Pax8 Aims to Shake Up Distribution With A Laser Focus On Cloud

An upstart distributor is looking to beat legacy competitors at their own game by focusing exclusively on cloud-based enterprise software products that can delivered and billed on demand.

Pax8 has attracted more than 800 managed service provider (MSP) partners in four years as thanks to a cloud platform that allows self-service and a "bill on behalf of" feature for end user customers, according to Ryan Walsh, senior vice president of partner solutions for the Lone Tree, Colo.-based distributor.

"We got into this because we really felt that distribution was broken for the cloud," Walsh told CRN. "Those guys are great at pick, pack and ship. But when it came to cloud distribution, they weren't aligned to that."

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Pax8 was started to help solution provider transition from on-premises to cloud solutions, Walsh said, helping them figure out which products to look at and what business problems to solve. The company doesn't sell any on-premises technology, Walsh said, meaning partners typically have relationships with other distributors around traditional products.

"We're unencumbered by legacy processes – we don't have to hold onto that," Walsh said. "We can build things as the market needs it, and look forward."

Pax8 chooses leading cloud-based products in major market categories such as security, backup, mobility and infrastructure, and then provides its partners with sales, marketing, ordering and provisioning enablement, Walsh said.

The company initially intended to put its cloud offerings atop an existing platform in the marketplace, Walsh said, but ultimately decided to build a platform of its own so that it can better respond to changes in the ecosystem.

Pax8's cloud platform is distinctive since end user customers can log into a branded marketplace and order or try cloud products as part of a self-service model, Walsh said. If a channel partner is interested, Walsh said end users can put their credit card information in and get billed directly from Pax8's platform.

Walsh praised Pax8's ability to deliver personalized marketing campaigns, arguing the company goes well beyond a template and provides a platform for personalizing content providing by Pax8.

Pax8 is focused primarily on helping channel partners sell to small and midsized businesses, Walsh said, with most of its end users having less than 1,000 employees. The company also works with VARs and system integrators, Walsh said, and helps national resellers with automation of billing and other business processes.

The distributor is seeing solution providers deriving a greater percentage of their revenue from cloud and recurring revenue services since it's directly tied to valuations for partners, Walsh said.

"We're adding channel partners that are going after the market aggressively," Walsh said. "There's strong motivation to have someone who can help with recurring revenue, someone who understands the nuances of it."

Pax8 attempts to lure MSPs by identifying a geographic or vertical-specific issue they're looking to solve, fulfilling the company's initial promise, and endeavoring to upsell from there, Walsh said.

In just three years, Parker, Colo-based LeafTech Consulting has supercharged its base of recurring revenue from virtually nothing to $7,000 each month, thanks to a new alliance with Pax8, according to the company's CEO, Chris McAree, CEO of the Parker, Colo.-based solution provider.

LeafTech previously found it overwhelming to get into cloud due to the plethora of options in each product category; McAree says he was grateful when he discovered Pax8 would be able separate the chumps from the champs.

"I needed a service that would allow us to buy, support and vet cloud services," McAree told CRN.

McAree said Pax8 has strong pricing agreements with vendors, pays good commissions to channel partners, and provides both sales assistance as well as Level 1 and Level 2 technical support. LeafTech has therefore converted most of its clients to email, antivirus, antispam, email archiving and cloud services products sourced through Pax8, McAree said.

LeafTech continues to work with legacy distributors around specific hardware sales, but McAree said the process is very siloed, with his company having to communicate with different people for each separate product area. Conversely, McAree said 95 percent of his dealings with Pax8 go through the same person.

"As a small business owner being torn in 12 different directions, there's nothing worse than having to deal with red tape," he said.

McAree said LeafTech hopes to get its share of monthly recurring revenue up from $7,000 today to $10,000 by the end of 2017.

"It's money in your pocket before the month even starts," he said.