28 May 2018

Artem Kuvshinov

Business development manager

White label reselling in hosting: when, why and who?

It is quite hard for a company to occupy a market by itself. Even the most successful companies need partners and this rule works for hosting market as well. Thanks to a cooperation between data centers, hosting providers, software developers and other players on the market companies can explore new business directions and earn more profit. One of the possible types of such cooperation is a white label reselling.

I have been working as a business development manager in ISPsystem for more than three years by this moment. At my daily work, I interact with both industry giants and startup-providers. Many times I was a witness of launching new services and partner programs by different companies and how white label reselling helps them and their partners to grow and develop its own services.

This article describes the benefits of reselling programs for both sides: reseller and provider. I will also cover the main principles of building the reselling business model and give a short guide for building your own program with some recommendations on how to avoid some basic mistakes at the start. Obviously, BILLmanager.will be an important part of my story.

A couple of (non)fictional characters

In order to give you a better understanding of the white label model, I will summarize my observations and experience to introduce a couple of characters. Despite the fact they are fictional, their image has many real-life examples behind. I won’t be surprised if some readers will feel а affinity with one of them. So, meet James and David!

David

David is a founder and owner of Alpha, a small hosting company. The biggest share of its income the company is generated from providing hosting services to local SMBs and individuals. Alpha owns and manages several servers for covering the needs of a few dozens of their clients.

Issues and perspectives.. Sometimes David’s clients want to rent an individual server. Unfortunately, Alpha doesn’t offer neither virtual nor dedicated server services. David could launch the new VPS service (virtual private server) service, but there are a lot of sunken rocks behind this solution: it is necessary to choose and buy the server hardware and special software and train his staff to maintain it. These tasks will require additional investments while the ROI (return on investment) is unclear.

James

James runs Omega, a large data center with many highly trained specialists and thousands of servers. The company provides a wide range of services: dedicated servers, colocation, IaaS (Infrastructure As A Service) and SaaS (Software As A Service). The most of Omega’s clients are government organizations and large corporations.

Issues and perspectives. James thinks about expanding the target audience of his company to SMBs (Small and Medium Businesses) and individuals. However, this task is not that simple as it may seem. It is necessary to analyze the market, create a unique offer and sell the idea of launching the new direction to the board of directors. In case of success, James needs to hire a team of marketing specialists and sales managers to promote Omega’s services at a new market. The ROI of this project is also unclear.

So both of our characters are in a similar situation. At one hand, there are no direct threats to the business, but at the other, they feel that they have faced some kind of a glass ceiling that limits the development of their companies.

Is there a chance that James and David can help each other? Yes, there is! Omega has a developed and modern infrastructure combined with a technical arbitration while Alpha has a ready client base and experience of working in B2C segment. We have a potential for win-win scenario here if both sides act thoughtfully.

White label reselling. How does it work?

It is quite simple! In our case, David, the small hosting provider, can resell services provided by the large data center managed by James. And the best part is that the clients of David won’t be aware that he is a reseller. Generally speaking, it is not necessary to have a special software for reselling. It is possible to order the services and make payments manually. However, it will be much more convenient and reliable if there will be a tool for automation of order processing, issuing receipts and accepting client payments. BILLmanager can be a solution here.

BILLmanager can handle the major part of the work in launching the reselling program. A provider needs to create special plans and think over the terms and conditions for resellers. In order to join the program, reselling company should create the new service and integrate its BILLmanager with the provider’s billing copying the plans from there. When done, the reseller can sell the provider’s services under the white-label scheme.

Ordering and processing services with reselling model

In the future, the reseller can resell different services from other providers as well. For example, James can resell dedicated servers from Delta, the another data-center and/or cloud resources from Gamma, the IaaS provider.

A possible model of reselling services from different providers

Provider side. Launching the white label reselling program

If you use BILLmanager, launching the reselling program is quite simple from the technical standpoint. However, the business model has many aspects that need to be mentioned. I will give my own recommendations for providers on launching the white label program.

Please note! Creating the white-label reselling program is only available in BILLmanager Corporate edition.

Terms and conditions for resellers

At first, you need to create terms and conditions for your future resellers. Here are some recommendations:

  1. Set the minimal retail prices for resellers. It will protect your business from damping and poaching existing clients by your own resellers.
  2. You may request having a legal entity for joining your reseller program. If a potential reseller doesn’t have an official legal entity there is a high chance that working with him will bring more hassle than profit.
  3. Set the minimal turnover volume for resellers. It will motivate them to sell more services for keeping their discounts.

Please keep in mind that every condition you set is a barrier for your partners. However, a well-thought system of the terms and conditions may raise the quality of your resellers without a dramatic reducing of their quantity.

Benefits for resellers

It is necessary to provide your resellers with favorable prices. A good move here is creating a gradual discount system based on the turnover. Another solution is creating the special group of clients called “Resellers” and adding exclusive tariffs for them. BILLmanager allows using both scenarios.

Financial aspects

Another important step is defining terms of payment for resellers. Large companies prefer to work under post-payment model while advance payments are good for smaller resellers. If you use several different currencies, think about setting fixed currency exchange rates for the better transparency. In BILLmanager these settings can be applied globally for all clients within the “Resellers” group or for every client individually.

