Transcript

Craig Donovan (Introduction):  The Wingman Experience: It’s a fun thing to brand. We’ve all rallied around the imagery. And I think that there’s some really great marketing components of that. But it really is the central tenant of Pax8: this is actually our product. We may sell a lot of other vendors and we sell a lot of SaaS products, and we get involved in the infrastructure service market. But, truly, our product is this Wingman Experience. And our entire model is built around partner success.

Announcer: Welcome to the Software Channel Partner Podcast where you’ll hear leaders of partner programs talk about their greatest challenges and most successful solutions. And now your host Louis Gudema, the president of revenue & associates.

Louis Gudema:  Welcome to the Software Channel Partner Podcast where we talk with leaders in software partner programs to learn about what’s working today. I’m Louis Gudema the president of revenue & associates, where we help companies grow faster by helping their channel partners grow faster. Today I’m talking with Craig Donovan, Vice President of Partners Solutions at Pax8, a born in the cloud distributor. We’ll be talking a lot in this episode about what exactly born in the cloud is and how it’s different. Before his current role at Pax8 a lot of Craig’s experience was in product development and software engineering.

Craig, welcome to the podcast.

Craig:  Thanks Louis. Glad to be here.

Louis:   And you’re one of the few people that beats me in the, I Grew Up in a Smaller Town contest.

Craig:  That’s true. Yeah. I grew up in a very, very small town in Western Colorado, just outside of Grand Junction on the Utah border. The town was actually small enough that they kept the exact population total on the city limit sign. And so when I moved out for college, the town janitor had to go down with the drill, remove the six from the 256 and replace it with a 5.

Louis:   Well, I guess he wasn’t too busy.

Craig:  That’s right.

Louis:   That wasn’t a real common event.

Craig:  Exactly. Very, very small town.

Louis:   I grew up in a farm town of 800. Usually I do pretty well in the smallest town contest, but you totally walked over me on this one.

Craig:  That’s great. Yep.

Louis:   So tell me about your career path and what brought you to where you are today. You started out by studying computer science in college, if I’m not mistaken?

Craig:  Yeah, that’s correct. It was actually sort of a predetermined, if you will. I went to a smaller university in Grand Junction. My uncle was actually the dean of the computer science department and I’d already had a brother and two cousins graduate with their computer science degree there. So there wasn’t much left up for choice. And so I kind of followed the standard path, got right into software development out of college and spent about 18 years doing software development in a variety of languages and a variety of different platforms.

You know, I get to do some really interesting things. The place right before Pax8 I was one of two developers writing the software engine that controlled all the dynamic ad insertion for video on demand for all the cable companies across the country. So some really interesting big data type problems. And that was all fun. But you know there’s something about software that always kind of left me a little bit cold. I was always looking more for that human impact: how the software was affecting people, how the other teams within my organizations were affected by what we were writing.

And so in 2016 I reached out to some friends that were at Pax8 and understood they had an opportunity for a different kind of a role. And so I joined the team and Pax8 was very small back then. The dev team was I think five people. So I sort of joined as sort of a general resource to do a little bit of technical work, did some project management. And very quickly as I started to learn more about the channel, I started to develop a real affinity for our partners and for the kind of businesses they were running. And started to move into more of a product management direction. And I think what really was the catalyst for this was, we wrote an integration to ConnectWise in late 2016 that we launched in early 2017. And I think we were all really proud of the work we did. I think what we wrote worked and accomplish some goals, then we took it to market.

And when we talked to the partners, we sort of got a resoundingly, It’s okay… They compared it to what every other distributor had done. They said, Yeh that’s okay; that looks a lot like what the big guys have done. And we took that really personally, Louis. We had worked too hard to be just okay on this. And so we were willing to use a little self-reflection and kind of going back to the drawing board. And at that point in time I committed to just going and figuring out what great was. And so I started spending 30-plus hours a week talking to partners just about how they were billing, how their office systems worked, how they were using ConnectWise. And really what they were looking for and where their pain points actually were, and what cool would be.

