When computers were new and IBM and Apple were the only real players in the game, they sold their products through resellers. Because these resellers were competing for business while selling products at the same price, many started adding free services to entice customers to buy from them instead of their competitors, birthing the business model of the value-added reseller (VAR). But once discounting became popular, VARs could no longer afford to add services for free. Now that product is an afterthought for most IT service providers, are value-added resellers a thing of the past?
What Is a VAR?
A value-added reseller is a company that partners with a vendor to resell their products and adds services like implementation or maintenance to sweeten the pot for end users. Some VARs may also bundle products together or add software, giving end users a one-stop-shop for all of their technology needs. For example, a VAR working with a retail client may purchase a tablet from the manufacturer, install point-of-sale and accounting software onto the device, and then resell it to the customer.
When this model first started, pretty much all resellers sold products at the list price, meaning there wasn’t much difference between them. Adding services as a bundle with the products gave end users much-needed help and provided VARs with an edge over traditional resellers.
Which Companies Still Call Themselves VARs?
Despite the value-added reseller model basically dying out with the rise of discounting, some organizations still refer to themselves as VARs or resellers. Here are just a few big names that fall into this category:
- CDW
- World Wide Technology
- Logicalis
- Ingram Micro
- Insight
Despite the term, many of these companies don’t prioritize products, instead focusing on managed services while allowing their customers to purchase hardware from them as well. The biggest draw to purchasing hardware from these companies rather than a vendor is that a VAR or managed service provider (MSP) can help the customer set the system up and maintain it for them.
How VARs Became MSPs
When discounting took over as the primary practice for resellers, it didn’t make financial sense for them to continue offering services for free. However, those services didn’t become any less valuable. In fact, resellers found that they were a more reliable source of income because it wasn’t just a one-and-done purchase. Instead, they could get regular monthly revenue by offering recurring services, like maintenance and monitoring.
With this realization, managed service providers were born. Additionally, most technology vendors started selling their products directly to end users. While they still had partner resellers, there were fewer benefits for those channel partners so services became a natural direction for those businesses.
Learn more about how VARs became MSPs.
VAR vs. MSP
VAR and MSP are often used interchangeably, and while their business models are similar, they don’t mean the same thing. VARs focus on product sales and offer services to entice buyers to purchase from them instead of other resellers. On the other hand, MSPs focus on service offerings and typically specialize in a single type of managed service, like security or cloud management. MSPs may offer products as well, but many do not.
Despite technically still being around, value-added resellers are very much a thing of the past. MSPs, however, seem to be the way of the future, especially until the supply of experienced tech professionals can keep up with demand. Plus, most hardware is much easier to use and install now than it was several decades ago, meaning the need for VARs just isn’t the same. Instead, companies are dealing with new technical challenges, like the cloud and cyber threats, meaning that’s where they’re focusing their budgets.
MSPs Are Turning Software Into New Services – As We Predicted.
Do You Need a Value-Added Reseller?
Unless you’re specifically focused on purchasing hardware and need help with installation, you likely need an MSP rather than a VAR. Standalone VARs really aren’t a viable business model anymore — although IT project consultants are always in demand — but MSPs can help you with a variety of technical services, including security, IT management, and networking, whether you have an in-house IT team or not. Businesses looking for help with their cloud environments, especially, should look at MSPs. Some MSPs sell products too, giving you the best of both worlds.
