At their Partner Event. Riverbed highlighted the success of Kentucky-based Tier 3 Technologies, which transitioned from an on-prem VAR to a SteelFusion and SteelCentral-focused MSP in less than three years.

SANTA BARBARA – A year ago, at its 2016 Partner Summit, Riverbed capped its about-face on managed services by adding a formal Managed Services track to its partner program. While the company had previously been fully committed to a traditional resale model, the January 2016 acquisition of Ocedo, with its as-a-service offering, and the growing cloud-fueled trend to subscription models in the industry led to the change. Riverbed also thought that its partner base was better suited to add managed services to their portfolios than Riverbed itself.

Now, a year later, most partners have been reluctant to make the shift, except of course for that minority of born-in-the-cloud partners who were there from the start. While Riverbed is now acknowledging that SteelHead-as-a-service as a bit of a leap for most partner business models, they also stressed at this year’s partner event that their SteelFusion and SteelCentral offerings are more intuitive for partners, and that further as-a-service offerings better suited to the channel are also on their way. At the same time, however, they are also stressing that partners who HAVE made the leap to managed services have been able to do very well, with Tier 3 Technologies of Louisville KY being offered as an example.

“We started in business as a channel partner 14 years ago,” said Michael Paynter, Tier 3 Technologies’ CEO. “Initially, we were a VMware shop, but we were looking to do a combination of virtualization and something else. We found, however that we kept running into bandwidth issues, I heard what Riverbed was doing and flew out there, talked with them, and signed up as a partner. Now we are primarily a Riverbed shop, although we also work with Microsoft, Palo Alto Networks and Gigamon.” They have a dozen full time staff, with more available as contractors as needed.

Until three years ago, Tier 3 was a traditional VAR.

“At that point, we began to see significantly compressed margins because clients wanted to cut CAPEX spending,” Paynter said. “So we began to migrate to an MSP model and have made the full transition. We also decided, a year and a half ago, that as we were selling application solutions, we needed to talk about the platform, because we needed a platform play for that, as opposed to a point product. We are now selling SteelFusion as a service, and have just been approved as an embedded partner.”

“Edge IT has become increasingly complex, but SteelFusion as-a-service is only just beginning,” said Alison Hubbard, Senior Director of Product Marketing for SteelFusion at Riverbed. “Some sites are too simple for it, and others just need servers for network services. But there are others that are hybrid, and which run Line-of-Business applications and storage, and there is a growing amount of opportunity in these kind of sites. SteelFusion fits in these sites where if the apps go down, it would be tremendously detrimental to the business.”

Paynter acknowledged the transition was a lot of work, but said that it was necessary.

“Clients aren’t looking for people to sling hardware any more,” he said. “I see Riverbed as a software solutions provider who can deliver it in a physical or virtual environment. We’ve made significant investment in skill development and ongoing education in our engineering staff, and all of our new people go through their solution selling approach. My job as CEO is to balance their time out of the market to do this with the enhanced revenues from when they are back in the market.”

Compensating a sales staff used to traditional upfront compensation has long been a principal difficulty for companies transitioning to managed services, and that has been the case with Tier 3 as well.

“It has been a challenge,” Paynter said. “We have had to almost completely remake our sales staff. But we need the MSP margin to make more money. Partners who just sell WAN optimization don’t understand the customer problems that have been created by the cloud impacting the move from CAPEX to OPEX, and they won’t be around for a long time. Until mid-year last year, the cloud adoption rate was steady, but since then it has really taken off.”

Tier 3’s customer base includes two fairly large and high profile customers – the state government in Kentucky, particularly the Department of Transportation, and KLX, a Miami-based aerospace firm they landed as a client through a past connection with a senior executive there.

“We have SteelCentral there, and are now talking about SteelConnect with them,” Paynter said.

Riverbed provided more details at the Partner Conference on its new Service Delivery Platform it originally announced earlier this year, emphasizing that it will have broad utility for partners, and won’t just be a large service provider play.

“I want to find out more about it and what it will do for me as an MSP,” Paynter said.

Hubbard emphasized that Tier 3’s success shows that partners can profit by investing in the managed services model.

“In only two years, they have transitioned their entire business,” she said. “We’ve seen a few of our partners make this transition, but many worry if they can wrap it all up. Tier 3’s success in managed services shows that they can.”