 From Miami Beach, Florida, it's theCUBE, covering Acronis Global Cyber Summit 2019. Brought to you by Acronis. Welcome back to theCUBE's coverage. Two days here in Miami Beach at the Fountain Blue Hotel for Acronis' Global Cyber Summit 2019. I'm John Furrier, host of theCUBE. We're breaking it all down. Our next guest, Ryan Walsh, co-founder and chief channel officer at PAX 8. Just talking, riffing about the changing the channels. Welcome to theCUBE. Thank you so much, John. Happy to be here. Thanks for coming on. We've lived multiple ways of innovation now, more than ever, cloud computing and digital products. The game is still the same, but the equation changes. I got to get a product in the hands of a customer through a channel of distribution, AKA system integrators, ISVs, Vabs, bars, resellers, whatever the hell the word is, it's a channel. That's right. And they want to have their customers pay them for services and have turnkey products. Okay, that old world has shifted to now software. That's right. You got hardware that you can buy from Acronis and all those edge devices that can be deployed, managed over the cloud. So the cloud has kind of changed the game. Yes. You guys that started the company, that's essentially born in the cloud distributor, which is interesting. So I want you to take a minute to explain PAX 8, born in the cloud distributor. What does it mean? How did you get there? Yeah, why do we do it? What's the story? Yeah, that makes sense. The traditional distribution game was on-premise technology, hardware, printers, software to install, ship it, right? Pick pack and ship. Now fast forward to a cloud game and you'd say, well, do you need distribution? There was a thought at a time that said, well, the channel is going to get disintermediated because all we're going to do is we're just going to go online and we're just going to download it. We're just customers going to buy it. I don't need a channel. I don't need a distributor. I'm just going to go get what I need. What we learned is that's not the case because there are some products that you can certainly go and download an app on your phone and know how to do that. But when you're talking about small and medium-sized businesses that might not have in-house IT, it's not so easy as downloading a product. And this was a problem that we wanted to solve as PAX 8. The reason we got into the game, we actually, many of us came from a born in the cloud software company. And we learned how powerful the channel was. In fact, we started selling direct and realized we just can't scale fast enough. So we committed to the channel. Once we did, we started selling to those partners and you might have thought, yeah, we didn't need distribution. Some of our partners said, yeah, go onto the traditional distributor's line card. And when we did that, we said, well, they're great at pickback and ship, but as it pertains to a cloud world, it's broken. And so, after we sold that company, the CEO of our company, John Street, and another co-founder, we said, well, hey, let's go fix a problem. What's out there? And we said, well, distribution is broken for the cloud. And that's how PAX 8 came to be. You know, it's interesting as a student of competitive strategy, business, being an entrepreneur myself and having some experience in the channel, like you guys have, it's interesting that the same meme comes around the trope or whatever you want to call it as, oh, the middleman are going to be disaggregated and it's direct to consumer. Now, I would argue that's true in a lot of cases, if it's more efficient to go direct to consumer, technology enables that. So downloading basic apps, media is not going direct. Yeah, middleman gets cut out, but that's undifferentiated value. And I think when you look at middleman, people get confused between a middleman role and a supply chain, right? So I think what you guys are doing is cracking the code on this value in the supply chain of distribution of software to an edge or channel partner that has a relationship with customers. Yeah, they only just change overnight. This is why we actually, I've been in meetings where I had a born in the cloud SaaS company show up at a channel event and at this particular event, we thought this guy was going to come in here and say, tell me about how great you are and why I need you. He sat in the chair and said, why do I need you? Like, I wasn't even thinking about this, right, as a channel. A year later, he came back and he says, I understand why I need you. One, why I need partners to help deliver that last mile because the trust was already there. But more importantly, customers want solutions. And now, you see what's happening with cloud products, Acronis being one of them, they can pull together multiple things to create a solution. And you really need to have somebody guide that to it. It is not as simple as just downloading an app and making sure that it all works for a business. It just isn't. Well, high volume, low margin businesses tend to get disemunated quickly. But when there's value creation, you talk about relationship to customers, great channel players have that. That's right. And they have costs around servicing that customer. The challenge is when the cost becomes so high to provision and serve the customer, gross margin gets hit. Well, this is where- And so if they can eliminate that risk, why wouldn't I look at a new supply chain partner or a new partner? This is where a PAX 8 comes into play, which is most partners don't have the in-house technology to build a platform to shift if they didn't support a recurring subscription revenue model. That's not easy. Because when you ship the box, you created a bill at that time. But now, if you're selling cloud products, you've got to turn it on quickly. You've got to allow somebody to order one, two, three more seats or gigabytes of something, and you've got to make sure that the bill is accurate. That becomes very complex, just to know what the price thing's at. You know, we've been doing a lot of coverage and reporting on modernization of the enterprise. Cloud computing, of course. Cloud 1.0, Amazon model. Cloud 2.0 is enterprise. And these nuances that are operationally challenging. But procurement, whether it's government, public sector, man, it's 1994. Right. Procurement, there's no modernization. You're kind of teasing out what I think is like a really big wave coming, which is