Technical support

Support policy is a very important aspect for resellers. For some clients, it may be even more important than the discounts. The most popular models of providing the technical support are free, paid or freemium. In the last case, the support is paid but resellers may get free tickets every month and/or with a certain amount of money added to the balance.

Provider side. Joining a reselling program

As a first step of becoming a reseller, it is necessary to find the best provider and discuss terms and conditions with him. After that, you need to integrate your BILLmanager with the provider’s billing. And, of course, don’t forget to think about the positioning of a new service and its target audience.

The regular edition of BILLmanager supports reselling of the most types or hosting related services: shared hosting, VPS and dedicated servers, domains and SSLs. However, some services require having the Corporate edition, for example, colocation and VMware/Azure/Openstack IaaS.

Choosing the provider

There is no a commonly accepted image of a perfect provider for reselling, but I will try to list a few main indicators:

  1. An existing reselling program. Generally speaking, any provider using BILLmanager Corporate may become your partner. However, having the reseller program means that he wants to work with resellers, knows how to do it and is ready to provide good conditions.
  2. A good business reputation, modern hardware, and reliable infrastructure. It’s highly likely that such provider will help you to avoid many technical problems. You can also use the provider’s reputation as your own competitive advantage. Your company will look more reliable if your website has a mentioning of the following kind: “Our servers located in Omega, the TIER 3 data-center”.
  3. Using BILLmanager. It is not necessary but will save you a lot of efforts when you integrate the billings.

The details of joining the reseller program are described in ISPsystem documentation.

Working with new services

Launching a new service is always risky. Reselling this service allows you to you reduce these risks but don’t avoid it completely. The key to success lays in the combination of the following factors:

  1. Choosing the price and service level.Decide whether you want to attract the clients with low prices or enchant them by a first class service. If you choose low cost model, be ready for a zero profit for the first months before you accumulate a large client base and get good discounts from the provider.
  2. Defining a target audience and promotion channels. Having a good product is not enough for success. It is important to understand who your clients are and how to tell them about your products using the promotion channels they get used to. SEO and targeting, hosting-related forums, special events — can help you to attract the right clients.
  3. Being unique and innovative. If you provide a unique service on the market you can define the game rules. For example, if your competitors sell regular virtual servers you may resell failover servers and set your own pricing. Offering additional services, like control panels, domains and SSL can help you to raise a customer satisfaction and get some extra profit.

Happy end

Let’s go back to our characters now. So, James and David became partners. Omega data center belonging to David launched the reseller program and David’s hosting company decided to join it. Let me describe some of the benefits that both sides received from such partnership.

Provider’s benefits

Expanding the sales channels, increasing the profits
The more partners you have — the more income you get. Although the profit margin here is lower than with the direct sales, resellers often work with a new target audience that is not available for a provider.

Resseller’s benefits

Expanding the scope of services
Some clients may need just a virtual hosting while another one may require an individual server. You may lose the client if you don’t cover his needs. Expanding the scope of services allows you to cover a larger audience and get a larger income. more profit.

Minimizing the outage of an equipment
In the hosting business, the outage of the equipment means lost profit for a business. Servers may become obsolete in just a few years after purchasing. However, the resellers may generate an additional demand for the equipment for maximizing the profits.

Saving money on hardware and software
Powerful and modern servers are always expensive, so the special software is. Don’t forget about the depreciation charges as well. Now take a deep breath and relax, because with reselling you don’t have to carry these expenses.

Saving money on sales and marketing staff
Resellers usually work with SMBs and individuals, it allows a provider to reach the audience without hiring and maintaining a large staff of sales, marketing, and customer care specialists.

The opportunity to test a new business direction.
Experimenting in a business is a great chance to get more profit. White label reselling allows launching a new direction for just a few days. If the new service will be successful, it is possible to think about providing it by yourself keeping 100% of the income.

Development of a partner network
Resellers are not regular clients who can leave you after receiving a slightly better offer from other provider. They are interested in a long-term cooperation and usually don’t leave the provider without a good reason for that. It allows him to make a better forecast of his main business indicators.

Saving money on technical personnel
The salaries of highly trained technical employees are traditionally high. But if you resell the services from another provider - you don’t need to have your own engineers, network specialists, and cloud architects.

Conclusion

White label reselling is a popular business model in the hosting business. Some people believe that reselling can only work for small companies and startups, however, many hosting giants started from reselling the services from other providers.

BILLmanager allows you to sell and resell all the possible kinds of hosting services: web-hosting and VPS, domains, and SSLs, dedicated servers and colocation, IaaS and SaaS products. The logic of working with the reselling models is quite simple and well-documented. Thanks to it web-studios, hosting companies, data centers, and telcos can easily launch their own white label program or join the existing one.

If you have any questions regarding white label models and managing it with BILLmanager we will be happy to help you with it. Feel free to ask it in tickets or drop a direct email to the business development department bizdev@ispsystem.com.

Artem Kuvshinov

Business development manager