And we did that for a few months. And then we finally started rewriting the original integration. And we kicked that off in sort of a March, April timeframe with all this new information. Launched it in June, and tremendous success. At that point we finally hit it. It was new, it was different. It was actually solving needs. And then the cool thing is we didn’t stop there. That became really fundamentally my job was to continue to be that voice of the partner within the engineering team. And in just 2017 and early 2018 I spent over a thousand hours talking about ConnectWise, PSA integrations, billing and whatnot directly to partners. Whether that’s over the phone or I spend a lot of time out on road shows.

Louis:   Yeah, it’s amazing how talking to the end user and having that agile approach makes a huge difference in how good what it is you end up developing is.

Craig:  Absolutely. I think that that’s, you know, that’s important in almost any industry. But within the channel, I think it’s particularly pressing because you know there’s no such thing as the MSP, right. It’s not a static type. Every business out there is working in their own way. Some businesses are billing ahead, some are billing in arrears, some might be billing two or three months ahead. They change how they charge for prorates. They change how they’re actually collecting the arrears charges on a usage-based products, etcetera. Every business out there needs something unique and different. And if you’re not listening to those people and you’re not talking to a really broad sample size, it’s really hard to figure out what actually is going to resonate and make the MSP’s lives easier.

Louis:   So for people who aren’t familiar, what does Pax8 do? What is the significance of being a born in the cloud company? How does that make you different from traditional distributors?

Craig:  I think that that is really the key distinction. So we are cloud distribution. So we only distribute cloud products. And I have to admit Louis, I think many people have the same question I did when I came here, which is? What is cloud distribution, right? There’s not something to ship. There’s not something to actually distribute, if you will. And it turns out I think that’s actually where the magic is. And before I kind of explained that, I want to take us back just a little farther to understand how we even got started.

So our founder John Street, this is actually his fifth company that he has started up. The one prior to this I think many people in the channel have heard of that’s MX Logic, which was a born in the cloud, email security vendor and at the time the best in the game. And when we were MX Logic, we really wanted to work in the channel. We were trying to connect with partners, and we were trying to go through traditional distribution. And frankly that process was painful. We weren’t getting a lot of value out of it. Our partners weren’t getting a lot of value out of it. With classic distribution they’re designed and their skill set is built around logistics. It’s around pack and ship. And so that’s where they’re earning that margin from is their superior ability to make sure that you can get a box from place A to place B at a particular time frame.

Unfortunately, in a cloud world when there’s nothing left to ship, there’s really no value anymore in that logistic expertise. And so you have to find something new and something different to be great at to earn your partner’s business and earn their trust. And so I think that’s where the born in the cloud really starts to come through for Pax8. We understand the cloud. We understand that things have changed, that it’s become a much more transactional month-to-month world. A world where the orders are being placed not once a quarter or once a month, but they’re happening — we’re seeing 17 changes a month on average on a subscription.

And so if you’re going to see that kind of change and that kind of transactional differentiation you’ve got to build a business around it that’s different. You have to build differently. You’ve got to provide other sorts of services to empower those MSPs in order to earn that margin. And for Pax8 a lot of that comes around support. And that’s a very broad term for us. We’ve got a tremendous team of cloud solution advisors that are there to help support a partner in figuring out what to buy or what a new product does or what new opportunities they might have. We have sales engineers that are there to give you in depth product demos or even do complimentary product onboarding’s once you’ve bought the product.

We’ve got an incredible tech support team. And so this is one of the things I always love to draw attention to. Our tech support team provide support for every vendor and product on our line card. I think a lot of times for a partner, there may be some hesitation about running through an intermediary before they get to support. In the Pax8 world that’s actually a better value add. Our team is handling in house over 85% of every ticket that comes in the door regardless of vendor. So now from a MSPs perspective they don’t have to keep track of seven different vendor support channels, they just use us. And anything we don’t handle in house we escalate quickly with the voice of a distributor directly to the vendor.

