Channel partner programs, CSPs, IT distribution

Pax8: Persistence, Patience Pay Dividends in Cloud Distribution Market

John Street, CEO, Pax8
John Street

Like many technology industry pioneers, John Street had the right idea at slightly the wrong time. As founder of Pax8 in 2012, he anticipated the day when VARs and MSPs would leverage cloud distributors. The challenge: Pinpointing exactly when cloud distribution would reach its tipping point.

Street has a knack for spotting technology inflection points -- and then profiting from them. Earlier in his career, he launched MX Logic -- one of the first channel-friendly providers of SaaS-based email protection and security services. After a successful solo run, MX Logic sold to McAfee for $140 million in 2009 but the business ultimately floundered when Intel acquired McAfee in 2011.

Street shifted his focus to Pax8 around 2012. He had big plans but his vision faced plenty of skepticism during the company's early years. After all, traditional distribution involves low margin, high-volume transactions. Apply that model to cloud services, and the profit margins are even thinner, skeptics asserted.

Pax8 Cloud Distribution: Build vs. Buy

During the early days of Pax8, Street faced the classic "build vs. buy" dilemma. Cloud distribution systems essentially are multi-tenant e-commerce systems. VARs and MSPs leverage the systems to source a range of SaaS applications, managing everything from procurement to configuration, pricing and billing along the way. Some early cloud distribution systems were built atop Jamcracker or Odin, which Ingram Micro has since acquired from Parallels.

Street wanted Pax8 to fully control it destiny, so the company built its cloud distribution system from scratch. The first line of code arrived in December 2012, and by May 2013 or so the system was live. The rapid development pace was impressive. But customers and investors initially ignored the system. A painful reality check arrived by around May 2014, when slow sales forced Pax8 to trim headcount from 34 people to about 18 employees.

What was the problem? Some critics wondered if Pax8 was using the wrong marketing terminology. Cloud distribution, after all, wasn't sexy. It screamed "commodity" and "low margin business" to some of those critics. At times, Pax8 briefly wandered away from the distribution terminology. But Street kept comping back to the same conclusion: Pax8's vision wasn't wrong. Success was merely a matter of timing.

Hello, Partners

The right timing, Street finally discovered, was this year -- 2016. "It's happening right now," Street told ChannelE2E last week during ConnectWise IT Nation 2016. His proof point: Pax8 now has 11 vendors and 900 partners transacting business on the system. Key solutions include desktop as a service (DaaS), business continuity, hosted communications and infrastructure as a service (IaaS).

Ryan Walsh

The IaaS component is particularly interesting. Rather than the usual market names, the IaaS platform involves ProfitBricks. Pax8 in February 2016 became the exclusive distributor of ProfitBricks as an IaaS platform in the US and Canada.

The relationships and innovations don't end there. While many cloud distribution systems and app marketplaces focus mainly on SaaS, Pax8 was one of the first to offer consumption-based (aka usage-based) pricing. That move could be particularly important as cloud providers and their customers move to microservice-based applications and associated infrastructure.

Street sees more upside ahead. The reason? There are 8.3 million on-premises LAN closets and server rooms today. By 2030, that figure will fall to zero, Street predicts. With those metrics in mind, Pax8 has gradually hired key team members from the MX Logic days. Ryan Walsh, senior VP of partner solutions, arrived in September 2015. Back at MX Logic, Walsh had a range of executive roles across marketing and product development. Earlier in his career, he held multiple roles in management consulting and professional services. I sense more hires are heading Pax8's way...

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.