For years, value added resellers (VARs) have been providing products to clients by packaging software with hardware or selling and installing bundles of related software.
Now, cloud computing is changing that model. Gone are the days of locally-installed software. Clients are able to go straight to the cloud to download or use programs, potentially cutting out the middle-man.
Smart channel partners are adding new lines of business, becoming IT experts and acting as consultants for their clients. This enables them to build return business and to stay relevant even as the traditional channel partner business model is eroding.
1) Build your business model on a problem-solving approach
Now that the cloud has come along, smart VARs will figure out how to soar on the wind currents, providing clients not just with software but with services and expertise to go with it.
Forrester Research analyst Tim Harmon told attendees at Channel Company’s XChange 2015 conference that VARs must stop focusing on being value-added resellers and must begin to be value-added service providers. Anyone can go online and buy most software now, but clients are still in need of tech support and advice on how to integrate cloud solutions. That can be an excellent source of recurring revenue.
A reseller can offer cloud services, for example, acting as a guide as their clients enter the world of cloud computing. Harmon said Forrester research shows the industry revenue mix for channel partners is 65% for products versus 35% for services but that the mix will be 40/60 by 2020.
Vision33, which specializes in SAP Business One management software, is a good example of this. Vision33 provides complete support for its product, as well as custom solutions. (The company’s commitment to SAP software has also paid off: last year Vision33 acquired once of its competitors.)
According to John Durant, director of channel sales at Carbonite, a provider of cloud backup solutions, the most successful value-added resellers don’t just provide one product or service, but group products into overall solutions for customers and provide ongoing training and support.
2) Mine your clients for opportunities
Many VARs that sell software are well-positioned to notice — and capitalize on — gaps in the market. This may mean branching out into new lines of business.
SWK Technologies, a New Jersey-based VAR, is an interesting case. While they were selling a business operations software called Sage X3, they noticed that two clients, both craft breweries, had no software for forecasting ingredients, planning batches, planning packaging and other tasks related to brewery management, especially for small companies.
So they built their own SaaS business called BeerRun. By expanding the range of products and services they can offer, they retain clients and expand into new markets.
3) Manage the change in the market
Trace3 was founded in 2001 as a reseller of IT infrastructure products but is leaving that behind to enter the consulting business.
The company has partnered with consulting firm The Table Group to offer an organizational health consulting service aimed at helping clients plan for the future, negotiate change and make their businesses more successful. The company also offers a technology innovation program that’s quite different from the services offered by their competitors.
Unlike other VARs, which offer support and training services based on and around the products they sell, Trace3’s services aren’t technology based, it’s relationship-based: in the past 13 years, Trace3 has developed partnerships with venture capitalists.
As a part of their technology innovation program, Trace3 allows clients access to those partners, who can tell CIOs which tech startups will be funded in the next few years. The CIOs, knowing what technology will be available to their companies, can use that information to plan ahead.
4) Add value by adding training
VARs have the advantage of knowing how customers are actually experiencing the product and about their individual use cases. So they are in an excellent position to tailor product training to specific needs.
For example, Newmind Group, a technology consultancy that acts as a VAR for Google Apps, Google Education and other products, offers a catalog of onsite, online and blended training to the businesses it helps with integrating these products.
It’s not about surviving, it’s about thriving
Despite the disruption of the traditional business model, companies that ride the wave of this change, innovating and adding new streams of revenue, are doing well. Trace3, for example, has grown massively in 2015, with sales expected to reach $500 million by the end of the year.
The cloud might be rolling in, but those value-added reselles willing to change their business models -- often around new services, new products and consulting -- are doing more than staying aloft; they are soaring.