Are VARs Super Partners?

Over the past couple of years, VARs have become the "It partner." Or so it seems by the increasing numbers of service providers — telecom, hosted, managed, etc. — that put VARs at the top of their recruitment lists. It's as if these geeks (defined respectfully as those who are tech-savvy) en masse suddenly removed their black horn-rimmed glasses and donned capes and became faster than a speeding Ethernet connection, able to leap the OSI stack in a single bound. ... You get the idea.

While the emergence of a Super VAR may be an exaggeration, it is an excellent analogy for the situation that VARs find themselves in. As a group, they are put on a pedestal as a great hope for the future of information and communications technology sales, but as individual channel businesses, many are struggling with the transformation required to meet those expectations. Perhaps our illustration should have shown a disheveled "Clark Kent" stuck in the phone booth?  Admittedly, both images show extremes, with the truth, or at least practical experience, lying somewhere in the middle.

So what is a Super VAR? Rauline Ochs, senior vice president of channel research firm IPED, wrote in a Dec. 9, 2011, blog that the most "attractive or ideal" VARs, or solutions providers as they are often called, are no longer defined by revenue growth but by their abilities to capture customer spend in the data center, hosted and cloud environments.

Obviously, not all VARs will fit this ideal today, but many are working toward it. IPED identified a continuum of descriptions for VARs that paint a good picture of this transition from Vintage to Progressive to Transformative. In her blog, Ochs explains:

• Vintage partners are those who largely remain in a hardware and software one-time charge, project-based revenue strategy with no plans for recurring revenue offerings.
• Progressive solutions providers are those with an active investment in training, education and solutions offerings in a recurring revenue-based managed or cloud service.
• Transformative solutions providers are characterized by a majority of company revenues recognized in a recurring fashion.

VARS IN TRANSITION

Because of its legacy focus on telecom services channels, Channel Partners has attracted VAR readers that already have made significant progress toward changing their business models toward recurring revenue models — usually by selling carrier network services but increasingly by adding managed and cloud services. We interviewed five of them at random about their evolution. Admittedly, five VARs' experiences are not statistically relevant, but anecdotally, they do a good job of representing the possible individual transformation process.  Coincidentally, two of the VARs — Nexus IS and SHI International Corp. — are most likely to be described as Transformative using IPED's VAR model above. Two others —  Complete Communications Inc. and Agility Technology Group Ltd. — appear to be Progressive while one — MAC Source Communications Inc. — straddles Progressive and Vintage with some recurring revenue, just not in managed or cloud services.