Louis:   That’s quite an operation. I mean it’s quite a lot for you to keep up with all the different vendors that you’re working with and their software and being able to support it. I’ve seen some people talk about born in the cloud partners also who only provide cloud offerings. 

Craig: Absolutely.

Louis: Are those typically Pax8’s partners or do you also work with hybrid partners who provide both on-premise and cloud?

Craig:  That’s a terrific question. I think that when you’re talking about the born in the cloud partners, those are partners that already understand the cloud in depth and they understand what they need. And sort of how to best maximize the value there. And so for them the value add for Pax8 is clear. It really becomes a no brainer. They already get the cloud and what we’re doing for them. And so we do have a tremendous amount of those born in the cloud partners.

Now the hybrid partners are also frankly just as exciting to Pax8. This is one of the areas that I get very excited about because we can help a lot of these partners who have got a standing on-prem business that are just looking to move into the future. They’re trying to keep up with this cloud migration. And those kinds of partners can lean heavily on Pax8. This is what frankly a lot of our support services, whether you’re talking again the sales engineering, pro service support or even tech support. We’re there to sort of help bridge that gap and reduce those pain points for a hybrid partner that wants to grow into a cloud provider.

Louis:   My understanding is you have over 6,500 partners. Who are they? How do you go about, what makes a good Pax8 partner? What do you look for? How do you go about recruiting and onboarding?

Craig:  That’s a great question. And so we have about 6,500 right now and we’re actually adding over 400 a month right now. And so that line card is just exploding right now. And so we really try to engage with partners in a few ways. I think unquestionably, the most powerful mechanism we have is word of mouth. Our partners that we have speak very highly of us. But we also have got this incredible field marketing efforts, and so we are out on the road all the time. We’re at almost every show around the country with a great crew there spreading the message and introducing people to what we do, and how we do it. And again, that’s a large part of that is trying to engage existing partners again to talk for us. At a recent show, we hosted a panel which was instead of Pax8 getting up there and selling the message, we just provided a panel for four of our partners to get up and just talk to other MSPs about their business and about how we’re working with them.

We’ve also, over the last year, year and a half really kicked off a powerful digital marketing arm that is driving a lot of interests there as well.

Louis:   Yeh I want to talk about that more in a minute because marketing’s an area that I’m involved with. So I definitely want to learn more about that.

Craig:  Absolutely, absolutely. I’d love to talk about all of this. And so the idea is we feel like we’ve got a powerful story that we want to get out there. It’s not something that I’m trying to sell. I think really the Pax8 value proposition is so strong that we just want to share the story and what we’re trying to do in as many ways as we possibly can.

Louis:   It sounds like your role is kind of sprawling. Can you define it, what exactly you personally are doing?

Craig:  Yeah, absolutely.

Louis:   You’re kind of the partners’ representative it sounds like in product development, but it sounds like a lot of other things too.

Craig:  Absolutely. And so that was really my sole role, was to be the partner’s voice within the development engineering team for about the first couple of years at Pax8. And about a year ago I moved out of the engineering team, at least via the org chart, and took over our service delivery and our sales engineering teams. And so that’s an organization of close to 50 people that are all focused on sort of the backend of the partner experience. So making sure that if a partner buys something, they can count on getting it. We have automated APIs that provision everything, and virtually every order runs through within a couple minutes in our system. That said, it is technology, there are hiccups. And the great thing about Pax8 is when those hiccups happen, one of my teams will jump into that for the partner and escalate it with the vendor. They’ll push that through. They work on behalf of the partner to make sure that you get those licenses as fast as you can.

