Software renewals – creating profitable revenue streams for the channel

Resellers face various challenges to making a profit. Software renewals offer the ideal solution

March 17, 2014

By Fred Mitchell, Symantec Division Manager, Drive Control Corporation

Resellers face the challenge of decreasing margins, a highly competitive market, shrinking end user customer budgets and more. Further exacerbating this situation is instances of vendors and some distributors ‘going direct’, eroding opportunities and revenue. As such, staying ahead in the channel is becoming increasingly difficult and resellers must look towards additional revenue streams in order to remain profitable. Software renewals, particularly in the security space, offer the ideal solution to this challenge, providing channel resellers with relatively simply acquired, on-going revenue streams that can assist with profitability and customer relationships.

Security software is a vital tool in a connected world, and organisations and individuals alike recognise the critical nature of these solutions. While they are often a grudge purchase, the need to protect digital assets from cybercrime and malware is well understood, making security solutions an easier sell. However, simply dropping a software box means that resellers are missing out on an excellent opportunity to create new and profitable revenue streams. Managing the process of software renewals can offer multiple benefits to resellers to not only improve their margins, but also develop stronger relationships with customers, which in turn creates additional business in the future.

The most obvious reason for resellers to manage the licensing and renewals process for their customers is the creation of annuity revenue. It is well known that maintaining an existing customer is far easier than winning a new one, and in the case of software renewals, can create up to 40% of the revenue from previous years’ software sales with very little effort. But failing to assist customers with renewing their licenses, resellers can miss out on receiving a substantial income. By managing this process and ensuring licenses are kept up to date, resellers can harness this income while at the same time freeing up their sales team to win over new customers and improve turnover.

In addition to creating annuity income, software renewals present opportunities for both upselling and cross selling. Software licenses generally last for between one and two years, during which time technology can change dramatically. This means that the client’s IT infrastructure and architecture have in all probability evolved along with this change. Extra computers may have been added, along with additional servers, which all require protection. The current solution may no longer be the best to suit their needs, as their security needs may have changed. The renewals period is an excellent opportunity to ascertain the customer’s current and future needs to ensure the correct solution is sold, as well as presenting an opportunity to sell complementary products that will enhance existing business and security solutions.

As an extension of ensuring software licenses are up to date and that customers have the correct solutions in place, resellers can also benefit from improved customer relationships, as well as improved vendor relationships.

The right solution, up to date and optimised, will continue to protect customers’ machines and run smoothly with no hassles, assisting with maintaining the performance of their systems. Resellers can become trusted partners, to whom clients will look when they require additional technology solutions, again providing new revenue streams and additional opportunities for income.

The management of licences can become onerous from a vendor perspective, and ensuring that the licences are renewed timeously can be a challenge. Vendors are continually looking for distributors and resellers that can provide this crucial management component. Resellers that can effectively manage this process can benefit from more vendor confidence and an improved relationship.

When it comes to ensuring profitable channel and reseller business, tackling the software renewals challenge is a win-win scenario. Not only is annuity income provided, which is essentially a profitable revenue stream involving very little effort, relationships with both vendors and customers can be improved. This has knock-on benefits for a more profitable business too. Ensuring customer software licenses are up to date is a sound business strategy that will pay substantial dividends.