Pax8: MSPs Need To Get Clients Digitized To Survive Coming Cloud ‘Tsunami’

MSPs who don't embrace digitization are putting their businesses and their clients are risk, said Pax8, which is looking to help mitigate that risk with a stack of technologies including in the near future a full range of networking and communications capabilities.

MSPs need to prepare for a coming "cloud tsunami," and the best way to do so is be prepared to assist clients digitize their operations with a stack of integrated technologies.

That's the word from Nick Heddy (right in photo), chief revenue officer, and Ryan Walsh, chief channel officer, at Denver-based Pax8, a cloud-focused distributor and builder of a stack of multi-vendor technologies.

Heddy and Walsh told an audience of MSPs at this week's NexGen 2019 conference that Pax8 was founded in 2012 with the aim of helping MSPs survive what Heddy called the coming "tsunami" that is the cloud, and in the last year helped partners with over a million Microsoft licenses, with 140,000 in the last month alone.

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"We're not successful unless our partners are successful," he said.

NexGen is produced by The Channel Company, CRN’s parent company.

Heddy said there are three main ways MSPs can survive the cloud tsunami.

The first is to build a best-in-class sales and marketing engine, starting with the compensation of an MSP's sales reps, and move away from the common misconception that capex sales bringing in money up-front is better than slowly building an annuity program, he said.

Pax8 successfully comps its sales reps on annuity sales using the Rule of 78, Heddy said. With the Rule of 78, a sales rep who every month signs a new customer that generates monthly recurring revenue of $1,000 will bring Pax8 $78,000 in revenue for that year.

"Year two is even better because I'm going to be 12 times 12 or $144,000 on that revenue generated from that sales resource," he said.

The second part of dealing with the cloud tsunami is building the right culture, which includes moving from an exclusive focus on sales and towards building the right kinds of values, Heddy said.

Pax8 has four core values: Advocate for some cause, innovate by constantly challenging how things are done, elevate employees through constant education, and celebrate the wins. "You have to lead by example, and then you'll see the right kind of culture naturally and organically form in the company," he said.

Walsh noted that an earlier presenter at NexGen, Nancy Rademaker, who focuses on the impact of digitization on consumer behavior, called attention to culture, and in particular said culture does not grow inorganically.

"You really have to do things to nurture it, to practice it, to bring it to life," he said.

Pax8 started focusing on those four values several years ago when the company was quickly growing and moved into a larger building, Walsh said.

"We put out a bunch of words that reflect the values that we thought contributed to our success," he said. "And we boiled it down and boiled it down to the four words Nick was talking about. And I'll tell you: Every all-hands [meeting] that we have, we talk about it, we give a shout out within the company to really bring that culture out."

The third part of surviving the cloud tsunami is to train your people, Heddy said.

"There's an old saying, 'What if I train my people and they leave my company?" he said. "Well, the inverse of that is, what if I don't train my people and they stay. We think it's important to invest in your people and make sure that they're getting the right type of career development."

Finally, Heddy said, it is important to value diversity because MSPs live in a very diverse world.

"At the end of the day, people buy from people that they know, that they trust, and that they can identify with," he said. "It seems like it would be the easiest thing to do to get a whole bunch of people who look and act like yourself because you know how to manage and motivate them. But having diversity is what creates a well-rounded company. And if you are bottom line-focused, the Boston Consulting Group says that diversity generates 19 percent more revenue."

Walsh added that a lack of diversity can be a threat to innovation because it leads to groupthink.

"Having a different perspective, different way of thinking, different way of approaching decision making, is really what gives us an edge that allows us to succeed," he said. "Because we can be copied. You can look at what we're doing, and try to replicate it. But it is really important to us to maintain that diversity."

MSPs who see the growing cloud tsunami need to be ready to digitize their clients by growing and standardizing their technology stacks, Heddy said.

Walsh, citing IDC studies, said that IT-related spending will reach $7 trillion between 2019 and 2022, and by 2022, over 60 percent of global GDP will come from digitized operations, offerings, and relationships. And, he said, CompTIA found that standardized technology stacks "supercharge" digitization efforts.

"This is improving the now and creating the next," he said. "This is something that we think about quite a bit in trying to help our partners. It's very common. Many of our partners are starting to build a cloud practice. And they may start that with buying Microsoft products. But if you stop there, you're going to be vulnerable."

Digitization is key to providing cloud services, Walsh said. "[Buyers today have] high expectations and low patience," he said. "You have to turn on those services instantly, or else they are walking."

Pax8 has built a platform that helps MSPs stack their required technologies, with APIs at the heart of that stack to put together the different technologies and validate their capabilities while providing automation and insights related to future sales opportunities, Walsh said.

Heddy also previewed some upcoming new technologies Pax8 is planning to introduce in the near future. "This is called the next generation stuff," he said. "This is not fully baked yet, but I can give you guys a little peek what's going on. This makes our PR person very nervous."

Pax8 is currently working on bring a new networking technology category to its stack including SD-WAN (software-defined wide area networks), UCaaS (unified communications as a service), and CCaaS (call center as a service), as well as bandwidth to connect to the cloud, Heddy said.

"We think Pax8 partners deserve all the money, and we want to enable it in the same way that we have with our other categories. There's lots more information coming soon, but we will be adding vendors a bunch of time in the very near future."

Pax8 is also planning its first large-scale conference, Wingman 2020, to be held in Denver in early June, Heddy said.