First of all, I’m not referring to VAR, Video Assistant Referee that attracted plenty of attention at the FIFA World Cup earlier this year, I’ve nothing against it, and consider the video ref an overdue step forward.
There are terms in technology that are frequently mis-used and as a result became misunderstood.
During any given week, I have a number of conversations with organisations re-evaluating their approach to reseller relationships.
Regularly organisations are titling those discussions as ‘VAR consolidation’. Here’s where the problem starts … What are they referring to by using the term VAR?
Progressively the lines between resellers and service providers have become blurred. The desire to differentiate, deliver more customer value and grow margins has seen resellers evolve to develop IP and deliver progressively more professional services, in so doing making their business’ more valuable.
On the flip side domain focused service and solution providers have sought the income associated with resale.
Service from your reseller
It’s apt to acknowledge that resellers could be judged by the degree to which they service clients without additional charge. The concept of value add in the term VAR is misunderstood.
What might be expected of the reseller as value add inclusive within the resold offerings, vs value add derived by committing to professional services?
Each reseller must choose how their operating model maximises inclusive service, whilst also maximising professional services incomes.
Classifying the supplier
At what point might we class the supplier as a services provider rather than a reseller? If we were judging numerically that might be the extent of their revenue or profitability that is delivered from professional services income.
The distinction is potentially judged through other means however – Are professional services core to their offering? Are they niche and focused with domain expertise in a given service type (ERP, CRM or security for example)?
In which case the supplier is a services and solution provider rather than a reseller.
Choosing to consolidate
A key hurdle is to develop an appreciation of what services they could successfully access within volume resale (inclusively), and how to optimise relationships with a limited number of suppliers on that basis.
Another, is to recognise that to consolidate suppliers it may be necessary to detach certain product and solution acquisition from services providers.
Indeed service providers may remain numerous, given the nature of discrete domain expertise that often characterises their business models, unless a selection of professional services aligned to competencies of resellers are also migrated.
A sourcing or procurement organisation that chooses to acquire products and solutions from a range of distinct services providers may make limited progress in consolidation.
The business benefit of those specialists however may be considered more than worthy of managing additional relationships.
Consolidation may best be achieved by categorising and identifying requirement types that logically fit together and the synergy with domain providers.
A primary software and cloud services reseller for example, plus a primary networking and security reseller, plus a primary hardware reseller … or the same organisation may be used for all three if complete consolidation is sought.
As for the term VAR …
It’s become an unproductive and unnecessary TLA, whereby it’s used to collectively describe resellers and service and solution providers.
When analysing the supply chain and portfolio of partners and providers, it’s far more appropriate to distinguish what type of supplier your organisation chooses to deal with for given requirements.
Which products, solutions and potentially professional services would you choose to acquire from a reseller?,
Which professional services and potentially products or solutions might you acquire from a services and solution provider?
Feel free to use the term VAR to describe the video football ref, please don’t use it to describe your reseller or service providers.
Stephen White is a research director at Gartner