Profitability for backup services can reach 75 percent more than what competitors offer partners, company says
Kaseya is pumping up the margins for backup services in its Unitrends Xtra program, saying partners can earn up to 75 percent more than what rival companies give in profitability.
The Lowdown: Kaseya, which bought Unitrends’ cloud-based backup services in May 2018, isn’t saying it’s pushing for greater sales, only bolstering partner profitability through margin enhancements, added resources, and new selling opportunities. If you read between the lines, though, it appears Kaseya is pushing partners to expand market share relative to its competitors and draw partners away from rivals.
The Details: Specifics about the Xtra partner compensation changes are unavailable. The Kaseya Website offers to provide details on how partners can earn 75 percent more than with competitors, but the company requires applications from those aspiring to become authorized partners.
According to research by The 2112 Group, partners offering backup and disaster recovery services earn margins of 16 to 20 percent on service sales. Assuming Unitrends’ partners are more or less in line with the channel average, the maximum 75 percent boost would put margins around 38 percent.
In addition, Kaseya is offering partners more support and resources, a share of the recurring revenue generated through backup sales, and the ability to sell add-on services in the Kaseya IT Complete platform.
Kaseya may be looking to take market share away from enterprise and midmarket rivals. In the margin hike announcement, CEO Fred Voccola specifically called out Veeam and Commvault as competitors that can’t match Unitrends’ partner compensation package.
The Impact: Existing Unitrends and Kaseya partners will likely appreciate the margin enhancements for backup and disaster recovery services. However, it’s difficult to validate the delta between Unitrends’ offerings and those of competitors without baseline numbers, which Kaseya did not publish.
The margin enhancements will likely attract some solution providers working with backup competitors to join the program. Just how much new business disaffected partners will generate is also difficult to calculate given that many managed service providers sell multiple backup services as a strategy to diversify their offerings and meet customer price expectations.
Background: Cloud-based backup and disaster recovery services are among the most popular cloud offerings in the channel. According to 2112, nearly three out of four solution providers and managed service providers offered some form of backup services in 2018.
The Buzz: “The Xtra program is the latest example of what Kaseya is able to do that no one else in the industry can – give our partners a money-making platform with the industry’s highest margins and best benefits. This initiative disrupts the status quo in channel programs. Not only will our partners receive up to 75 percent higher paybacks when they sell Unitrends’ BDR solutions compared to any other competitor in the market – including Veeam and Commvault – but now they’ll also get paid when their customers purchase any product in the Kaseya IT Complete suite in the future,” said Voccola. “Based on the expansion of Kaseya customers over the past several years, this equates to an annual recurring-revenue stream greater than the initial margin received on the original BDR transaction.”
Channelnomics Point of View: Through the enhanced margins and benefits, Kaseya is likely trying to shore up Unitrends partners that operate in an increasingly competitive market segment. Moreover, Kaseya is likely trying to stimulate more attached sales of its core managed service tools through Unitrends partners.
On Pod2112 last year, Voccola described his vision for creating a Swiss Army knife of managed services that allows Kaseya to offer partners a one-stop shop for all the tools and resources they require to satisfy customers’ IT needs.