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4 Don'ts for Your Value-Added Reseller Business Model

September 27, 2017

In the 2016 State of IT report, Salesforce Research surveyed more than 2,200 IT leaders and CIOs to discover how their organizations have been impacted by this shift and which strategies top performers are using to stay ahead. Two major points stood out:

  1. Sixty percent of IT leaders rate predictive analytics as absolutely critical/very important over the next five to eight years, and 58 percent rate the IoT the same.
  2. Eighty percent of those developing in the cloud say they are working primarily on projects that will transform the business.

These statistics provide just a glimpse into how technology advancements are changing the business market landscape. VARs now operate in a world where cloud computing, big data, mobility, and the IoT, among others, transform how vendors and solution providers sell technology and how end users consume infrastructure and applications.

As a consequence, VARs must transform their business models so that they essentially emphasis the “value-added” aspects of “value-added reseller” and put less emphasis on the “reseller” portion. While the model will vary for each VAR, there are a number of things that they can collectively avoid in developing their business model moving forward. Here are four major don’ts for the VAR business model.

#1: Avoiding Emerging Market and Product Innovation Funnels


VARs can be highly entrenched when it comes to product offerings, primarily due to the time and effort it takes to explore and develop new market and product funnels. Although VARs have been able to develop a VAR business model by following well-developed product and service routes of the past, it is a methodology that no longer works. Hardware is far from being a recurring product sales generator dead end for VARs. Still, most realize that it's only as resilient as their understanding of how to provide it as part of bundled custom services that meet specific needs in a shifting landscape.

As the role of IT leaders changes to encompass a much broader role at the C-suite table, they are being tasked with finding business-oriented solutions to real problems and emerging market needs. CIOs who came up through technology now find they are in a sphere of influence beyond those traditional roles.

Security and the cloud are two examples that have evolved far beyond an amorphous state to highly specific needs with highly specific ends for enterprises. VARs that do not put in the time to understand those emerging needs and how to help them create customized turnkey solutions will be left behind.

That means cultivating relationships in research and development arenas in order to be ready for emerging market needs. Becoming fluent in the influence of the Open Compute Project (OCP) is one example of how to prepare for the development of emerging product and solutions markets that will shape the VAR business model today and tomorrow. Already, VARs are being asked to be fluent in the benefits of OCP servers with more product and end-to-end solutions in this area to follow.

#2: Don’t Avoid Value-Based Outcomes


This is just one example of their need to branch out and master the art of aggregating vendor products into holistic solutions, bundled with their home-grown products and services, which offer greater value to their customers. This outcome-based selling model is meant to address the growing need from end users that are increasingly looking beyond the more-with-less model and now want completeness in their IT investments.

Increasingly, CIOs are being called upon by business units to deliver turnkey systems that deliver on specific business outcomes. This requires that VARs be capable of incorporating complementary technologies and services to give the customer simplicity in sourcing and implementation.

This value-based outcomes model requires that VARs be prepared to offer customized solutions that address specific customer business objectives. Increasingly, this means expanding their offerings to include emerging trends such as business intelligence (BI), big data, and unified communications.

Examples of understanding how healthcare is using BI and big data to change outcomes means developing holistic solutions from the ground up. That means from solid-state drives (SSD) through the server to the Hadoop or Spark platform environment that drives it for a specific data-use outcome. It can also mean helping CIOs connect the dots of BYOD, telemedicine, and mobility with unified communications and collaboration in the healthcare environment.

#3: Not Allowing for Multiple Strategies


Another thing that VARs must avoid in their business model plays off of the #1 “don’t” insight. That is the need to move away from having a single strategy to having multiple strategies. Three examples of this would be to:

  1. Add new products that open new market opportunities
  2. Add complementary products that add value to something already sold
  3. Look for displacement products that can be substitutes for existing ones

#4: Selling Boxes Rather Than Solutions


The cloud stack is very broad in terms of how businesses are utilizing it. As a consequence, VARs must avoid creating a VAR business model that delivers components and build the model on delivering solutions. That still requires a strong component-level understanding such as with how SSDs impact the cloud.

The fact of the matter is that clients are predominantly looking for solutions to address a few key trends, including:

  • Cloud computing
  • Mobility
  • Convergence
  • Scalable processing and storage
  • BI
  • Smart security management

This comes as no surprise to most VARs, but things become murkier when they realize that clients have vastly different and specialized needs that require these solutions. It no longer works to sell “boxes” or components. VAR business models must be based on filling the end-to-end solution needs that are specific to different industries. The VAR must have strong industry knowledge, but also be capable of learning the highly specific needs of the client within that sector as well in order to provide a one-stop shop for end-to-end solutions.

That will more often than not require that they be capable of choosing what they need from as many vendors as necessary to achieve best of breed at a price that delivers value. Taking a virtual CIO-type advisory role is only the beginning, as they must also be capable of effectively supporting implementation. This may require either transitioning into a managed services provider or partnering with one.

Specialization in cloud computing is one major growth area for VARs where a deep understanding of how particular sectors are utilizing the cloud can create recurring sales with more robust, unexplored opportunities. A recent survey of more than 150 leaders from U.S. channel organizations conducted by workflow automation company Nintex found that 48 percent of surveyed channel partners say revenue is more predictable with cloud-based and managed services solutions versus on-premises solutions.

A closer look would likely reveal that each of these channel-partner VARs would take a slightly different approach to reaching this goal. What they all share is an understanding that today’s VAR business model requires a much higher degree of innovation, industry immersion, and solution flexibility to meet the end-to-end needs of today’s clients.