Recurring Revenue Is King. Transactional Hourly Lifestyle Consulting Decaying.

According to a CRN Channel Chief Roundtable one thing  differentiating  winning , profitable resellers from  losers –  recurring revenue.  The article implies that it can be the different between a valuation of 8 to 10 times earnings and a valuation that provides a reseller with a marginally higher paying job for a few years.

In general, the channel chiefs said partners that have adopted recurring revenue streams around cloud and managed services are the ones driving the profitability and valuation increases. For example, Cindy Bates, vice president of Microsoft’s U.S. Small and Midsize Business division, said solution providers that have made the shift are reaping the benefits.

And maybe there’s some hope that all this free pre-sales and demonstration based consulting is going to soon go extinct:

“I don’t think [partners] are giving away their services the way they used to,” said Jesse Chavez, vice president of worldwide channel strategy and operations at Hewlett-Packard. “They’ve learned that, in a lot of ways, they have to charge for their services. I think that is helping their profitability.”

The bottom line of the roundtable: VARS focussing on a specialized area, charging appropriately and building recurring revenues are highly profitable and building businesses that others want to buy. Lifestyle VARS who want to continue to focus on the big margin sale and bill only as services are requested are about to go extinct.

While the article bandies about the description “Lifestyle Consultant” it never provides a description of the term. Based on the context in the article it appears that they mean a consultant or consulting firm continuing to rely primarily on high margin one-off sales , billing on-demand (hourly) and not building any type of recurring revenue stream.

The full story is at Channel Chief Roundtable: Partner Profitability, Valuations Soaring

About Wayne Schulz

Wayne Schulz is a consultant who writes about the ERP industry and technology related news.