The other half of that organization is sales engineering, which have this really broad charter. So they do presales engineering, so they will help a partner understand what a product does, will get into the details. Give very technically deep product demos. And then on the backside when a partner purchases a product for the first time, those same engineers will contact the partner and work with them for the first hour or so to do product onboarding. Make sure that, you know, it’s one thing to sort of see a cool demo of it, but we want to make sure that once the partner has their hands on the keyboard and they’re actually starting to configure it, they have a good experience, that they’re ready to launch, and their techs are ready to move forward with it.

Louis:   So what are some of the ways you think that the Pax8 has, how you’ve changed your partner experience? And your software due to their input?

Craig:  Yeah, that’s a great question. I think that we change the experience all the time. Just from a software perspective we beta test absolutely everything. And so when they have a new idea of a feature, they’re constantly testing that with partners. If I go back to the ConnectWise integration, some of the things that we’ve added recently is when I first envisioned this integration, I sort of envisioned it as sort of this magic button. That we would push a button and it would all flow through to ConnectWise and partners would love it.

And then I showed it to the first partner and they said, Well this is almost perfect, but I don’t like the fact that I can’t set the taxable flag. I said, Okay, well let’s go back and let’s tweak that. And then the next partner said, Well, this is almost perfect except I don’t like the way that you’re choosing the type of the edition that’s going across. I said, Okay, we’ll go back to that. And after about five of those conversations, I realized again to the complexity and diversity of our partners: they weren’t looking for a magic button, but just for a wizard or something that they could control that made it reliable and easy to push that information across. And so we’ve continued to add those flexible points in there.

From the sales engineering perspective, we always have our ears open for other sorts of services that partners might be looking for. Right now, we have a robust professional services division that does a lot of work around Azure and email migrations. We’ve been hearing a lot of requests lately for help in the security space. Help doing standing up a security product or doing a policy migration, things like that. And so we’re in the process of building out some SKUs around that. That same team is also looking at building out some SKUs around partner education, which is another request that we’re hearing quite a bit.

Louis:   Yeah, pre-sprawling, how big is the company now?

Craig:  We’re closing in on about 350 people right now, which is amazing because it was about 35 when I started in late 2016.

Louis:   Yeh, that’s huge growth, that’s amazing. So you even do I understand recurring SaaS revenue billing for the partners?

Craig:  That is an option, yes. And so some of our partners don’t even want to do the bill, they want us to bill on their behalf. And so we do have an arrangement where we can bill their direct customers and then cut the check back to the partner at the end of the month.

Louis:   And this bill looks like it’s coming from the partner, not from Pax8?

Craig:  That’s correct. Yes, we will white label and brand it as the partner and that service is completely passed through.

Louis:   Quite a range of services there. So tell me about Wingman.

Craig:  Yeh, the Wingman Experience. It’s, it’s a fun thing to brand. We’ve all rallied around the imagery and I think that there’s some really great marketing components of that. But it really is the central tenant of Paxc8. This is actually our product. We may sell a lot of other vendors and we sell a lot of SaaS products and we get involved in the infrastructure of the service market. But truly our product is this Wingman Experience and our entire model is built around partner success. We don’t charge any minimums, we don’t have any quotas, we don’t have any fees that we charge our partners. The only revenue source we have is the margin on things that are running through the system. And so this creates this really powerful mechanic where the partners always get paid first. And so every structure of every part of our business needs to be about partner enablement and partner success.

And so when you talk about the Wingman Experience, it’s the tech support, it’s sales engineering support, it’s the sales floor support, it’s being out in the field marketing events. It’s the educational bootcamps that we do. There’s a lot of these things that we’re doing, but it’s also fundamental to the culture frankly of Pax8. This is a company that lives and breathes this idea of the Wingman Experience.

Louis:   So you’ve mentioned before this question about marketing, and in other interviews that I’ve done I’ve asked people about if they see on the vendor side, if they see a marketing skills gap between software vendors and their partners. And do you see that gap that the vendors have much more robust marketing capabilities than their partners do?

