Technology businesses come and go; but as a category, VARs are the survivors of the technology world. A couple of years ago an editor asked me if SaaS was going to kill the channel. At the time, it was too early to tell exactly what was going to happen, but I expressed confidence that VARs would survive as an important channel, even if they had to evolve in significant ways.
VARs are thriving, but they don’t look like VARs from the past. Today’s successful VARs are built increasingly around service and support and less about selling products — the reseller part. In fact, some of the VARs no longer resell hardware or software at all while others will source hardware or software only if the customer requests it. Those that continue to actively sell products are increasingly encouraging their customers to implement Linux and open-source-based solutions that allow the VAR more control than they can get with the big traditional vendors.
This has huge implications for hardware and software vendors:
- Vendors have long depended on VARs to reach smaller market segments, so the sales process is going to change.
- Growth of Linux and open-source-based solutions will generate additional competitive and price pressures, leading to even greater commoditization of hardware and software. Life is going to get even harder for VARs that still resell.
Another business model change
Just as the VARs changed their business models to adapt to an environment where it is hard for them to make money reselling products, vendors need to re-think their business models and adapt to reach the end-users historically served by VARs.
What are vendors to do? First, recognize what is happening and why. VARs don’t hate hardware and software. In fact, both are critical to their customers and the services they provide. The issue is that they couldn’t make money selling against volume resellers, so they gave up. Since vendors can’t increase margins to VARs — and even if they did, the added margin would be bid away in the market — vendors need to find other ways to work with and support VARs.
The traditional approach is leads, training and certifications. However, talking with the new breed of VARs reveals that customization and support are what they crave. If you want to keep them in your camp, focus your efforts there.
Bruce La Fetra develops strategic marketing plans for software, technology and services clients. After more than 20 years as a consultant and practitioner, he launched La Fetra Consulting to elevate marketing into a strategic role by encouraging a service-oriented approach and building stronger ties between companies, customers and partners. He previously served as Business Strategist with Rubicon Consulting, Director of Industry Marketing for Docent (now SumTotal) and Director of Strategic Marketing & Business Development for Internet Commerce at First Data. Contact him at firstname.lastname@example.org.