The Keys to Building Annual Recurring Revenue With Partners

Lessons from Cato Networks’ Frank Rauch on how to effectively generate annual recurring revenue with and through channel partners

More than 90% of software and service vendors have transitioned to selling their products through subscription plans, creating a steady stream of annual recurring revenue (ARR). This shift from traditional sales models based on transactional perpetual licensing offers numerous benefits, particularly the predictability of revenue streams. Investors and analysts highly value this predictability, as it can lead to higher market valuations and greater financial stability. However, while the long-term recurring contracts associated with subscription models bring significant operational and economic advantages, vendors often face challenges in generating sales through their channel partners. The transition requires partners to adopt new sales approaches, which can be a significant hurdle.

A prime example of success in this space is Cato Networks. The company recently announced it has surpassed $200 million in ARR, achieving this milestone by doubling its revenue volume in less than two years. This impressive growth highlights Cato Networks’ effective implementation of the subscription model and its ability to navigate the complexities of the partner ecosystem.

Frank Rauch, Cato’s global channel chief, brings experience from legacy and emerging channel models. In a recent episode of Changing Channels, Rauch shared insights into the company’s journey and the lessons learned from developing ARR through partners. He emphasized the importance of educating and enabling partners to understand the value of recurring revenue and aligning incentives to motivate their engagement in the subscription model. Rauch’s experience underscores the critical role of strategic partnership management in driving the success of subscription-based sales, offering valuable lessons for other vendors looking to transition to or optimize their ARR strategies.