Datto is starting to act even more like the managed services providers (MSPs) it serves. Indeed, the business continuity and data backup provider is cutting prices on its SIRIS hardware suite -- and then holding firm on the pricing for the long haul.
To me, it sounds a bit like Datto is getting away from product discounts that come with specific date deadlines ("buy it before January 31 to receive 50 percent off"). Instead, the company is cutting prices for SIRIS and then holding that new price steady for the long haul -- avoiding the temptation to do an even deeper discount for a limited period. MSPs, in turn, should be able to set their long-term margins in a more predictable manner.
"The big change involves the end of promotional pricing," confirms Datto CEO Austin McChord. "Rather than offering our MSPs the flavor of the month on pricing, we're introducing a really great price all the time. It's really big for the channel because MSPs will always know what their margin is" based on the price they set to the customer, and based on the new SIRIS pricing.
Economies of Scale
McChord says Datto's growth -- and the resulting economies of scale -- have allowed the company to cut SIRIS prices for the long haul while ending short-term sales promotions. The company is generating profits but raised $75 million in Series B funding in 2015 to further accelerate growth.
"Going forward, our MSPs won't miss out on a special sale price and they won't have to change their price quotes to customers" since SIRIS pricing won't fluctuate, he notes.
Datto is introducing additional discounts linked to longer-term services commitments, reflecting the company’s increasing emphasis on services. The new pricing is available worldwide for the SIRIS line, but McChord hints that similar moves could be coming for additional Datto product lines.
Benefits and Challenges
No doubt, MSPs could see some clear benefits from discounts that are locked in for the long haul. But it can be challenging to break customers and partners from their classic buying mindset, especially if business continuity and backup rivals occasionally offer deep fire sale discounts to channel partners.
In the consumer market, J.C. Penney once tried to end all sales -- instead introducing permanent price cuts. The move backfired, however, and the big retailer ultimately went back to its "big sale event" mindset for coupon-cutting customers.
Admittedly, Datto has a different business model serving a vastly different customer base. Datto has never disclosed suggested retail pricing to end customers. Instead, pricing information is only shared between Datto and channel partners. That approach means partners can work in private, calculating their costs before generating a price quote for the end-customer.
