D&H Distributing: 'The More Recurring Revenue You're Bringing In, The Higher Your Valuation'

The channel hasn't historically captured enough of the nine million SMB seats that are buying IT as-a-service and D&H wants to help solution providers take advantage of the market opportunity.

D&H Distributing wants to help SMB-focused channel partners grow its recurring revenue streams and make more money per seat, said Jason Bystrak, vice president of D&H's cloud business unit.

There are 78 million seats in the SMB market in the U.S. The annual average monthly IT spend is about $5,000, which means a nearly $4 billion market opportunity, Bystrak told an audience of solution providers at The Channel Company's Xchange 2020 in San Antonio.

“Nine million of those [78 million] seats are buying in an as-a-service model, so they aren't writing a big check for a piece of software or hardware,”t Bystrak said. “I don't think a lot of us in the channel are participating very well in those nine million seats -- a lot of that is direct to vendors.”

[Related: CRN Exclusive: D&H Plans To Expand DaaS, Cloud Services With Focus On SMB Partners]

D&H wants to help partners get in the everything as-a-service game, Bystrak said.

BNB Technology, a Norman, Oklahoma-based MSP and D&H partner, is selling hardware and software services to its clients today. BNB is also offering 5-10 hours of monthly consulting and break-fix services to its SMB customers for a set cost.

Most of BNB's customers -- many of which are in the dental industry -- are buying hardware from the company and are still paying in a CAPEX model, said Mitzi Hernandez, director of purchasing and sales manager for BNB.

“Right now I'm selling 3-4 servers and month and most [customers] are paying within the first 15 days, which is why it's been hard to move to recurring revenue,” she said.

While BNB is good at capturing hardware refreshes, the firm has been working toward wrapping software and services around its hardware offerings to boost its recurring revenue stream, Hernandez said.

"We're very interested in everything as-a-service," she said.

Many partners already know how to wrap services around hardware products, but D&H is helping partners build value-added services around software solutions, too, such as Office 365.

D&H offers a broad portfolio of endpoint devices and cloud-based services and software to go along with them, Bystrak said. Customers will always need both -- the cloud solutions, but also the endpoints that attach to those services, he said.

The distributor also offers a cloud-based platform for partners to manage subscription-based solutions, as well as flexible financing that can give end users the monthly payment they are looking for, while paying partners upfront.

Selling everything as-a-service is a scalable business model that lets partners sell more solutions into their existing customer accounts. "It forces your sales and marketing motion to talk about the entire seat opportunity, not just one component," Bystrak said.

The average end customer still buys from several IT vendors, so partners that don't think about adopting a mindset where they consider multiple solutions per seat run the risk of losing the customer, Bystrak said.