Active vs. Joined Partners: The Overlooked Risk in Vendor Programs

[00:00:02] Nancy Henriquez looked at a backup company and saw a crowded market she had no interest in entering. Then she looked at its partner list and put her life savings into it. This is the Business of Tech. I'm Dave Sobel. Before we start, a disclosure. I own Small Biz Thoughts, an IT service provider university, which sell community and education to MSPs.

[00:00:26] Today's argument is that the channel doesn't measure whether its partners survive, and my business benefits from that argument. The person at the center of today's story also leads a community in this space where I compete. So discount my conclusion as much as you like. Keep the facts. They're sourced. Most of what this show covers starts as someone else's reporting. Today's starts with ours.

[00:00:51] Start with Dr. Backup, the cloud backup provider Mitch Rahm founded in 2002. It has been sold. The buyer is Hasvara, a Dallas-based company that Nancy Henriquez and Thomas Reiton created for the deal. The deal was announced September 18th, and terms were not disclosed. The company keeps its name and now operates as Dr. Backup, a Hasvara company. Rahm stays on as a strategic advisor for a year.

[00:01:19] Reiton is chief operating officer with a 15% stake. Enriquez did not want to buy a backup company. She told Business of Tech she saw a crowded category full of good products and large competitors. In her words, quote, I didn't see myself as a David among Goliaths. End quote. The partner program changed her mind. Truly, she said, the partners is why. So look at the partners.

[00:01:45] Dr. Backup's marketing describes a pro-partner program of more than 300 IT consultants. Enriquez told us about 125 are active today. The 300 figure counts everyone who has joined since the program began. The rest retired, closed their businesses, went back to corporate jobs, or went to work for other MSPs. More than half of everyone who ever signed up is gone, and the public number still counts them. Enriquez treats that gap as the reason for the deal.

[00:02:14] If those partners had someone to mentor them, to guide them and build a community around them, she asks, would their stories have been different? Her plan is to rebuild the program through an MSP owner's lens, with coaching built in, so partners get help growing their businesses and not just a product to resell. For now, the program runs as is. She describes what backup means from the operator's chair. An incident hits a customer and the first thought is, quote, when was the last time I tested the recovery?

[00:02:44] Quote, now the money. The acquisition is bootstrapped. Quote, Enriquez said she put her life savings into it, and she turned down an early investor because she wanted full control over direction. Quote, I didn't want this story to be told from a perspective of capital, she said, but that of community first. End quote. She says Dr. Backup is profitable and has been all along, and those profits go back into the partners.

[00:03:10] We asked whether competitors could use that financial structure against her in partner conversations. Her answer was short. Quote, competitors will always compete on what they can, and I will focus on building up our partners. End quote. Then the timing. Before the deal, Enriquez stepped away from work to care for her grandmother, who entered hospice and died in January.

[00:03:33] Enriquez had been interviewing for community roles in the channel, and her grandmother made her promise to return to ownership instead. The doctor backup opportunity arrived about a month later. There's one question she didn't dodge. Enriquez is head of community at MSP Unplugged, and she has publicly criticized vendors who build communities and then turned them into sales channels.

[00:03:56] Now she owns a vendor. She says she'll keep that community independent, and she has asked the community to hold her to it. The test she has set herself is measurable, whether those 125 partners stay, grow, and run better businesses. We'll check back in a year. So one company has two numbers, 300 who joined and 125 still there. Almost nobody else in the channel publishes the second one, and that's worth asking about.

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[00:05:22] YouSecure.io slash YouHealth A partner program is funded out of a vendor's sales budget, and a sales budget measures one thing, the sale. TechIsle surveyed 5,450 channel partner firms and found where that money goes. 72% of vendor incentive spending is concentrated at the moment a transaction closes. Now set that against where an MSP's money comes from.

[00:05:50] 41% of MSP revenue comes from renewals. The vendor pays at the signature, and the MSP lives on the years after it. 42% of the vendor's sales budget. That mismatch decides what gets counted. When a program pays it close, its systems are built to record closes. A partner signing up is an event. A partner who quietly stops selling is not.

[00:06:15] No alert goes off and no incentive is withheld because none was going to be paid anyway. That partner just stops appearing in next quarter's numbers and stays in the cumulative number forever. You might reasonably say vendors do track partner health. They have tiers, scorecards, and index models. They do, so look at what partners say about them.

[00:06:39] Among partners in programs that use a composite score, 65% can't see how it's calculated, and 73% of MSPs worry their score will drop without warning. The scorecard exists. It measures the partner for the vendor's purposes, and the partner can't read it. So the vendor holds two numbers and publishes one. Joined is a marketing number, and it only goes up.