the modernization of products, marketplaces, and delivery value. Yeah, you're right. Do you see it the same way? What's up? A hundred percent. And what's interesting about what you're talking about, even when we started, and what we're doing right now, the nuance around what you're saying, has, we've built things in our platform that we didn't envision in the beginning because the market said, this is a problem and we need to fix this. How do you make it easy? And one example of that is, whether you're an enterprise customer or you're a partner, a managed service provider, providing multiple cloud solutions to a customer, what they want is pull it all together, turn it on quickly, and make sure that I can support this technology stack. Look at what Acronis is doing. They've put together data protection and security. This is a very unique combination. Well, a lot of these customers are not just buying that. They're also buying Microsoft products. And so as they grow their stack of technology, they still want to get it as fast as they can. They don't want to pay for things that they don't use. This is the new nuance that we had to solve for this problem with our marketplace, is nobody wants inventory in a virtual world, pay for what you use, nothing more, nothing less. And you really need advanced automation and integration to make that happen. And that's where Pac-Sate came in. Well, I think the Pac-Sate Acronis story is interesting because you think about the demands of the dealer owner manager or the guy who's the entrepreneur or owner of the channel, whatever that partner it is, they have to hire people. The human resource side of the equation is super efficient, but it's also a razor edge too, right? If you overdrive on human labor, that has to get trained on security, right? Well, hey, why not bring in Acronis in there and Pac-Sate, and I'm up and running with a full-blown security suite, cyber protection, new category, I can bring that to market through my channel. That's right. Trust relationships there, everything's kind of end-to-end. It kind of works. What's unique about what you're saying is a part of our model, which is, you know, what's sexy that you talk about at first is, oh, you got a cloud marketplace, or partners can use this thing to order multiple cloud products. That's pretty cool because they typically, they wouldn't have the capability to do that themselves. But a part of our model is Pac-Sate provides tier one support to these partners. To your point, if you have to bring on a technician, you may not know whether you're going to sell something new right in the beginning. So the fact that Pac-Sate can provide sale support and tier one support on that product allows a partner to figure out whether they're going to sell it, how they're going to sell it, without incurring that cost because you have a partner like us. So what's your positioning relative to the competition? What do you guys offer that's different? How are you guys positioned to the channel versus some other big player? You know, what we talk about, and a lot of people said, well, why would you come into this game when you have such big names, big brand recognition? They got more money, they got more engineers, they have some tech. But what they didn't have was cloud and your DNA. That's what we represented. So we were untethered by legacy processes. You know, we didn't go through a pick pack and shipwork. We were built from the ground up to be in the cloud. Devops. Yeah, devops and high automation, this blend. So what we, the message we've taken to the street and our focus is we're blowing up traditional distribution because you needed to think and operate differently to take advantage of the cloud. And so this is our message. Our differentiation is solely around this focus on enabling a partner. And if you look at what we are, you know, we're very selective on the cloud products. We have a cloud marketplace, but a lot of people do. The big difference is really we create a partner experience where we're there by their side. We're not telling them what to do. We're there to make sure that they can grow their cloud footprint. You're not just fulfillment. That's right, we are full service. Yeah, and there's a big difference between saying, I know you want this. Can I, you know, I'm going to place the order to, how do you introduce a new technology like a Cronus to a partner who's never heard of it? They typically aren't coming in saying, well, I want a Cronus and I want to buy it. It's how do you teach them? How do you show them how it works? And then how do you support it? You know, channels are very efficient as well. Like, if you're good, you're gone. You're golden, you'll double down on it. If you suck, you're out. You're out. It's like, they don't tolerate dogma. So I got to ask you, when you go into the channel, one of the things that they have, and just my observation is, they have a bar about value creation. They want partners that are going to create value. That's right. What's your pitch to them when you're saying, what value do I bring for you, channel partner? So is this to PAX 8 to the channel partner? PAX 8 to the channel partner. What value are you bringing for value creation? Bring me value. I'm buying all day long. We're going to do. Yeah, PAX 8 value, this is, it's two-fold. What we're trying to do is, there's a revenue side of that value, and there's a cost efficiency side to that value. I'll start with the cost efficiency. Partners don't embrace cloud because there's friction in the cloud buying process. It's difficult to get. The bills are difficult to consolidate. It's difficult to aggregate all of that in one place, and then ultimately make sure that that flows through their business systems. So the value that PAX 8's creating on the simplification of buying cloud, we have a technology that allows them to quickly provision, aggregate the bill, but we don't stop there. Marketplaces that stop there aren't doing enough because we hear about the buyer's journey with customers, and this is where that journey for a partner doesn't start and stop with our marketplace. They actually have tools like professional service automation tools where they want what we do with our marketplace to integrate into those tools. So we simplify that whole buying process. That's one huge value add that we have. On the revenue side, most of the partners that we deal with don't have time