Are VARs like Record Stores, Obsolete?

With all due respect to the great people at the 240,000 VARs in North America, what is the point of a VAR today?  Vendors are aggressively courting end users, i.e. Apple Stores, online stores.  Traditional direct marketing resellers (DMR) like CDW and Insight have always been "the boogie man" anyway to VARs and they are offering more value-add services while selling large volumes of goods at thin margins.

To quote my friends at VARBusiness:  a VAR or Solutions Provider is any third party company that deploys/integrates/resells and/or influences hardware/software/service to an end customer.  The most common value-add VARs traditionally provide is "Access and Advice".  When you think about it, the value proposition is pretty close to that of record stores, look what happened to them.  Do you even remember the name of a record store.  For the record I do....Tower Records.

10 years ago VARs kept inventory in order to be able to respond quickly to clients. It was a competitive advantage.   Presto! with the combination of FedEx, the internet and the huge economic buying power of the mega resellers it is no longer an advantage.  In fact tying up cash in inventory is a disadvantage.  And that was before SaaS eliminated inventory.  So access has gone by the wayside, what about advice?

Queue a discussion of social media....Much of the channel discussion that I have been involved in centers around communication between vendors and resellers.  It is about about becoming more interactive, relevant, and timely.  The goal being to better enable the channel to resell products and vendors to stay relevant to those resellers.  The same logic and technology can be used on end users with the same wondrous result.  However, another attribute of social media is a down side for VARs.

VARs filtered the "signal to noise" ratio for end customers by being knowledgeable about a set of products, i.e. reducing the noise.  These products are filtered, as they are preselected as a portfolio product by the VARs.  The good ones do it on the basis of product features, service, vendors stability, etc.  As VARs select the products before the end user uses the product, they are Pre-Filters.  The VAR can give advice about the 2 to 4 products that they carry in each product category.  The advice is valuable, in some cases invaluable.  But wait, there is a new source of information for buyers: fellow travelers. 

What is more compelling:  a power point from a sales person or a series of rhapsodic reviews from professionals in your position i.e. doctors, lawyers, coffee shop owners.  Unsure?  Well then try it for free for 30 days.  DIY (Do It Yourself)  in full bloom.  

There goes the "advice" portion of the VAR value proposition.  What happens when a company with a powerful market position, credibility, and aggressive prices like CDW or Insight offers user recommendations on their web site (which neither do today) or it is available on Amazon?  Is it game over for VARs?

The IT channel is at the cusp of a change.  My contention is that there is room for Value-Added Resellers but not for resellers masquerading as VARs.  In future posts I will develop the “whys and wherefores” a bit more.

Who Let the Dogs Out? Not Sure Anyone Did

On the train back from San Francisco and much of the week at the RSA Show (biggest IT security show). One of the topics that I investigated was the health of channel as measured by investment by suppliers. Well the answer is mixed, I sound like an economist in Time Magazine. For every company increasing their investment in the channel there was another taking the wait and see approach. uggh.

However on the positive side, there were a number of direct companies of the SMB variety who are starting to invest in the channel. This is reflected as upgrades at some, hiring at others. SMB's or start ups are typically the early part of trends, so may be also in this case.



The bad news from the show was the sparse attendance, no obvious signs of a recovery here. Thursday was nearly dead in much of the Expo hall. Back on the good side many of the vendors reported that the quality of attendees was high. Is that due to tight budgets and companies only attended if they are actively in the market for security?



The best booth entertainment was the fellow playing an instrument by disturbing a magnetic field, never touching anything. Not Bruce Springsteen but interesting. Worst entertainment, get your picture with a big guy in a diaper. Not sure the Sumo wrestler was the best idea.



- Posted from my iPhone

Channel and the Economy, Who is Winning?

As the great recession took hold, a number of firms reduced investment in the channel.  Many did not dump partners all together, rather they reduced budgets in channel "overhead".  Which translates to channel  focused employees and programs.  The prevalent notion was; "our relationship with the channel is fine, we don't need anything but direct quota types.  They can drive sales and in their spare time do channel stuff."

There was a resulting increase in complaints for resellers who could not get questions answered, quotes generated, MDF, or they never heard from vendors unless there was an active deal.  Pipelines suffered for many channel oriented firms, just the economy or did the reduced proactive effort by vendors contribute?

Major channel players followed this script, WebSense for one.  They keep giving the team a haircut until little was left to be proactive.  Recently WebSense has begun to hire a new team, is that a good sign in the economy?  WebSense is not the only company to go through this process, one company that shall remain nameless, decided to layoff their channel leader saying they hoped to share her expertise with other small companies within their investors portfolio.  The executive speaking to the press said they just did not need anyone full time.  Good Luck with that!

Has the approach changed?  Are there more channel employees at the vendors?  Are they more optimistic?  How does the spending level compare with 2 years ago?

I am headed to a major network security trade show this week, RSA, to get a sense of the mood toward the channel and the mood of the channel.  I will be blogging from the show as I learn anything interesting.

The Wavelength Analytics team is at it again with an updated look at the high tech job situation.  They have expanded their work to include Boston as well as the Bay Area.  Take a look at the latest blog.