There are probably a large number of you who will disagree with this article completely, and I really hope to hear from you – Tweet us @ChannelInsider – because I’d love to learn more about how you’re achieving success.
That said, let’s continue the age-old discussion of what companies in our channel call themselves.
Perhaps you’re still a “Solution Provider.” Or you’ve graduated to “Cloud Solutions Provider” (CSP) or “Managed Services Provider” (MSP). Some may even claim the impossible, that they are still “Value-Added Resellers” (VAR), in which case I’d like to hear how you’re able to afford giving away added value services when you generate little or no profit from the sale of the related products.
I’m not trying to be snarky here; this is serious business. My journey began in 1981 as a Solutions Provider and continued as a VAR, a reseller, a corporate reseller, and ultimately as an MSP before the term was coined. We called ourselves Network Monitoring & Management. That was 1998.
Throughout that entire time and on until my official departure from active channel duty in 2009 I watched as margins dwindled down to basis points. Some partners practiced a degree of self-deception and ignored the fact that the meager remaining margin was eaten by the internal operations required to process the orders and any credit used to facilitate the purchase. Selling products became a losing proposition long ago.
Then Came the Cloud
If product sales weren’t challenging enough, the explosive arrival and growth of cloud computing put the last pegs in the coffin. Customers by and large stopped buying servers, storage, and other items related to them. What was left were endpoint devices and peripherals. Never the greatest source of profit generation, these were insufficient to support an ongoing business based on product sales.
For many channel partners the vendors were their sole source of funding for marketing efforts. Even more have strong relationships with technical resources inside the vendor companies. How could you preserve those relationships with a vendor you didn’t sell anything for?
Further reading: From VAR to MSP: Managing the Shift from Push to Pull
Vendors May Be More Realistic Than You
Vendors like Microsoft saw the reality of the value of channel partners’ influence and leaned into it far sooner than others, though more recently they seem to think it has changed. Citrix introduced their “Flex” program in the mid-1990s to incent and compensate channel partners for simply influencing the purchase of their products. They explained that they didn’t care who sold the licenses as long as they got sold, so they provided deal registration and paid handsomely for projects that pulled through the sale of their licenses.
Influencer programs may have subsided over the years but the ethic behind them is still very much alive. Many vendors recognize the value of having channel partners who use their expertise to win customer engagements for projects that require their products. Many will work hard to help those partners close those deals, even though the products may be procured elsewhere. For them it’s not who processes the order, it’s who drives the purchase.
Originally, the channel was created to handle the large number of receivable accounts manufacturers like IBM didn’t want to handle themselves. They were accustomed to fewer customers processing fewer, larger sales. They were daunted by the idea of millions of small A/R accounts, so they were happy to pass that along to “aggregators” who would distribute product to “resellers” who were more than happy to have all those receivables.
Today those customers can purchase the products they need from catalog and online sellers or retailers like BestBuy, Staples, and Office Depot.
The Future is Specialization
Resellers who saw this coming set about transforming their business to focus on providing excellent professional and technical services, including managed services. Some identified the tools and services they needed and then trained their people for this. Others recruited new resources. They educated themselves in ITIL and other methodologies and performed remarkable transitions.
Others had “MSP” printed on their business cards.
The result has been an enormous number of MSPs in the marketplace, only some of whom are competent. The rest simply damage the reputation of the name MSP.
It is up to each channel partner to determine where they are now. If you’re still a “reseller” you need to do some serious soul-searching. If you’ve taken on the name MSP but not much more you will eventually run out of customers to disserve and dissatisfy.
If you’re among the remarkable breed of transformed MSPs, you need to start thinking about where you want to specialize to rise above the market noise. This looks a lot like the medical profession. The age of the general practitioner is pretty much over. Every doctor wants to specialize. You should too.