What Customers Want From VARs

Caterina Luppi is a VAR's perfect customer. As senior director of technical services for the National Parks Conservation Association in Washington, D.C., she oversees IT operations for the nonprofit's 140 employees in 13 regional offices across the country. With limited staff and such a far-flung operation for an organization of this size, she's very reliant on the support of her solution providers.

In fact, even though a VAR purchase may cost more than buying direct or through a direct-marketing reseller, or DMR, she'll often give one of her preferred solution providers the business. What she values most in those partners: expertise, price and quality of service. "I have five or six close relationships with my VARs. I trust them," Luppi says. "I know I can go to them, and I know I'll get the best price."

But Luppi isn't the typical midmarket or enterprise customer, as the VARBusiness Market Insight Report found. The survey--a merger of the State of the Midmarket and State of the Enterprise studies--quizzed more than 600 midmarket and enterprise IT decision-makers on their purchasing trends, budgeting and channel relationships. The results are interesting, to say the least.

Most IT users will buy product through the channel but choose to implement systems on their own. And even as end users plan to increase or maintain relationships with IT resellers, they're rather guarded on how they engage with them.

In this inaugural Market Insight Report, VARBusiness will delve into how end users view the channel, what they expect of their resellers, how they want to engage solution providers and where they say VARs need to improve.

NEXT: Banking on expertise

Sovereign Bank of Dallas (not to be confused with the Pennsylvania mega-bank of the same name) is in the process of acquiring a regional rival, Jefferson Bank. When the deal is completed, Sovereign will double its network of branches to 13 and its assets to nearly $600 million.

Overseeing the IT portion of the merger is Chris Rapp, the bank's IT director, who was hired to bring more of the IT operations in-house to reduce cost. While Rapp and the bank's management would rather do most of the IT installation and integration work with internal resources, there's only so much his department can handle; it's just Rapp and one other person.

"We do a lot," Rapp says. "We do most routing programming and switch installations. We really count on our internal people handling all of the break-fix stuff, like PC, printer and monitor problems. For more complicated stuff like VoIP and WAN work, we'll go to the outside for help."

Technical expertise ranks at the top of end-users' list of the value solution providers bring to their operations. Cost reduction, understanding business operations, implementation and breadth of product offerings were highly rated as well, but nothing came close to expertise.

Surveyed midmarket firms and enterprises generally said they will buy through the channel or indirectly, but they don't want the services and support that bring margins to resellers. They say they can save money by doing IT implementations themselves and will turn to outside experts only when necessary. Even then, they would rather collaborate with a solution provider on an IT project than outsource one altogether.

The top-five list of spending priorities over the next 12 months reads like a series of complicated technology implementations: security infrastructure, backup and disaster recovery, networking infrastructure, regulatory compliance and application infrastructure.

When asked how they would implement those technologies, the landscape shifts. Forty-six percent said they would implement disaster-recovery systems on their own, while 35 percent said they would collaborate with a solution provider, and only 7 percent said they would turn the entire project over to a VAR.

Similar numbers were reported for security, application infrastructure, business intelligence and storage. Amazingly, 62 percent of the respondents said they would implement communications systems--such as VoIP--on their own; only 4 percent would outsource the project.

More often than not, the internal implementation strategy is a result of management pressuring its IT department to cut costs. If they're paying to support IT with a staff and infrastructure, they should be able to handle most IT issues--at least that's what management thinks. In the case of Sovereign Bank, Rapp says educating his management team on the capabilities and limitations of his department is a huge challenge.

"Reluctantly, they'll let us use outside help, but they would rather we do everything ourselves," Rapp says. "There is a little bit of a challenge to educate our executives. What they don't always understand is that there are different segments of IT, and that IT isn't a blanket that covers everything technology-related."

Rapp and Sovereign have a longstanding relationship with T Systems, a Dallas-based VAR that provides the bank with IT support. They already speak a few times a week, but that's going to pick up with the acquisition. Fortunately for Rapp, T System also works with Jefferson Bank. "They've got a good idea about what we need to do with that network," he says.

NEXT: Building relationships

Mark Reen sees both sides of the solution provider and end-user relationship. By day, he's a database administrator and IT developer for Franklin International, a Columbus, Ohio, construction company. By night, he's a consultant and occasional reseller. Even though he sees the value that solution providers bring to the IT equation, convincing his management or colleagues can be daunting.

The problem, as Reen sees it, is twofold: Many businesses believe they know what they need and they don't want to be sold or constantly pitched.

"We've had a lot of companies that call themselves consulting companies and all we get is sales pitch," says Reen. "It's hard to get around that."

In the order of influence, consultants and analysts are king. IT decision-makers say they'll turn to agnostic sources of information first before considering the recommendations of vendors or VARs.

A recent study conducted by the Harvard Business Review found that sales cycles are starting long before the customer ever engages a salesperson--at the vendor or reseller. Given the amount of information available on the Internet and through other sources, end users are doing more research and price comparison in advance. Many resellers say this changing dynamic is causing customers to believe they know more than their resellers and leading them to go through DMRs such as CDW or direct from vendors for their IT purchases.

"I get consistent sales calls from vendors and VARs, and I don't really give them much time of day," says Sovereign's Rapp. "I have my established relationships and what I need, and usually if there's something I need right now that's not covered by the vendors, I'll do the research and search for the vendor I need. Then it becomes a communication chain that I initiate."

A tactic some solution providers are taking is partnering with agnostic consultants that will provide end users with unbiased purchasing recommendations. The consultant then refers the customer to an appropriate reseller to fulfill their needs.

Another problem VARs have, according to the report, is pricing perception. Many end users believe that going through the channel adds more cost to their IT purchases than going direct or through a DMR. When asked what they want their VARs to improve most, the No. 1 answer was price--particularly among midmarket respondents. Service, speed, client knowledge and technical support followed as areas that VARs need to improve.

While end users that participated in the Market Insight Report expressed indifference toward solution providers and a disdain for their sales tactics and prices, the majority said the channel is a primary source for goods.

Another contradiction: While more than 80 percent of end users say they prefer market-leading brands, more than 90 percent said they would either buy or consider buying an alternative brand if it was recommended by their solution provider. Midmarket customers are more apt to accept an alternative recommendation.

"I want to make sure that we're going to get the best deal for our money. If we're going with the exact same product, software or service, I want to make sure we're getting good value," says Matt Mittan, the network administrator for Dobson Brothers Construction in Lincoln, Neb. "I trust other people that I know who are in the field that might have used their stuff."

The trust factor underscores the importance of building strong, lasting relationships. The average end user's relationship with a solution provider is 6.1 years. End users that have lasting relationships with VARs understand they can go to them for advice, support and sound purchasing decisions.

"My VARs have been pretty good with the quality of suggestions and being honest on what's best for us," says Luppi of the National Parks Conservation Association. "They know not to push one brand or one product; if they do, it's a lost client. It's in their best interest to promote what's best for the customer."

Low prices may motivate IT decision-makers, but the need for technical expertise and experience will always drive them to seek help from the channel.