Buying products and services on subscription is growing in popularity. So, how can the technology channel develop an effective go-to-market strategy to tap into this trend? Tech Data’s Roman Rudolf explains how partners can transform their business model with Technology as a Service.
The subscription economy is growing very fast in both areas, B2B and B2C. Subscription-based consumption models are being adopted in markets like music, TV, furniture, flowers, food and also IT and mobile hardware, software, and peripherals.
So, what is the best approach for a channel partner to join and go-to-market in the subscription economy?
The market needs and trends
First, it is important to understand the scope of this new model.
According to research by MarketandMarkets, the global device-as-a-service market will grow from $50.3B in 2021 to $303.6B in 2026. Zuora’s annual Subscription Economy Index™ (SEI) report revealed that subscription businesses grew five to eight times faster than traditional business ones. Last year, subscription-based businesses demonstrated revenue growth at a rate of 11.6%, while revenues of product-based peers declined. In line with these findings, The End of Ownership report discovered that 78% of international adults currently have subscription services (71% in 2018).
Like for so much else, the pandemic has accelerated this trend and we have seen B2B businesses of all sizes seeing the increased digital dependency as a catalyst for change and the subscription model as an opportunity to boost technology sales. Given the huge potential for profit and the need to stay competitive and profitable, this trend has also extended into how vendors provide technology as well – jumping on the bandwagon and introducing their own subscription-based business models. According to IDC’s Industry CloudPath Survey, 53% of all software revenue will be generated from a subscription model by 2022.
Business customers now also require access to better digital tools faster and an enhanced user experience to compete, thrive, and survive. That said, if new technology is required, it can be hard to justify the high upfront outlay in hardware and software. This consequently makes our Tech-as-a-Service (TaaS) model attractive because the cost of technology is boiled down into a monthly charge, where only what is used is paid for.
By transforming the way technology is procured, channel partners can improve profit margins, shorten technology refresh cycles, and sell more services than ever before. TaaS can provide a fully integrated and automated solution that combines hardware, software, and services into a single subscription for customers, giving them access to the latest technology, easy upgrades, and optimised IT budgets. Creating loyal, long-term, sustainable relationships with customers for life – by choosing the right TaaS programme, resellers will strengthen their position as a trusted advisor. Users will not need to obtain a loan to purchase the equipment fit for the job. This is especially important for small and medium-sized businesses (SMBs) who do not have deep pockets to pay for the latest solutions. However, they know that having the best technology can be critical to their business, helps them attract the best talent to work for them, and improves their marketability.
Scale up, innovate, and differentiate
TaaS offers SMB resellers the chance to scale up and innovate their service offerings to their end customers. It also allows resellers to benefit from a new marketing and selling approach that will lead to deeper customer relations. The ability to trade-in old devices allows channel partners to increase sales of new equipment, boost sales of higher-end equipment, and nurture deeper customer relationships. A subscription model provides resellers with the opportunity to develop, offer, and build in their own services to the customer offering to differentiate their business and grow.
TaaS journeys are rarely the same as each one really depends on business needs as we and our partners have discovered with our TaaS programme. For example, Tech Data partner and Italian telecommunications business, Gruppo Aura, required a reliable and easy to use distributor to kick-start its partnership with Vodafone and Apple. By adopting TaaS, it provided the company with the perfect synchronisation of all portals, making calculations very fast and simple. As many of their customers are used to using a financial lease and worry about not knowing how much they will be paying at the end of the contract, Gruppo Aura created tailor-made solutions using TaaS to take care of development, integration, financial management as well as pre-and post-sales assistance to ensure the latest and most innovative solutions are provided. The business is now able to propose financial formulas for the rental of completely customised devices that guarantee greater flexibility for the customer compared to traditional purchases – allowing users to introduce iOS and macOS devices with great tax advantages and the possibility of renewing the devices after 24/36 months.
In Spain, another Tech Data partner, technology consultancy Efor chose TaaS to help anticipate clients’ existing and future needs. It allowed the business to create more secure and flexible relationship models with clients, that could be adapted according to financial needs and therefore secure transactions and free up risk, which is very important for solid growth. As an end-to-end solutions provider, TaaS allows them not only to sell devices but also to offer agile financial solutions that complement digital transformation. With TaaS, not only does the channel partner get the price of the devices but they can also calculate the instalment and focus the offer from another perspective, adding value to the operation – something customers value greatly.
The benefits of applying the TaaS model can be great. For example, our partner British IT support company, GEEX, decided to switch to the leasing model 10 years into business to make it easier to sell to customers and provide the latest gadgets. Since using TaaS, turnover for GEEX has grown from thousands to over £2 million and leasing is now 80% of the business.
TaaS really is a model that adds value when considerations around financial solutions and the acquisition of equipment need to be made. We are finding that it helps channel partners to differentiate their business in an overcrowded market and empower them to meet customers’ IT and budget requirements, and to always deliver an exceptional service.
Traditional financing solutions are very rigid and sometimes with delays during the sale – proposing this alternative service gives customers added confidence. When properly created with flexible funding options, TaaS is a simple one-stop-shop model that offers differential value propositions, helping resellers to secure the sale and give the customer ease of purchase.
Establishing a service layer that helps customers manage the lifecycle of devices reflects positively on the marketing and sales process. Selling should be a consultative process that delivers value; TaaS empowers channel partners to build trust and elevate the customer relationship to another level. Channel partners can substantially grow their business by investing time and resources into reimagining their go-to-market strategy via TaaS to unlock the power of user-centric, data-driven growth, and gain a competitive advantage. The subscription model helps businesses to drive greater average spend, launch a virtuous cycle of using data to better serve consumer needs, and inspire loyalty – providing a unique value proposition to consumers who appreciate the convenience, novelty, and curated experiences during the pandemic and beyond.
Roman Rudolf is VP Strategy and Services EMEA at Tech Data, and was previously VP Integration EMEA, responsible for market growth and portfolio expansion. He has over 20 years’ experience in the technology industry including senior executive positions at Avnet Technology Solutions where he was VP and Managing Director Central Region, and Global Director Mergers and Acquisitions.
Visit Roman’s LinkedIn profile here