A New Golden Rule

The VAR-to-VAR market is no longer a novelty.

CRAIG ZARLEY Can be reached via e-mail at czarley@cmp.com.

The annual CRN Sourcing Study confirms that the fastest-growing source of products for many solution providers is other VARs. Responding solution providers said 9.7 percent of all their product purchases came through peer-to-peer connections, compared with 3.8 percent in 2005.

Steve Harper, president of Network Management Group, Hutchison, Kan., told me that revenue for the DoubleCheck Email manager appliance he sells to other solution providers was up 100 percent last year. Harper's secret for cracking the VAR-to-VAR market: "Being a VAR, we get it. We understand their pain and what they want."

And what VARs increasingly want is to buy products from someone they trust, without having to invest in sophisticated certifications to sell the product. Of course, they also crave the ability to make high margins. Harper accomplishes that with his antispam device by allowing other solution providers to rebrand the product as their own and set their margins.

Contrast that formula with the margin-killing one often associated with products sourced from major vendors. Often, customers can shop prices on the Web and play one VAR against another.

Rory Sanchez, president of SL Powers, a West Palm Beach, Fla.-based solution provider, said sales of his Guaranteed Networks network monitoring managed service to other VARs are gaining traction in part because he knows how to avoid vendors' marketing missteps.

"We know all those pitfalls of what some of the big-name manufacturers have done to us in the past," he said. "We tend to create a VAR program whereby the VAR gets treated the way we want to get treated by Hewlett-Packard, IBM and the other guys."

Vendors would do well to study and emulate some of the VAR-to-VAR strategies in their own channel programs. The messages that come across loud and clear: Keep programs simple, and don't betray a trust by competing against your partner. Most VARs learned those lessons long ago, but many vendors can't seem to grasp them.

Maybe as the VAR-to-VAR market continues to gain ground, high-tech vendors will finally take heed and listen to what their solution provider partners have been telling them for years.

Are you turning to your peers for products? Contact CRN Industry Editor Craig Zarley via e-mail at czarley @cmp.com.