As Cloud Rolls In, Partners Should Transition From VAR To Value-Added Service Provider

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The channel is jumping on the cloud bandwagon, and partners should be working toward making the transition from value-added reseller to value-added service provider, according to Tim Harmon, analyst covering B2B sales for Forrester Research.

"The days of the product resellers are pretty much gone," Harmon said during a keynote presentation at the XChange 2015 conference in Washington, D.C. hosted by The Channel Company, the publisher of CRN. 

Offering cloud and professional services -- instead of peddling gear -- is a shake-up to the traditional sales model for many solution providers. But it's also a big opportunity to cash in on attractive reoccurring revenue. And as more customers adopt cloud, more integration skills will be sought. This is where solution providers come in, he said.

[Related: Partners Offering Hardware, Carrier Services Combo Get A Leg Up On The Competition]

“Sometimes [customers] will need help managing a solution, sometimes they don’t, but they do need a full scope solution provider that can tell them all of their options,” he said.

Solution providers could have the economic downturn to thank for the trend toward services and away from hardware-based sales. The cloud and managed services market took off in 2008 when IT organizations were hurting, and slashing their budgets as a result, Harmon said.

Revenue mix for partners today stands at about 65% products, 35% services. But by 2020, Forrester predicts the mix will look more like 40% and 60% in favor of services sales, Harmon said.

"Right now this practice is still lukewarm, but it's going to get hot," he said. Vendor discount margins are getting tighter for partners, another reason why building out a services practice will be important for solution providers to consider moving forward, Harmon added.

Raven Data Technologies, Inc., a solution provider based in Reisterstown, Md. has a revenue mix of 40% services sales. Matt Johnson, president and CEO of Raven Data Technologies believes that selling services is where the industry is going, and what most providers will have to do, he said.

"It’s shifting. We are getting to a point where people aren't buying product anymore. Anyone can go online and buy salesforce and Office 365, but customers are looking for integration and professional services to tie it all together," Johnson said. 

For many solution providers, getting to that forecasted 60% services revenue mix won't happen overnight. 

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