The great philosopher Aristotle once said, “Knowing yourself is the beginning of all wisdom.” While Aristotle had a very wise mind, he never was a member of the IT channel. With the recent advent of cloud-based applications the lines have blurred between reseller classes. It has intermingled the two designations that have dominated channel IT sales for a long time, the Managed Services Provider (MSP) and the Value-Added Reseller (VAR).
This blurring of lines has led to many VARs and MSPs losing their so-called “identity” which may in turn prevent them from truly achieving the business growth they wish to see.
So, whether you are new to the channel and are trying to decide which route is best or you are a seasoned veteran looking to switch from VAR to MSP or add managed services to your business, VIPRE Security has your back. We want to help channel members best understand what is unique about these two distinctions and which may be best for you.
Who Are They?
Value-added resellers are solutions providers that offer third-party software and hardware to end-users at a markup. In addition to this service, VARs normally provide some combination of procurement consulting, configuration, and customization work. VARs will also, at times, take multiple solutions and bundle them together to offer these products as a complete package to customers. VARs generate their revenue through a combination of flat-rate fees per license and billable hours, but their engagement after selling the product is finite.
Managed Services Providers, on the other hand, are companies that operate and maintain network, application, system, and e-management services across a network to multiple SMBs and enterprises. MSPs will often use a “pay as you go” pricing model. This in turn allows MSPs to serve as the IT department for SMBs that don’t want to put costly IT administrators on their payrolls.
VAR vs MSP
VARs often have a significantly easier time getting their business up and running. They can easily add new products to their catalog to sell almost immediately. Most VARs will likely serve larger organizations and enterprises while tailoring their solutions to usually fit a specific industry. Additionally, a VAR will typically not provide technical support for their products. This allows them to pass on support duties to the vendors. However, VARs lose a lot of the flexibility in building their business the way they wish to as they are obligated to the vendors and their products. Vendors will rarely allow the flexibility and influence on product that MSPs have for a VAR. On top of being limited by product flexibility, many VARs can rarely provide deep discounts on products.
MSPs on the other hand, are afforded the opportunity to build their business the way they wish with greater control and flexibility. With typically better pricing discounts by vendors through partner programs, a MSP can position their company as an even more cost-effective solution for the SMB sector. There’s usually a large amount of lift required to not only get off the ground, but to continue running effectively. They must function as a full-service IT department to multiple businesses concurrently, not only providing administration, but providing technical support both on-site and remote management capacities. To be effective in this class it takes a savvy business person coupled with solutions and processes designed to increase efficiencies. Effective management will allow for greater profit and lifetime value per customer.
Which is Right for Me?
At the end of the day, there are numerous pros and cons associated with both MSPs and VARs. When deciding which reseller class is right for you, it boils down to how involved you wish to be with your customers in the long-run. More involvement could lead to greater profits, but the amount of effort required can sometimes be a hindrance and end up as a roadblock to those looking to turn profits at a quicker rate.
One thing that can simplify the process in both classes is utilizing excellent partner programs offered by both vendors and value-added distributors. Ideal traits a solution provider should be looking for in these programs are predictable revenue, high margins, and simplicity in implementation. There are additional benefits present in many programs, but it is truly up to the individual business owner to decide what is best for them and their customer base.
We at VIPRE hope that this first entry in our three part series in which we will explore the IT channel delving deeper into the Managed Services side and how you can build your business for current and long-term success.