The decline in margins on IT hardware sales may have accelerated the move of many VARs to solutions selling, but the Wall Street meltdown, credit crunch and recession only served to solidify the commitment of many to move into those kinds of sales.
That was the impetus behind the formation of the Solutions First Council, more than a year ago – a group of VARs taking a leadership role in transforming their businesses and offering their experiences up to help other VARs looking to change, too.

Members of the group presented at the VSR Business Optimization Summit in Philadelphia this week on their transformation progress and some of the issues they’ve faced in the process -- a process they say can take from three years to five years.

“It’s clear that people in the business will be chasing less business,” says Brian Marcel, chairman of IBCS Corp. a solution provider which sells mobile solutions in Europe. “People will cut prices and there will be less margin.”

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Tom Beusch of Miles Technology agrees, saying he knew he would have to change his entire business model in order to continue operating.

“My competitors would be the CDWS of the world,” Beusch says of going forward as an IT hardware reseller. “I had to change my structure if I was going to do this because the hardware business only offered single digit margins.”

So like other members of the Solutions First  Council, Beusch embarked on a transformation towards more of a solutions business and now calls himself an Applications Solutions Integrator or ASI.

To make this transformation, VARs need to ask themselves “What is the value to the customer,” according to Todd Baggett, CEO of RedLine Solutions, another member of the Solutions First Council. Starting from that question should inform VARs’ sales efforts.

It’s also necessary to make changes to personnel, says Beusch, who has reached a one-to-one ratio of technical people to sales people.

“You can’t take a hardware sales person and convert them to an applications/solutions sales person,” he says. He’s had difficulty getting his hardware sales people to talk about solutions, and dedicated two-years worth of weekly sales meetings to solutions sales training.  

After those two years he changed his tactics and brought in what he calls specialists. These specialists act as back ups to the existing sales people who still retain customer ownership. With the higher margins paid by solutions sales, Bush was able to leave the compensation structure in place for his existing hardware sales people while adding compensation for the new specialists, he says.

In addition, he offers $5,000 bonuses to sales people who sell his internally developed software.

Marcel says that top hardware sales people may already be bored with what they have been doing and see solutions selling as a new career path that can keep them engaged.

“You may find your stars are getting bored with selling just products,” he says. “They may want this new career path.”