Nick Heddy: talking the Pax8 effect

Nick Heddy, Pax8 Chief Commerce Officer

A deeper dive into the Total Economic Impact™ study conducted by Forrester Consulting on behalf of Pax8

Early in January, Pax8 hosted a webinar sharing the completion of the Total Economic Impact™ study conducted by Forrester Consulting on behalf of Pax8. The Unveiling the Study webinar was hosted by Chief Operating Officer and Pax8 co-founder Ryan Walsh and Chief Revenue Officer Nick Heddy.

Watch the Webinar and Get the Study

The study results themselves are significant and offer great proof points for MSPs who partner with Pax8. To dive deeper into the findings, we sat down with Nick so he could spend some time walking us through what it all means. Keep reading to get Nick’s enlightening and inspiring insights.

Pax8:

Can you give us a little background on the study itself, what brought it about?

Nick:

The seed was really planted by the studies we’d seen from some vendors, where for every dollar, the ecosystem pulls through five or six dollars. We kept seeing some pretty impressive numbers. At Pax8, we always talk about billing, provisioning, support, and selling as being our big levers—places we help partners, but we could never offer hard proof of the impact of those pillars. It was just a fortuitous series of events that led to the convergence of our commissioning the Forrester study and also being able to sit down with Billy Beane and Jay McBain to discuss the study.

First was the fact that I had and still have regular inquiries with Forrester principal analyst Jay McBain. From those came the idea of commissioning a total economic impact study. Then another key piece fell into place. We’d had Billy Beane lined up to talk about Moneyball and analytics at a partner event, but the pandemic hit, and we had to cancel it. With the Billy Beane contract sitting there on the shelf, we saw a creative way to use it. So, we commissioned a Total Economic Impact™ study from Forrester Consulting focusing on the results Pax8 delivers to our MSP partners. Once it was complete, I sat down with guest speaker Jay McBain and Billy Beane to talk about applying analytics in new ways to drive success.

Pax8:

What does a study like this mean for Pax8 and for our partners?

Nick:

To answer that, I need to take you back just a bit. Especially during the pandemic, we were churning some partners because they were being lured away by offers of a free month or two on contracts. It was a time when money was top of mind for everyone, and we didn’t have a talk track to combat that. We didn’t have numbers outside of the anecdotal such as, “We think this would save your billing person a couple of hours.”

This study means we, and our partners, can finally quantify the return they see working with Pax8. There is a matrix in our webinar that applies the same ratios from the study’s $5M aggregate partner profile. The matrix extends it out to show the benefits you could see if you are a quarter-million-dollar partner all the way up to a $50 million partner.

We are also seeing a lot of acquisition activity with MSPs merging to form bigger MSPs, and we regularly get calls where an MSP says, “We’ve just been acquired, and our acquiring partner is direct with Microsoft. We’re telling them that we don’t want to be direct with Microsoft. Can you help us have this conversation?” This study allows us to quantify what it means to be direct with us and what the marketing development funds (MDF) impact can be. The study also teased out a lot of things that are anecdotal where perhaps there is not a revenue number tied to the benefits that come from working with Pax8.

The quantitative and qualitative findings from this study arm our channel account managers (CAMs) and our partners to have intelligent conversations around the impact of being with Pax8’s modern ecosystem.

Pax8:

Is there one finding from the study that you think will be most surprising to the channel?

Nick:

The most surprising finding, I think to me is that 249% ROI over three years actually feels like a conservative number. That was the thing that stood out to me. A 249% ROI is definitely exciting, but I think the study misses some realistic opportunities. That number is based on partners who were buying just one or two solutions, but imagine if you add more solutions to your stack. I think it could realistically be closer to 300, 400, or 500% ROI!

First off, to factor in differences between partners, the benefit numbers were risk adjusted by 10% for study calculations. The other factor is that, while the study details the elements that are driving the highest margins and expanded revenue opportunities for our partners, the 249% ROI is based on partners who were buying just one or two solutions.

You’re hearing all sorts of conversations across the channel around standardizing your stack and consolidating everywhere you can. Partners who are buying five, six, ten, even fifteen vendors from us also experience added efficiency gains from standardizing support, billing, and provisioning across their entire stack. A partner spread out across many direct distributors and vendors who then moves to Pax8 may have four or five times the ROI.

Another discussion that’s happening all over the industry is the need to focus not just on that next new customer but also on how efficiently you are delivering services to your existing customers. If you are intentional about how you deliver services and the source from which you get those services, I think that is the conversation that people need to be having, not just the 249% ROI, which to me felt like a minimum deliverable.

Pax8:

If there is one thing that MSPs should take away from this study, what would that to be?

Nick:

If the only thing that comes from this is that you’re having conversations with your people and the rest of your organization about efficiently delivering services, that would be a win. You have to remember, though, that each partner is a unique snowflake, and not all the benefits apply to everyone, and there are a whole lot of other benefits that weren’t teased out in this study.

I think this study is a good catalyst to go have that conversation about being more efficient and being more intentional about the types of customers, the types of projects, and the types of services you take on. That’s how you get that insane EBITDA (earnings before interest, taxes, depreciation, and amortization) efficiency.

We hear some partners talk about 35% EBITDA efficiency, which is off the charts unheard of, but those types of partners are very specific about the type of customers and about the type of services they want to deliver. So hopefully, this is the catalyst for our partners to have the conversation about being more efficient, as that’s going to be key.

Pax8:

How can Pax8 help partners then facilitate that conversation?

Nick:

Of course, buying everything from us is a start (pause for laughter). But seriously, I would say your CAM, the person who is the point guard in the relationship between MSPs and Pax8, is your connector and facilitator. Across productivity, infrastructure, continuity, security, networking, communications, and operational tools, it’s impossible for any one person to be an expert on all those things. This is why every CAM is surrounded by a group of amazing experts and solution consultants across all the categories we have in our line card. There’s a dedicated team of eight who would love to talk with you and help you design your perfect stack so that you can realize those efficiency gains.

Pax8:

You mentioned there being some benefits that weren’t teased out in this study, can you elaborate?

Nick:

Yeah. A lot of that revolves around our current focus on building a community. Before, we were going to market with our marketplace as the reason to do business with Pax8. It has always been about that person who is helping you get to your unique next level. Now that person is a community that includes our product experts along with our partners, your peers, and others in the channel who are doing what you do. We’ve even added facilitated peer groups into Pax8 Academy. I think one aspect not captured in this study is the value of the Pax8 community. All of the benefits of our enablement, our community, our group of peers—building out that community is one of those anecdotal pieces that is tough to capture the soft ROI around.

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Pax8:

What’s next for Pax8, and how does this study serve as a steppingstone?

Nick:

All the metrics that were churned out of this study are Pax8 in its current state. I would say that we’re not necessarily the strongest or the absolute smartest, but we are the most agile and able to adapt. I do, however, honestly believe that we have the best platform in the industry, and I would stand unprepared onstage and debate that with anybody.

That said, where we’re heading with our marketplace is truly going to leapfrog the entire industry, and it’s connecting right now. There are lots of partner marketplaces, consoles, and platforms out there, but none are working to connect the customer to the partner to the vendor to the distributor and connect all the business players in the ecosystem the way Pax8 is. The next version of this is an intelligent marketplace that connects all the business players and analyzes all of that data in real time, using machine learning models and AI technology. You’re bringing forward insights that a human being can’t capture by doing a look back on a data set. You’re finding real-time correlations in a dynamically shifting data set, and I think those insights will create a competitive advantage. In the coming months and years, you will see from us a focus on providing insights through data analysis. We envision this will be the path forward for Pax8, our partners, and the channel itself.

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