Cloud hosting provider Rackspace US Inc., of San Antonio, Texas, has officially launched a new offering that enables 2-Tier resellers in Microsoft’s Cloud Solution Provider program to resell and refer both Microsoft Azure and Microsoft Office 365 to end customers.
The Cloud Solution Provider program allows Microsoft partners to manage customer relationships and billing directly with buyers of Azure, Office 365, and other online products. 1-Tier resellers, which are generally large companies with sophisticated tools and processes, buy licenses straight from Microsoft. 2-Tier resellers purchase from 2-Tier distributors instead.
Rackspace joined a handful of 2-Tier Azure distributors last July, and has been one of an equally small number of 2-Tier Office 365 distributors since January. Only now, however, following months of behind-the-scenes preparation, has the company begun making CSP distribution services available to members of its partner program.
According to director of channel sales Chris Rallo, Rackspace’s 2-Tier CSP distribution options stand out from those offered by familiar names like Ingram Micro, Tech Data, and AppRiver because they come bundled with support from the company’s in-house technicians on top of the usual infrastructure and software licensing. That both relieves resellers from administrative burdens and provides them a second way to collect margin on CSP deals.
“Not only are they selling the infrastructure but they’re getting a support component,” Rallo says, adding that Rackspace’s pricing structure gives resellers ample room for profit.
“Our margins are market competitive in comparison to other providers in the industry,” he states.
Though the new offering, which is officially named the Rackspace Reseller and Referral Program for Fanatical Support for Azure and Office 365, is open immediately to existing U.S.-based CSP members in the Rackspace Partner Network (as well as European partners in the case of Azure only at present), Rackspace views net new partners as a bigger, more tempting target. The company plans to begin marketing the new program at the Microsoft Worldwide Partner Conference in Toronto next week, but its initial promotional efforts will be limited in scope.
“We want to start smaller in this half of the year,” Rallo says, in an effort to collect more information about what kinds of partners respond to and benefit from the program before launching a more aggressive channel recruitment effort in 2017.
ISVs, “born-in-the-cloud” VARs, and midsized regional solution providers are among the types of partner Rallo expects to embrace Rackspace’s new program with the most enthusiasm, as such firms are likely to see outsourcing support to a third party as an appealing way to free up time for tasks like sales and solution development. Traditional VARs that offer support services of their own, by contrast, may view Rackspace’s CSP offerings more as competitive threats than opportunities.
Other partners could share similar concerns, given that Rackspace has been a 1-Tier CSP partner selling directly to end users since last year. Rallo, while conceding that sales conflicts are an inevitable part of the channel landscape, says that Rackspace goes out of its way to minimize friction with its partners and to include them even in deals its sales force pursues directly.
“We kind of pride ourselves on being channel friendly in that regard,” he says. Furthermore, he continues, Rackspace salespeople are increasingly emphasizing mid-market and enterprise deals anyway.
“We’re going to heavily rely on our partners to drive the SMB business,” Rallo says.
Rackspace’s 2-Tier CSP distribution program is part of an ongoing strategic shift toward supplementing its long-standing hosted infrastructure services with third-party support for cloud products from both Microsoft and Amazon Web Services.
“Our core roots are around support,” Rallo observes. “It was natural for us to evolve to looking at other leading platforms.” The course change also enables Rackspace to offer its customers and partners alike a wider range of hosting options.
“They want choice,” Rallo says.
Rackspace has a 14-year history of collaboration with Microsoft, and has won that vendor’s Hosting Partner of the Year award multiple times. According to Rallo, today’s announcement follows an extended period of negotiation and planning with Microsoft’s CSP team.
“We’ve been talking to them for several years,” Rallo says, adding that complex agreements like this one take time to finalize and implement.
