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The Other “Managed Services.” An Impending Battle Between Equipment Dealers & VARs?

29 Oct, 2011

If you’re like many dealers today, IT management is presenting itself as the next frontier for your business – expanding your service footprint and wallet-share by winning an IT support contract or a deal to replace hardware.  These are great goals that many dealers see as “low hanging fruit” opportunities in their existing accounts, and also as a great long-term strategy to grow their businesses. 

But in many cases, there’s often an IT VAR in the account, reselling hardware and software and delivering services. Or at least there are IT VARs trying to break into those accounts and win the business. Office Equipment Dealers and IT VARs, then, can only be considered competitors, right?  And competitors seek only to beat one another out of existence, right?  Should we be preparing for a “Battle Royale” between the IT VAR community and the Office Equipment dealer community over the “turf” that is our client space?  Not so fast. 

I could spend the next 700 words or so explaining exactly how a dealer can crush the IT VAR competition off the face of the planet, but I’m not sure that’s the most productive answer.  Maybe there’s a better one.  Hear me out. 

IT is many things: networking, security, messaging and communications, productivity, data management, connectivity, etc.  And that’s just a sampling.  There are more kinds of hardware and software – servers, pcs, operating systems, networking equipment, productivity applications, phone systems, and peripheral devices – offered today by more vendors than any one person could reasonably count, and it’s growing fast. 

Further, businesses need those technologies to work together more deeply than they ever did before.  Voicemails from the phone system sent to Outlook inbox, company data accessible via smartphone, etc. 

This is convergence.  Specifically, it’s the tendency for previously separate technologies such as voice (and telephony features), data (and productivity software) and video to share resources and interact synergistically.  The more technology stuff one provider knows how to sell and deliver in this converged model, the more services they can provide our clients and the more money they make.  But technology is complicated.  Becoming great at administering Microsoft Exchange, for example, takes lots of work and experience, and probably a certification from Microsoft somewhere along the way.  Microsoft Exchange is just one example among SO many technologies that the average small business uses on any given day. 

What If
Let’s take a small industrial roofing firm, for example.  They’ve got Microsoft Exchange, Office productivity suite, an Accounting software app, a LOB inventory and job management app, some roof survey and estimating software, an important SQL database that they use to manage their key customer and product/pricing information, a network copier/fax/scanner and a few peripheral things like scanners and digital cameras. Right there we’ve already listed more than five different technology challenges. What if I am not a database management expert?  Or, what if I’ve never seen that Roof survey software before?  Or what if I don’t know what to say when they ask me about that network copier?  What’s an IT VAR to do? 

I have a couple of choices.  First, I could take the time to learn how to support each technology that each client uses.  But that could take a while and it will probably cost me a lot of money - product training, certifications, learning the value prop and sales pitch, etc. 

Second, I could limit the scope of the services that I’ll deliver to that client, so that I can’t help them with that technology, and leave them to find another source of support…a source of support that may later on overstep its bounds and compete with me for that client. 

The third option is:  I could find someone who already knows how to deal with that technology and team up with them.  If we arrange the right kind of “fulfillment partnership,” we’ll both get paid for serving those clients.  When I find a client with that technology, I call in my partner.  When they find clients with needs in my area of expertise, they call me in. 

I win because I maintain control of my relationships, and my clients don’t end up paying 3rd parties for support.  Even though I’m sharing the revenue with my partner, I can manage expectations so that it all appears to come through me, and keep my true competitors from ever getting in the door.  And I get easy new business every time my partner walks me into one of their accounts, too. (Talk about "lead-generating!)

My partner wins because they get easy new business every time I walk them into an account, and they can manage expectations with their clients to make it appear that it all goes through them.  They can better protect their relationships by keeping real competitors out, as well. 

Best of all, the client wins because they get coherent, congruent support from a team that actually understands the bigger picture of the business and its technology for a great value. 

Now just replace “IT VAR” in that example with “Dealer.”  Which of those three options do you choose when a client asks you about the data network or the server or the phone system?  Think about the investment in time, tools, and people that will be required for you to get an IT service practice up and running.  Think about the competitive threat caused by letting other providers into those accounts if you choose not to go after them yourself.  And think about the time you’ll need to see a return on that investment for building it out on your own. 

Now consider your ROI if you can offload all the skills and all the actual work, but maintain your involvement in that account and still capture revenue.  The cost of delivering service goes way down, and margins go way up.  Best of all, both you and your partner effectively double your prospect/client base. 


Kate Hunt is VP of Community Development for ExchangeDefender & Editor of LooksCloudy.com. She has spent most of the past decade inside IT service organizations & has seen it all – from service delivery to vendor relationships, to marketing & sales – and leverages that expertise to help VARs & MSPs maximize profitability & client satisfaction. Contact at kate@ownwebnow.com.

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