Craig:  I think they certainly have a broader arm to push marketing material, obviously they have more resources. I think the challenge, and this is some of the places that we can start to help in, is tailoring that message to the narrower focus of a specific MSP or in turn the MSP’s customers.

Louis:   Yeh, so I guess that’s where Marketing Autopilot comes in?

Craig:  Yes, so there’s a couple of ways that we do this. So the Autopilot is a really cool feature that we’ve added into the command console and this is a way to do account-based marketing. So very, very targeted marketing campaigns that show up directly in the command console. The command console is our ordering platform that the partners are in, typically daily or weekly when they’re adding or changing their subscriptions. These are preloaded campaigns that will pop up in front of them.

So, for example, we recently had one where Microsoft had a tremendous promotion to help partners migrate from a very specific type of in customer to Microsoft 365. So we scan through their customer list, identified all the targets that would be good targets for this. We displayed it to them on their homepage so they could see what those opportunities were. And then provided them with the emails and collateral it would take to go execute on a marketing campaign.

Louis:   So you said these are very highly targeted account based marketing. So partners are using this to go after say dozens of potential new accounts, but not hundreds or thousands?

Craig:  Typically, it kind of depends on how we’re positioning it. And so Autopilot is typically keyed off of their current customer list. And so what we’re really doing there is helping them find new opportunities within that customer base.

Louis:   Yeh, that’s very smart. So ways to upsell the current customers to new offerings.

Craig:  Exactly. And another place that we’re really helping out with that is we run regional, we call them mission briefings. And so these happen I think eight times a month or so around the country, different cities, and these are free value adds for our partners. They’re one day long seminars, but they’re not sort of your standard vendor pitch seminars. They’re actually designed to provide sales techniques or marketing techniques to the MSP, helping them identify an opportunity or how to increase their Microsoft competency score to get better rebates. Things that are specific to help the MSP run their business.

Louis:   Okay. Interesting. So how do you think, you’ve been in your role for just a few years, I think you’re at the center of what’s changing in the software channel. How do you think the software channel has changed over the past few years, aside from the advent of born in the cloud companies. What are you seeing?

Craig:  I think the cloud is causing a lot of ripple down changes, right. The very nature of the cloud is so transactional and it’s shortening the cycle on everything. And so, I think when we were talking about hardware on-prem, we kind of moved at a particular speed. I think people are used to making purchases quarterly, and companies are used to responding to needs and demands and feature requests sort of quarterly, every six months, every year. It took a while for partners to get big enough to sort of manage that sort of a thing. And the advent of the cloud has done a couple of things.

One, it’s certainly made it move much faster. And I think partners are expecting minutes in terms of turnaround for turning on services. They’re expecting their billing to be accurate at the end of the day. They’re expecting features to get put into new software vendors within weeks, not months. And so that puts a lot of pressure on vendors to become more agile and distributors to be more agile. And everybody is just kind of moving much faster to react to all the changes that are happening. I think that it also has given an opportunity maybe for some smaller players to get into the game. With the removal of the cost of classic distribution, new smaller vendors can get into the game a little bit easier. Smaller MSPs can get in there and start changing things.

Louis:   It’s interesting. I was just having a conversation recently with Michelle Ruyle who’s a consultant to SaaS startups and she has over 20 years of channel experience with IBM and other companies. And she was talking about how the software world has gone heavily SaaS just in the last few years and everybody’s converted their offerings to the cloud. And to me it was a little bit of a surprise that it was happening so much now because I headed up a SaaS company 15 years ago.

Craig:  Right.

Louis:   And I know Salesforce has been around now for 20 years. And so I guess I personally took cloud and SaaS a little bit more for granted than a lot of people in the industry, including quite a lot of MSPs did.

