It's a question constantly posed in the industry. VARs are the experts in the field of providing solutions to the end-user (whether enterprises, mid-markets or SMEs), and they should know the best way to get a deal for their clients: under budget, on time, every time.
It's easy to be glib and say that we should get what we pay for. But if we take a deeper look we soon discover that the world of the VAR is not that simple.
VAR ecosystems
In a typical solutions channel structure, the VAR is the first and last line of support to the client. They advise, implement and provide maintenance and support to the end-user. In the meantime they also forecast, build pipelines and devise sales and marketing strategies so vendors can maintain a healthy margin to keep their business doors open. A delicate balance, and one that contributes to a sensitive channel ecosystem.
According to David Mitchell, senior consultant for Ovum: "Channels over the last five years have achieved a balance that works for vendors and end-users alike." However, he sees a change starting to manifest-one expected to have an impact on the way VARs do business, and how they view their revenue and business models moving forward.
The increasing complexity of solution sales is starting to see a change in the way end-users approach a vendor sales pitch. End-users are beginning to be wary of solution sellers. The pressure to purchase based on a vendor's "sales cycle" as opposed to the end-user's "buy cycle," coupled with increasingly complex pricing, complex contractual negotiations and changing support and maintenance to legacy systems has left a sour taste in the mouth of many end-users.
Shift in focus
Mitchell sees a shift in the focus for VARs. He believes that VARs will become more customer-centric in their dealings with the end-user. The reason for this is twofold.
Firstly, end-users are leaning on the relationships they have with VARs to provide them with better service. They are asking-and expecting-the VAR to be their trusted adviser, to be able to provide them with the best and most cost-effective solution. Secondly, and ironically, VARs will be forced to be the champion for the end-user because of margin squeeze by the vendor. Mitchell said he's seen this occurring in North America and EMEA and is starting to see it happening in Asia-particularly in the more developed markets of Singapore, Hong Kong and Australia.
VARs versus vendors
Typically VARs are treated as an extension of the vendor's sales, marketing and support organization. Thus they have a commitment to meet a certain revenue number to maintain their margin status. This makes the VAR beholden to the vendor first and foremost, with the needs of the end-user a distant second.
If the vendor cuts this margin, the VAR needs to make up the shortfall somewhere. What Mitchell proposes is that the VAR provide greater advisory capacity to the end-user by getting the best deal for their client to rectify the shortfall.
In some instances they may look at a competing vendor to provide a solution that may or may not be more expensive. He labels these new VARs as "Super Resellers" and expects to see more and more of these types of deals being negotiated in Asia over the coming months and years ahead.
This of course is not a bad thing. It's merely a change in the channel ecosystem, and like ripples in a pond it will cause tremors.
But this will, in the end, achieve a balanced state. In this channel ecosystem "Super Resellers" are first and foremost advocates for their clients. The ultimate goal: the redefinition of the point where value enters into the equation, perhaps a place where it should always have existed: in the hands of the client.
Stephen Teh has worked for global distributors Ingram Micro, Alstom IT and local distributor Business Bits. He now works for global relationship and loyalty marketing agency ICLP Ltd based in Hong Kong. Contact him at stephen_teh@iclp.com.hk.