What Business Model Should the VAR Examine?

Peter : On Rad's Radar?
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

What Business Model Should the VAR Examine?

So many keynotes (and channel strategists) have suggested that for channel partners to be successful going forward they would have to do 3 things:

  1. Perform R&D and develop some IP
  2. Build their own cloud services
  3. Go beyond brokerage to systems integration

Storagecraft writes, "According to a study by CompTIA, four out of 10 IT companies are monitoring the impact cloud computing has on the MSP market before deciding to offer managed services."

"ScanSource CTO Greg Dixon explains why it's imperative for solution providers to build managed services into their product offerings in order to boost recurring revenue and expand their value add." [source]

Let's examine each one.

First, the Duopoly doesn't even do research. They have industry labs (e.g., CableLabs) and vendors that do the research and development. G.fast wasn't developed in an ILEC lab. So if the Duopoly isn't doing R&D, how would a VAR? Is Comcast doing R&D? No. Cable Labs does it for them.

On developing IP (intellectual property), I have to wonder what they mean. Most VoIP providers have noone of their own IP. ISPs don't have any IP; hence why so many were open to DSL patent suits. [see here and here]

On the second point: Build their own cloud services. Well, MCPs (Microsoft Certified Partners) used to run their own MS Exchange email servers and Small Business Services for small business. Microsoft kind of squashed with the end of life of Microsoft Windows Server 2003 and SBS and the launching of its own cloud services, highlighted by Office365.

Channel partners are being encouraged to resell from the cloud brokerage platforms that Ingram and Tech Data have. These cloud services brokerage (CSB) compete directly against the carriers. They offer email, backup, apps, CRM, etc.

Backup services are offered by a number of VARs and MSPs. These partners already offer managed router and other managed services. Again this is directly in competition with the carriers and other vendors.

It isn't cheap - CAPEX wise - to start a cloud services business. One could buy IAAS or PAAS or VPS and resell it to customers, but that is low margin, low control business.

I looked at a few MSPs. Global Data Systems is on the MSP Mentor Top 50 list. GDS is a CLEC and Cisco VAR with MSP lines of business. Is that the model that these channel experts are advocating?

Claris is a cloud provider and a healthcare MSP. Other than some network, what kind of partner would Claris be to the Duopoly?

Appia is on the MSP Mentor list too. They are a Hosted UC shop. Appia advocates to VARs that their business model is dying - so they have that in common with channel experts.

There are VARs that perform system integration. It is a special skill set - one that even the Duopoly can't provider (which might be why they want the partners to do it).

The dig on Agents as channel partners is that Agents are mainly good at transactional sales like network services. They aren't very good at selling cloud or managed services. I think that will be proven incorrect in the next couple of years.

One thing that all the partners can provide: a multi-vendor solution or complete solution selling. I'm not certain that all carriers want to see a multi-vendor solution being presented. Until the carriers themselves offer a turn-key solution, customers will lean on channel partners for one. (And this is actually the sweet spot that Agents need to step up into.)

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