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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.”

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.”