[00:07:06] Active is an operating number, and it's the one that would tell you whether the program works for the people in it. Nobody has a reason to publish a number that goes down. In plain terms, the partner count isn't a lie. It's what you get from a program that pays for the sale and never had a reason to count who stayed. Which means the partners who stay get sorted by someone else's criteria, and the sorting has already started.

[00:07:35] Start at the top of the ladder. Microsoft stopped accepting new enrollments in its Azure Expert MSP program on September 15th, at the renewal's end in January 2027. The path Microsoft recommends is a new designation called the Frontier Partner Specialization. Azure Expert MSP was the credential you had to pass an audit to Renew. Partners who held it earned something difficult. That credential now has an end date, and the vendor chose it.

[00:08:04] Now look at the bottom of the ladder. Arctic Wolf built a lighter version of its managed detection and response offering for MSPs whose customers have fewer than 100 employees. Its chief revenue officer, Will May, described the goal as reaching that long tail of customers. Omnia analyst Matthew Bell named the risk. Managing a new partner tier without cannibalizing the existing one. So one vendor is closing a tier at the top, and another is opening one at the bottom.

[00:08:33] Neither move is about how the partners in those tiers are doing. Both are about where the vendor wants to reach next. That's the consequence. A vendor places you in its program according to its own map, and you move when the map changes. Without the active number, you can't tell where you stand on that map. A program where most of the people who joined are still running businesses is a different place to build a practice than one where most of them are gone.

[00:09:03] You'd want to know which one you're in before you bet a service line on it. So here's the choice. You can ask every vendor your practice depends on for the number they don't publish. Of the partners who joined, how many are still active, and how many are growing. Then weight the relationship by the answer, including when the answer is that they won't tell you. Or you can keep choosing vendors on product and margin, and find out that next partner retirement which kind of partner you were.

[00:09:31] The first choice costs you an awkward question. The second means finding out too late. And that awkward question has a price attached to it. The MSPs who win the next three years won't be the ones with the most AI tools. They'll be the ones who turn AI into a business. PAX 8 calls it managed intelligence, built on the marketplace over 47,000 partners already run on. Join them.

[00:10:01] PAX8.com That's P-A-X, the number eight, dot com. This episode is supported by MailProtector. One of the things I keep hearing from MSPs is that they want email security from a vendor focused on MSPs. Not a relationship where you're wondering what the roadmap looks like after the next acquisition, or where you fall behind enterprise clients. Mail Protector is independent, partner aligned, and to reduce the ticket friction that eats up their day.

[00:10:31] In a market where trust matters more than ever, that's a real differentiator. Visit MailProtector.com to learn more. Why do we care? A service you price for three years sits on top of a vendor program you can't see three years ahead in. When a vendor won't tell you its active partner number, you're carrying that risk inside a fixed price agreement, and it belongs in the price.

[00:10:57] That means a shorter term, a migration clause, or enough margin to pay for the switch you might have to make. So what to consider? Ask for active and growing, not just active. At each vendor's next renewal meeting, ask two questions. What share of the partners who joined in the last three years are still active? And what share grew their revenue on the product last year?

[00:11:21] Partners leave for reasons no vendor controls, but whether the ones who stay are getting bigger is on the program. A refusal is also an answer, so write it down next to the contract term. Match the client term to what you can see. When a service is built on a vendor that won't disclose its numbers, don't sign clients up for longer than you can reasonably see that program lasting. Otherwise, write in the right to substitute an equivalent product.

[00:11:49] Either way, you're pricing the chance that the program changes underneath you, and right now most agreements price that at zero. Put the migration in the margin. Moving clients off a retired program or a collapsed tier is labor you'll do whether anyone pays for it or not. Size one migration per vendor dependent service over the life of the agreement, and carry it as a line in your costs instead of discovering it as a loss.

[00:12:16] The vendors that publish their active numbers are the ones where you can carry that line smaller. If this trend continues, by the time Microsoft's January 27 renewal cutoff arrives, more vendors will have re-tiered their partners around reach rather than retention. My bet, and it's the bet my own business is built on, is that the partners who stay are the ones who get help running their businesses.

[00:12:40] If Hasvara's 125 haven't held and grown when we check in back last year, that bet is wrong. And you'll hear it first. This is the Business of Tech. Want to go deeper than the news? The Small Biz Thoughts community is where MSP owners and operators work on the business, not just in it. Member meetings, a deep resource library, and courses through IT Service Provider University. Everything you need to run the practice you actually want.

[00:13:10] Join us at smallbizthoughts.org. Interested in advertising? Head to mspradio.com slash engage. The Business of Tech is written and produced by me, Dave Sobel, under ethics guidelines posted at businessof.tech. Thanks for listening. I'll see you on the next episode. Part of the MSP Radio Network.