It’s a tough time to be a Value Added Reseller (VAR). For those who don’t know, VARs are a breed of IT consultant popularized in the 1990’s and still near-ubiquitous in certain channels. They’re hard to miss:
Without going into too much detail, the VAR model is one of selling software licenses for the margin, with the idea of “adding value” via technical expertise and support. Vendors get qualified sales reps: customers get experienced help: VARs see project revenue from the initial sale, then recurring revenue from support retainers. Everyone wins, right?
Wrong. Cloud computing is destroying the traditional VAR model, and rightly so. Here are 3 reasons why.
1. Customer needs have changed. The old VAR model was helpful because, generally speaking, software installations were complex. Getting a locally-hosted Exchange server up and running was a significant task, requiring time and technical expertise. Customers were happy to pay a premium if it meant having helpful local nerds on-site to help. Sold.
These days that’s no longer true. Cloud computing applications are by definition hosted on third party servers, meaning you no longer need technical help in getting setup. Patches and updates are pushed by the vendor, meaning you don’t need an IT guy or a VAR retainer. The technical side of VARs isn’t needed anymore. Customer needs have changed.
2. Vendor needs have changed. Used to be, vendors needed VARs because they worked like salespeople. Land a VAR and you land their customer base. Easy.
Thing is, vendors don’t need VARs to make sales anymore, not if they’re cloud-based. Customers come to software directly – they read a review, type in the URL, sign up for a trial, and convert to paid customer if they like what they see. The cloud model cuts the middle man out.
3. IT is changing. Underlying all of this is the fact that the fundamental business role of information technology (IT) is changing. Nevermind – it has already changed. In the old VAR model, IT was still something you could ignore. It was a tool, no more, no less. VARs existed to service that tool.
The power of cloud computing has changed that. Extremely powerful tools have become so easy to use that today, more than ever before, small and mid-sized business owners are incorporating IT as a core component of their business. Your CRM, your email, your website: all are inextricably linked with sales. Good luck separating them. IT has changed.
What does all this mean? To our admittedly biased minds, it means that A) The VAR model is broken, and B) We need a new model. Not to be immodest, but that’s us.
Customer needs have changed, so how do we meet them? We’ve got a whole services page for this, but, generally speaking, we’ve seen value in 1) matching business process to software, which is the opposite of the VAR model, 2) custom development and integrations between silos, and 3) user training. The whole cloud computing thing is still new to most business owners – helping them find, configure and use the right tools is a huge value add.
Likewise, vendor needs have changed, so how do we align ourselves? Because the new model is subscription-based, users can come and go as they please. That’s great for users, but difficult for vendors. It’s called churn. Consultants can (partially) mitigate churn by bringing in qualified customers (ie, companies whose objectives match the solution’s strengths), and by helping current users convert to “power users.”
We can also provide a measure of hand-holding that many vendors either can’t or won’t. Development teams speak tech. Clients speak business. Consultants speak both.
If you’re a user or vendor, ditch your VAR, or demand they live up to the name. Cloud computing has changed the landscape and VARs have been too slow to respond. It’s time to wake up.
If you’re a VAR, get your shit together. There are huge opportunities out there and you’re not going to see them if you don’t adapt. For reals.
If you’re someone else, well… I can’t really believe you just read this whole thing.
What do you think? What’s the future of VARs?
VM Associates is a New York City cloud computing consulting firm. We help companies transition into newer, better, smarter software. Contact us to talk about your business, the cloud, and how we might help.