Subscription-based services are changing the dynamics within the channel, which presents a unique opportunity for resellers

The New Office: The tipping point for subscription-based services

Janet Gibbons, Partner Strategy and Programme Director at Microsoft, explains how Office 365 can work for resellers.

Subscription-based services are changing the sales and customer dynamic within the channel. Situations and budgets can change quickly in the current economic conditions, so companies need flexible offerings from partners they can trust. Subscriptions enable this flexibility and repeated contact which, as a result, can encourage the sort of sustainable long- term relationships that can be so valuable to resellers.

The upcoming launch of the new Office suite will provide resellers with the opportunity to develop more of these retainable relationships. The new Office will be available on a subscription basis (Office 365), and so partners will have the chance to sell the technology as a recurring subscription. This means recurring revenue and recurring opportunity.

This move to subscriptions is part of a wider trend in changing consumer behaviour. The world of ownership – where we bought physical products such as CDs, DVDs, newspapers and even cars – is eroding fast. With subscription-based services such as Spotify, LoveFilm, WhipCar and media paywalls, expectations are changing, and this is reflected in the business arena. Entrepreneurs are already reaping the benefits of the changing market with innovative ideas and start- ups. And this evolving behaviour and the opportunity it creates are causing many sectors to redefine their go-to- market strategy.

The new Office 365 SKUs for business will provide a significant opportunity for the channel to capitalise on the benefits of this subscription-based economy. With Office 365, partners will have the chance to demonstrate their value beyond the point of sale. The introduction of products available through subscriptions is changing the sales and customer dynamic. From the one-off transaction with no room for further development to an interactive customer relationship that generates repeated revenue through usage, service upgrades and renewals.

As with any transition in payment model, there will be challenges. When selling through subscriptions, partners will have to make the shift from cash up-front with one-off payments, to payments spread over time. This will provide an initial cash-flow challenge for partners selling services rather than products. However, in time, the predictability of repeated and forecastable income will bring stability and security which is simply not possible with a business built on one- off payments.

The subscription-based model of Office 365 presents an opportunity for repeated contact that can enable Value Added Resellers (VARs) to reward customers with a service that suits their specific needs or preferences. Resellers can better position themselves to provide customers with what they want, where they want it and how they want it. For example, a company that quickly grows from a basic Office 365 package to requiring a more sophisticated marketing function.

Resellers could recognise the growth in their customer and offer them additional products such as CRM to support them. The more well-informed consultancy a partner can offer, the more successful it will be.

The benefits of subscription models for customers are vast too. The models allow for greater freedom and variety in the way technology can be consumed and paid for. Businesses can make small, predictable payments in return for the technology instead of a single lump sum. This makes it easier for them to plan fiscally and additionally customers can upgrade or downgrade as necessary. Rather than one-off interactions with resellers, the company engages in a continuous relationship with its service provider, thereby enabling better service.

It is in this way that the new Office signals a tipping point in the trend towards delivering products via cloud- based subscriptions, helping the channel make the most of subscription-based technology.

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