Value-Added Resellers (VAR)
Value-Added Resellers (VARs) hold a distinct position in the supply chain and distribution networks across various industries, notably in technology and software. VARs purchase products from manufacturers, enhance them with additional features or services, and then resell those upgraded solutions to end-users. This model not only benefits the resellers through margin expansion but also serves clients by providing more tailored and comprehensive solutions.
Historical Context
The concept of Value-Added Resellers originated in the computer industry during the late 20th century. Initially, hardware and software companies sold their products directly to consumers or through broad-line distributors. However, as technology became more sophisticated, customers required additional services such as installation, customization, and ongoing support, which manufacturers were not equipped to provide. VARs emerged to bridge this gap, purchasing standard products, adding significant value, and offering the enhanced solutions to customers.
Business Model
The core of a VAR’s business model lies in augmenting existing products with additional functionalities or services. This can take several forms:
- Customization: Tailoring software or hardware to meet specific customer requirements.
- Integration: Combining multiple products to work seamlessly together.
- Support Services: Providing installation, training, maintenance, and technical support.
- Consulting: Offering expert advice on how best to use the products to achieve business goals.
By doing so, VARs can justify a higher selling price and build stronger relationships with their customers, ultimately leading to recurring revenue streams.
Types of Value Addition
Hardware Improvements
VARs can add value to hardware in several ways. This might include pre-installing software, bundling hardware with necessary peripherals, or customizing systems to meet specific performance criteria. For instance, a VAR might buy basic servers and install specialized software, configure RAID setups, or enhance cooling systems to meet a particular client’s requirements.
Software Development
In the realm of software, VARs frequently develop custom modules or applications that complement existing software products. This can involve creating tailored reporting tools, integrating third-party applications, or developing mobile extensions for desktop software.
Service Offerings
Another critical area of value addition is services. VARs often provide end-to-end solutions that encompass everything from the initial sale to long-term support. For example, they may offer managed IT services, where they remotely manage a customer’s IT infrastructure and end-user systems on a proactive basis.
Benefits to Manufacturers
Manufacturers benefit significantly from working with VARs. Some key advantages include:
- Market Reach: VARs can access markets and customer segments that the manufacturers might not be able to reach on their own.
- Expertise: VARs possess deep industry-specific knowledge and expertise, enabling them to position products more effectively and provide superior customer service.
- Focus: By outsourcing value-added services to resellers, manufacturers can focus on their core competencies, such as product development and manufacturing efficiency.
Benefits to End-Users
End-users also gain numerous advantages from working with VARs, including:
- Tailored Solutions: Customers receive products and services tailored to their specific needs, which can result in increased efficiency and effectiveness.
- One-Stop-Shop: VARs offer a single point of contact for a wide range of services and support, simplifying vendor management and reducing administrative overhead.
- Enhanced Support: With a VAR, customers benefit from more responsive and personalized support, ensuring quick resolution of issues and minimal downtime.
Challenges Faced by VARs
Despite their critical role in the value chain, VARs face several challenges:
- Margin Pressure: As products and services become more commoditized, VARs often experience pressure on their margins.
- Technological Changes: Rapid technological advancements require continuous learning and adaptation, posing a resource challenge.
- Competition: The VAR market is highly competitive, with many players vying for the same customers, making differentiation essential.
Trends in the VAR Industry
Cloud Computing
The shift towards cloud computing has significantly impacted VARs. Traditional hardware and software sales are declining as businesses increasingly adopt cloud-based solutions. This has forced VARs to pivot, offering cloud services and transitioning to a subscription-based business model.
Managed Services
There is a growing trend towards managed services where VARs offer comprehensive IT management services for a recurring fee. This model provides a stable revenue stream and fosters long-term customer relationships.
Cybersecurity
With the rising threat of cyber attacks, cybersecurity has become a critical area of focus for VARs. They are expanding their offerings to include advanced security solutions, such as threat detection and response services.
Case Study: Cisco Systems
Cisco Systems, a global leader in network and infrastructure solutions, works extensively with VARs. Cisco’s partner program enables VARs to sell its products while offering additional services such as network design, installation, and support. Cisco provides training and certification programs for its VARs to ensure they possess the necessary expertise to deliver high-quality services.
For more information about Cisco Systems’ partner program, visit Cisco Partner Programs.
Conclusion
Value-Added Resellers play an essential role in the modern economy, offering enhanced solutions to customers while driving value for manufacturers. As industries continue to evolve with technological advancements such as cloud computing and cybersecurity, VARs must adapt to remain competitive. By staying ahead of trends and focusing on their strengths, VARs can continue to thrive and provide significant value in the supply chain.