Profiting vs. Commoditizing

Email is a commodity as far as IT goes. Has been for a better part of a decade and with the few exceptions (compliance, audit, disaster recovery) not a highly profitable task without massive scale.

Two years ago we started offering migrations as a part of our hosted email model, then extended that with migrations of compliance archiving products as our competitors started going out of business, started piling on support, billing, etc to get our partners a profit profile that is consistent and virtually eliminates the costs associated with email support entirely.

As you may imagine, this is something that appeals to small business IT the most as they have the least amount of time and flexibility to provide these services around the clock profitably, consistently and effectively. And, much like myself, you’d be completely wrong in that assumption.

Here is what my typical SMB partner discussion goes like:

Vlad: So here is what we do [… blah blah …] does any of that seem like it would help.
Partner: We resell Office 365/Google Apps/Appliance X but we don’t make much margin there.
Vlad: Right, so (repeating) here is what we do that eliminates the cost structure of it all..
Partner: But that costs more.

Sometimes it gets tiring trying to convince people whose business model is convincing other businesses to outsource IT to outsource the most expensive and least profitable piece of that business. But that’s my job and here is the other part of it..

As I’ve been talking here for the past year or so, this is the gold rush moment for SMB IT – and we’re doing all we can to help partners all over the spectrum to get to the cloud faster and more profitably. The more clients you have the larger market you serve the more services you can provide. We’ve spent better part of the year developing those and we’ll be launching them in 2016.

Here is how I see it: The only thing that matters at the end of the day is the service, not the price. We’ve raised the price in 2014 and will likely do so in 2016 and we’ve grown right along with it – people don’t sit around trying to knock $1 off the price (some, like me, might try to do so just as a sport) but they go livid when things don’t work. That’s how we continue to build the business and how we view the future – yeah, we’ll lose people to Outlook.com or Gmail but I can show you the numbers of our archiving, encryption, compliance and services that come on top of it that people love to pay for.

I used love for a reason, mostly because I hear it a lot. When things go well and when things go wrong. “I love you guys because you have to deal with that stuff and I hate it.”

I am always asked about “What’s next?” yet the response is rather boring and strategic: Find out what I can build scale at, generate profits, outsource annoyances and keep delivering services that others hate being accountable for. Some folks consider commodity as something that lacks value – but if people need it and rely on it who am I not to profit from it? You think the Walmart heirs are crying themselves to sleep?