The Win-Win-Win of Managed Backup Services

After nearly three decades in the data protection software business, I've seen plenty of major changes – in the technology itself, and in the way organizations acquire it. 

One of the most significant developments has been how subscription-based pricing models have overtaken perpetual licensing. In my role as CEO of NovaBACKUP Corporation, it's a shift that I can view through multiple lenses: as a software vendor, a reseller of third-party software, and an end-user of Software-as-a-Service (SaaS) products.

A Tale of Two Software Vendors

My first job in the industry was at an anti-virus (AV) software manufacturer. The executive team wanted to increase sales, so they decided to offer "lifetime" licenses for $29.95. At first, business boomed, and we gained a huge market lead over our competitors.

However, before too long, we'd saturated the market and had already collected "lifetime" payments from all our customers, who were now demanding protection from the latest viruses. New purchases were dwindling, and our product development and technical support expenses were skyrocketing. It was no surprise that one year later the business was sold for pennies on the dollar and never heard from again. After all, what good is a lifetime AV license that can't protect you from future threats?

Now cut to Adobe, where they took a very different approach to growing the business.

In 2012, Adobe started offering its products in a SaaS distribution model and introduced subscription pricing. At the time, as a fellow software vendor and Adobe end-user, it looked to me like a crazy risk. Lowering the price of your products (by half in many cases) immediately affects revenue and cash flow. Then there was the risk that customers could leave in droves, further damaging revenue generation.

As we know, that didn't happen. Although Adobe's revenue took a small short-term hit, it recovered within three years and then continued growing. By 2016, Adobe's annual recurring revenue (ARR) topped $5 billion, and it's grown to almost four times that in the last seven years.

Today, it's rare to find perpetual licensing for software. Instead, we've witnessed the success of vendors that launched subscriptions, including Microsoft, Salesforce, Oracle, HubSpot, Atlassian, AWS, and many more.

That's great for the software manufacturers, but what about their channel partners and end-users? In fact, the benefits of subscription-based managed services extend throughout the software ecosystem.

Managed Backup Services: The Benefits for Customers and Partners

As both a vendor and a customer of subscription services, I see the value on both the revenue and cost portions of our income statements. Like our customers, we don't "own" the solutions we use internally, but we've learned that we actually have more power with subscriptions. 

The switch to subscriptions is something we’re also seeing more of in the backup industry, as more businesses choose managed backup services. Our own customers and partners find that a subscription-based managed backup service provides more long-term value than a perpetual license in many ways, including:

• Lower upfront costs: Subscriptions remove the need for large initial investments, making high-quality software more affordable for businesses of all sizes and allowing them to grow at their own pace.
• Predictability: With managed backup services, customers and partners can predict their costs and income. Customers can plan their budgets more effectively, and partners gain the financial stability of predictable, recurring revenue.
• Continuous updates: In a managed service, updates, patches, and new features are automatically available as they're released, without additional effort for customers or partners. This also reduces the risk of compatibility and compliance issues, as every customer is always on the latest version of the software.
• Cloud-based access: The cloud offers the ability to remotely monitor and manage software and backup jobs, reducing the need for expensive IT infrastructure. Plus, cloud infrastructure providers typically have the resources, technology, and skills to optimize security and minimize outages.
• Comprehensive support: Managed backup services often include tools, training, and ongoing support as part of the subscription. The best vendors also ensure their channel partners can access expert support and training opportunities.

Advice for Partners Considering Switching to Managed Backup Services

After working with many managed service providers that have made the move into offering Backup-as-a-Service through subscriptions, I've identified several factors that are essential for success:

1: Sell your expertise (and teach customers to value it)

Your customers aren't buying a product from you – they're subscribing to your expertise. It's important to help them understand that your expertise in selecting, setting up, monitoring, and managing their backup software improves the security and availability of their data.

For more detailed advice on how to position a managed backup service with your customers, read our white paper.

2: Standardize a solution set for all your customers

Having a standard solution set that you can support expertly and confidently will help you provide a higher standard of service and increase trust in your expertise. Better service leads to greater customer satisfaction and more word-of-mouth referrals that help grow your business.

3: Identify the right subscription pricing model

I recommend choosing one of two approaches for pricing your services: transparent pricing or service bundles.

A transparent pricing model, with clear usage-based charges, allows for situations where some customers use more storage than others and charges each customer fairly for the capacity they use.

Bundling services (for example, by combining backup, AV, health checks, and your support into a "security bundle") makes it easier for your customers to budget and for you to increase profitability. Having a service bundle as a single line item for a regular subscription also helps shift sales conversations from price negotiations to highlighting the business value you can deliver.

Having a service bundle as a single line item for a regular subscription also helps shift sales conversations from price negotiations to highlighting the business value you can deliver.

4: Take advantage of support from your software vendor

By offering Backup-as-a-Service, you should gain access to your vendor's technical team to provide in-depth knowledge and troubleshooting guidance whenever you require it.

Your vendor should also give you access to tools and training that make it much easier to manage customer backups. Look for vendors that provide reliable, responsive support to help you deliver the best possible managed backup service for your customers.

Switch to Managed Backup – and Watch Your Business Grow

The days of proudly displaying software boxes in your office are long gone. The pride of ownership has given way to the peace of mind that comes from predictable costs, up-to-date software, and expert support.

To learn more about how offering Backup-as-a-Service can help you boost revenue, increase customer satisfaction, and make your life simpler, read our guide, Grow Your Business with Managed Backup Services.