What is a VAR?
The term VAR or Value Added Reseller is used interchangeably by the technology industry. It is a company that purchases hardware, software, or other technology products and resells it to end users with additional offerings bundled in.
The VAR does not simply act as a middleman between a vendor/manufacturer and the end user but “adds value” by bundling additional components which they produce—selling the combined solution as one complete turnkey offering. These components could be products or services.
Examples of Traditional Bundled Offerings:
Products: VARs have typically purchased computer hardware platforms from manufacturers and developed their own software applications to be sold with that hardware. The software applications are normally designed to meet the needs of a specific industry verticals such as financial services, legal, healthcare, banking, and others. The two products (both the hardware and the software) are then bundled together and sold as one offering for one price to end user companies.
The items purchased by the VAR may be individual computer components which are resold to companies for installation to existing systems, or they might be complete desktop or laptop computers on which the VAR installs custom software they have built based on their expertise and the specific needs of their customers. For example, specialized case management software for law firms or engineering and project management software for architectural firms.
Services: Although hardware customization continues today, VARs have found that additional revenue can be gained by offering specialized support services such as training, installation, customization, consulting, technical support, or other professional services. These VARs are commonly known as solution providers because they offer their clients more than just individual products. They offer complete technology solutions.
Examples of Services VARs May Offer:
- Installation and configuration: Installation and configuration services bundled with computer hardware will enable small and mid-size companies with no IT department to benefit from technology which they may have been unable to deploy on their own. Similarly, companies who have an IT team on staff but need specific expertise which they do not have would also benefit from a VAR providing the installation and configuration services.
- Training: As already discussed, VARs often develop specializes software applications for clients in specific industries such as financial services, healthcare, accounting, and legal. Since these applications are unique to the individual needs of the company, training must often be conducted to educate the client’s employees on its use.
- Technical support: Technical support may be offered to small and mid-size clients without an in-house technical team. It may also be provided to larger enterprises who are strapped for resources or not as knowledgeable about the specialized components they have purchased, resulting in the need for additional technical assistance.
- Performing hardware or software upgrades: Hardware, software, or other network components sold by VARs will need to be upgraded over time.
- Design: VARs may also offer more complex services including complete network design.
Changing the Way VARs Do Business
As the price for computer hardware declines and more and more companies are moving away from in-house servers and other hardware to cloud computing solutions, VARs are finding it more difficult to sustain the margins, revenue, and competitive position they enjoyed in the past. In addition, VAR sales were traditionally one-off, meaning that once the hardware was sold to a customer, the training ended, or the short-term project was completed, the sale was done and the VAR moved on to the next customer.
As a result, successful VARs are searching for ways to take advantage of a recurring revenue stream that will give them guaranteed revenue month after month for the length of a customer’s contract – which is typically yearlong or multiyear. These VARs are transitioning to more of a Managed Service Provider or MSP role.
With the widespread adoption of cloud computing services, the role of the traditional Value Added Reseller—offering products with services bolted on—is morphing into that of a strategic provider of technology solutions. Like many Managed Service Providers (MSPs), VARs are becoming consultants rather than simply order takers. This new way of selling products and services provides peace of mind to the VAR that their business is on a more secure footing with increased growth and revenue opportunities over a longer period of time and that erosion of margins on the solutions they provide will be less egregious.
Both VARs and MSPs can no longer see themselves as break-fix companies, only showing up when something goes wrong or if specialized hardware or software is needed. To be successful today, they must be viewed by their clients as partners – trusted IT advisors and advocates to companies who are looking to technology to solve their business challenges and drive growth. VARs must focus on the needs, goals, and challenges of their client’s company as a whole and develop complete solutions (not just individual product components) to achieve those goals.