Craig:  Absolutely. And I think we saw a lot of the same trim. Again, if I go back to the MX Logic days. And MX Logic was a born in the cloud SaaS vendor. And so I think when we first started up Pax8 in 2012 we thought we were right there and it was ready to take off. And I think it did take just a few more years before the channel as a whole had really reached the tipping point on SaaS.

Louis:   Does Pax8 think of itself as a marketplace? You have all these value-added that seems to put you beyond just a marketplace.

Craig:  Yeah, I would agree. I think that a marketplace is closer to what you would expect out of the traditional distribution tier. It was a place where you could go and buy things. We really pride ourselves — and again, this is why we talk so much about the Wingman Experience — it’s much more than a marketplace. Because a marketplace, there’s a lot of marketplaces out there, and that’s effectively a commodity sale. What we want to do is actually be the partner to the partners. We want to be there to support them in really whatever they need, whether they need billing support or tech support or even sales support.

Louis:   And it sounds like you’ve developed quite a lot of programs just in the six, seven years that you’ve been around to do that.

Craig:  Absolutely.

Louis:   So what should I have asked you that I didn’t? What keeps you up at night?

Craig:  I think what keeps me up at night is just the immensity of the opportunity. It’s mostly excitement that keeps me up at night. It’s sort of figuring out which of the 17 hills that I’m going to climb the next day. There’s just so much excitement right now, so many things that I want us to build out for partners. So many things that I want us to build out for the channel. I think there’s some really, really cool innovations coming down the pipe on almost every front imaginable. Whether it’s new services, new documentation guides, or a lot of new technological features that we’re going to be wrapping into the console very shortly.

Louis:   Yeh, it sounds like if you’re onboarding 400 new partners a month and adding all these new services and all these new features there’s plenty to keep you busy.

Craig:  Absolutely.

Louis:   As you’ve said, plenty of excitement around. You know, the whole business world and the channel world, the indirect world is changing very rapidly. It sounds like you keep up a lot by talking, spending a lot of time every week talking to partners. But other than that, are there particular podcasts or blogs or websites or publications, events, other things, other ways that you use to keep up with the industry?

Craig:  Yeh, I think for me personally, I spend a lot of time at sort of industry events. So we’re at a lot of Exchange events, a lot of HTG events, and just listening to both the partners that come into the booth. But I really love sitting in on seminars and sessions, listening to industry experts talk about where the trends are going, or again, my favorite are partner panels. Whether they’re ones hosted by ourselves or somebody else, when I can directly hear MSPs conversing with each other, I think that’s priceless.

Louis:   The first interview I did was with Rob Rae from Datto, and he was saying something similar. He was even talking about books and podcasts that were done by MSPs that he thought were very valuable and very interesting for him. Craig, how can people contact you?

Craig:  I think the easiest way is frankly to go to Pax8.com and from right there there’s an easy link to get information about scheduling a call or joining as a partner. And again, I want to reinforce joining as a partner, there’s absolutely no cost or commitment. So there’s no reason for a partner not to check us out let us prove it to you.

Also, you can look at us at virtually any road show out there. We’re going to be there. It’s a loud booth with the Wingman in full color. Look for us there. That’s probably the easiest ways.

Louis:   What about LinkedIn or social media? Are you very active with that or?

Craig:  We are, we definitely, we also have a very strong presence on both Facebook and LinkedIn for Pax8 as well. We have some user groups running on Facebook for our current partners, trying to connect them and trying to get everybody talking.

Louis:   Terrific. Well, thank you for joining us today, Craig.

Craig:  Awesome. Thank you so much Louis.

Louis:   I will be sending you a copy of my Bullseye Marketing book as I do all guests in appreciation.

Craig:  Fantastic, I appreciate that.

Louis:  And if you’re listening to this on Apple podcast, Google, Spotify, or another app, and you found the podcast interesting and useful, please leave a review — that will help other people learn about the podcast too. Thank you for listening to the software channel partner podcast, and please subscribe and listen to future episodes.