to go check out cloud products. We do all that vetting, and then half our company is sales. So our internal reps help our partners get introduced and sell- You're driving revenue. Yeah, we're driving revenue. I'll give you an example of this value add. It's not a matter of saying, and this is what a lot of marketplaces do. They put up a bunch of tiles and say, we'll go pick what you want. You're still faced with the same challenge. Well, I don't know about that. I don't recognize the Acronis logo, or maybe I do, but I don't know what's in that product. It's really about sales enablement. How do you do that? Well, the one way that we do this is we go talk to partners about how to grow a cloud practice. We actually go into the field and introduce these cloud products and have partners talk to other partners about how they grew their stack of technology. And then again, we'll demonstrate it, we'll show them, we'll run through the whole thing to sell on their behalf. This is what we find is value add, so a partner doesn't have to do that. They can build a cloud practice and they can do it cost-effectively. As a disruptor coming into the marketplace with the cloud mindset dev ops, you got a lot of advantage. You can automate, you're driving revenue. Come on, it's a winning formula. You pull that off, you're going to do well. Right, so I wanted to get your perspective. Looking at this industry, what's the modern channel look like? I mean, I've heard all that, oh, the channel's dead, it's changing. It's certainly changing. What's the new picture of the channel in your mind? Oh man, I tell you, this is a great question and one that I'm really excited about because we deal with a lot of partners who were, they had a non-prem practice where they would drive out and service an account. The new definition of the channel now is one that's untethered by Agia because they're taking advantage of cloud services and can get turned on anywhere and can get supported anywhere. So what we're seeing is managed service providers that are showing up and they are acting as an outsourced IT and a virtual CIO to a small business. Now to do that, what they're doing is they're building a stack of technology to say, when you sign with me, this is how I interact with you. I have a stack of technologies, I'll deliver it, configure it, I'll answer questions for you and they're going even further than that. These guys are also partnering with other partners who have specialty because what they realize is to be a generalist is hard to win. Now you got to be niche, razor focused because what we see is customers are now educating themselves before they call a partner, right? 70% of the research is done before they even call. So you better know what you're doing. And so what we're seeing, the channel of the future is one that's focused on their specialty. They're not afraid to partner with other partners who have a specialty that their customers may want and everyone is dealing with automation integration. So it has to happen at the speed of light. Time to value, time to value, speed to market. This is a progressive partner today and they're growing. They're growing rapidly and they're buying each other. There's a huge M&A activity now because they recognize as a fragmented market. So if you're really good at your focus, you really can take advantage of that. So speed, agility, profitability, customer satisfaction. Core drivers, core drivers. But then what you need though is there's no reason to go it alone. This is where a PAC say, you would say, well, okay, that's value for the service provider. Why do you need tier two? Well, you need to aggregate these solutions and bring it into one place for that partner. You need somebody to help them out to be by their side. This is something that we're finding, this is a part of the value chain. Well, I think certainly direct to consumers happening but there's still value creation opportunities out there from the new shift. Acronis is doing a good job with you guys, you think? Acronis, good for you guys? I tell you what, Acronis is blowing up with us. We were just talking to Sergey about this, like why, why is this happening? Well, one of the things that they've done that's really adapting to what the market wants is, one, they put multiple solutions together in a single place and made that easy. Two, they made an upgrade to their user interface. So it's really easy to interact with. So you could have a great technology but if it's not easy to work with, customers are moving on. That's the state of reality today in the market. They put those things together at a great price and they're maniacal about support. And so they're built to make sure that partners and their customers sort of get up and running with their product quickly and add to that. Then we've got integration with their platform and ours. Now it's like it's a perfect opportunity because now we can all move quickly, automated. This is why it's a great union. Ryan, thanks for coming on, sharing your insight. Take a minute, give a quick plug for PAX-8. What are you guys working on? What are you guys looking to do? Hire, take new territory, what's the plug? PAX-8 is blowing up distribution and we're growing rapidly. One of the things we're focused on right now is that with the focus on the customer experience and digitizing operations, what we're focused on now is thinking differently about how you target your customers and what they need. If you take a page of the Amazon marketplace playbook and I'm talking about the consumer products, they're really taking advantage of understanding the characteristics of each buyer. This is what PAX-8's focused on for the future so that you can really have a more targeted conversation and focus and marketing campaign with your customers and we're going to deliver that with our platform and do our partners. And being cloud guys, I'm sure, date is a big part of it. Date is a big, this is the future. We're hiring data scientists to really be prescriptive about how to target and what comes next. Ryan, thank you so much for sharing that insight. Good stuff, congratulations. Looking forward to tracking your progress in the industry. Thanks for coming on. Thank you so much, John, I appreciate it. Yeah, I look forward to talking to you in the future. Okay, this is the CUBE coverage from Miami Beach for Cronus's Global Cyber Summit 2019. I'm John Furrier, thanks for watching.