The Cranky Admin

Bundling: the Future of IT Services?

Subscription costs are overwhelming the SMB.

I believe there's a gap in the market for the delivery of IT services as a cut-price bundle. It may even be that this is ultimately the future of the channel.

I don't know about anyone else, but I can't afford today's cloud-delivered IT. Despite this, I'm increasingly dependent on cloudy applications, if for no other reason that it seems developers aren't actually writing anything else. The problem with applications as a service is that each of them come with a subscription fee. Combined, those subscription fees are often just too dang expensive.

Floor Cost
The problem with many subscription-based services is that I both don't need to use something on a regular basis, and yet need access to it instantaneously whenever I do need it. The classic example of this is Photoshop.

I'm not a photographer, nor a professional graphics nerd. Despite this, at least a couple of times a year I need to dirty my hands with pixels and get my image on. Way back in the beforetime, this wasn't a problem. I could buy a copy of Photoshop every three years and feel like I got my money's worth.

The initial cost, some $700, was a little steep. That said, Adobe had always offered upgrades for significantly less and it worked out OK. When Creative Cloud launched, Adobe was asking $20 USD per month for a single application, which works out to $240 USD a year or $720 USD every three years. That was more than double what I had been paying on my "it's OK to be out of date" approach, and made Photoshop a tool I could no longer afford. Especially as it launched with a yearly mandatory commitment.

TeamViewer is another example of such a product. It's not a solution I use every day. It is, however, a solution I need to be there every day. TeamViewer wants $800 a year from me and enforces this through a program of irritation wherein older instances of TeamViewer can't log into systems sporting newer versions. They also hide the link to previous versions of TeamViewer, making it miserable to stay on older versions for a few years.

At $25 a month/$300 a year -- or even $30 a month/$360 a year -- I wouldn't have any room for complaint. I'd just shovel my money at TeamViewer and away we'd go. Unfortunately, like Adobe, they want to charge double what I feel their solution is actually worth, and nobody ends up happy.

Cell phone and SIP providers, Office 365, DNS registration, Web hosting, Amazon instances, Salesforce, Evernote, Sync.com, Dropbox, DocuSign, WebEx, and on and on. Enterprises can negotiate reasonable prices, but individuals and small businesses are stuck paying for their discounts.

We need access to these services, and since we don't use them nearly as often as our larger rivals we’re less of a drain on vendor resources. But the minimum cost to get access to the stack of subscription services a modern business relies on is increasingly too high.

Bundle Up
Back when on-premises IT was a thing, channel partners would do "integration." They'd take hardware and software from multiple vendors, lash it together into a single functioning whole and sell that stack as a single solution.

The channel got good at industry-specific solutions. If you were a photographer, you'd be able to find a channel partner that sold storage-heavy solutions with good backups bundled with a reasonably beefy desktop, Photoshop and a few other odds and ends. The really good channel partners even negotiated discounts from the vendors in order to be part of the bundle, and everyone won.

Today's cloudy vendors are trying to kill the channel. They want to own the customer relationship directly. In the case of large accounts, this makes perfect sense; but the overwhelming majority of the world's businesses are small businesses. In Canada, that's something like 99 percent of employer organizations. In the U.S., at last count, it was 95 percent.

Even though few individual small businesses have the buying power of an enterprise, collectively they're an important bloc. The current approach isn't working, and I believe there's room for channel partners to come in and start bundling online services. By negotiating at scale, they can drive discounts for folks, like myself, who need a lower floor cost for infrequently used services.

As with systems integrators of the past, these nouveau cloud channel partners could also make figuring out what services are needed easier by providing industry-specific bundles that wrap up the most commonly-used solutions into one easy-to-understand monthly or yearly bill. Think of it like paying for your power, water and natural gas all on one bill and getting a bit of a discount for buying from a single provider.

It's About Being Competitive
Despite my focusing on perceived value for dollar at the beginning of this piece, there is a much more quantitative measurement worth considering: the cost per employee. Employees cost more than their salary. There is the employer portion of taxes to worry about, benefits, training, supplies, and now IT.

In the on-premises days even small employers could achieve economies of scale by centralizing IT. In today's world, that's increasingly not possible, and we are billed per user per month in a much more direct fashion. Enterprises always got discounts, but it's easier to see the effect of that with cloudy subscriptions, and it can't be cleverly designed out by dedicated nerds doing innovative things in the server room.

Small businesses are already at a disadvantage competing against larger rivals. With the difference in cost per employee of IT becoming impossible to ignore, business owners are going to start casting about for solutions. The question: will vendors allow it?

About the Author

Trevor Pott is a full-time nerd from Edmonton, Alberta, Canada. He splits his time between systems administration, technology writing, and consulting. As a consultant he helps Silicon Valley startups better understand systems administrators and how to sell to them.

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