit. Others simply raised their prices to cover the software cost. It was totally transparent to the customer.
Tools to Wrap Your Services Around Create Your New Service Products
More and more software developers have similarly shifted gears in their sales models recently. Rather than look to channel partners to re-sell their software to customers, these developers now look to channel partners to directly purchase their software licenses and use them on behalf of their customers to make things happen for them. To deliver needed services. This software becomes a tool that enables them to deliver a service.
The ancient problem of non-existent profit margins on products was solved. MSPs made more money on the sale of the services they built around these tools.
This is the secret sauce for adding new services to an MSP’s portfolio. New things to sell to existing customers. Problem solved!
Creating a New Software Provider Relationship
Many modern software developers have re-imagined and re-architected their programs to support MSPs use of their products as tools to create services around. Some have even integrated “for MSPs” into their messaging to emphasize their evolution.
Some are now advertising their MSP customer management platforms on television commercials.
Progressive security software providers now offer their partners the ability to proactively use their security operation centers (SOC) as their own. Most individual channel partners cannot take on the expense of operating their own SOC, so the availability of their software partner’s facility enables them to offer and sell services they simply could not previously.
Training available from these progressive providers also serves as a game-changer, helping MSPs accelerate their ability to offer more and more sophisticated services that earn higher and higher fees.
Finding Toolsmiths
Toolsmith-style software providers are emerging at an unheralded rate. A simple search on “software for msps” may surprise you.
From experience, my strongest recommendation is that you begin by preferring names you know. Software providers you have been familiar with for years and have come to trust will always be your best bet for a reliable partner.
Remember also that you become more than a partner when you adopt the Toolsmith model. You become the customer. Software providers are highly motivated to help your team becoming expert at integrating their software into your offerings. These will very likely be the most productive, proactive, pleasant, and profitable vendor relationships you’ve ever experienced.
Found any great Toolsmiths? Please tell us about them in comments and the chat!
:This month’s Evolving MSP examines how channel partners will be “Coping with Copilot.” As with all previous Microsoft “big bets,” Microsoft is betting big and is all-in to making it’s AI/ML offering THE AI/ML offering.
While there, take a look at “The Evolution of Channel Citizenship” which examines how and why channel communities are so important to the growth of the industry.
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After 35 years as a channel executive I have spent the past 15 years writing for and about many channel companies including ITSPs, MSPs, CSPs, ISVs, Distributors, Manufacturers and others. To explore having me create compelling content to promote your business, take a look at my many content offerings, tour my portfolio, and contact me at hmc@howardmcohen.com!
