Channels: How important are traditional VARs and SIs to service providers?

The main source of revenue growth for many vendors has been service providers and VARs purchasing products for their customers or for their own infrastructures. The economic downturn and pressure on IT to get more out of virtualization and cloud initiatives are reducing the number VARs selling hardware; consequently, there will be fewer of them in the future. Remaking your channel to meet the high demand of a services business is a “migrate or die” opportunity for the traditional VAR. Service providers own and manage all aspects of the networks: traditional connectivity and access; service provisioning and managed services. Their network operation center investments can be easily virtualized to create new cloud-based services to meet the needs of businesses and take advantage of spend allocated to cloud, to which IT is turning to wring costs and reduce operation expenses associated with resources and energy to improve productivity and access.

Vendors have long depended on the VAR channel and service providers’ purchases to grow. Now, as competition intensifies, they must offer a way of monetizing the managed service offers from services providers or potentially lose to the over-the-top providers such as Google and Amazon, which are siphoning consumers from service providers with innovative business offers.

What is your strategy and role to connect service providers to your VARs? How will you create a new community of sellers of services in the cloud?  The first step is to offer a connection between the service provider and VAR. Next, develop and deliver education/resources for VARs to help them change their business models to address the service business.

Best practice examples: Incorporate various strategies

YouSendIt, a traditional MSP, has recently launched a full partner strategy by engaging with ACG Research to develop a practice to change their direct business to reach Microsoft Outlook’s VARs and SIs. The company is attracting customers with a large file plug that allows interconnection with Active Directory. Read more about their channel strategy creation on ACG Research’s website (http://www.acgresearch.net/blogs/79.aspx). Note: levels, margins and outreach can be discussed with lrobinette@acgresearch.net.

Presidio Networked Solutions’ success in its selection of partners to create value through white label programs with Level 3 (www.acgresearch.net). Both of these companies have recognized how important the channel is to extend their reach to customers they do not have today and will never be their customers as most SMBs depend on the local VAR or system integrator for IT outsourced support.

France Telecom acquired Equant and created a virtualized cloud professional service practice, migrating customers from traditional offers to cloud offers with Orange Business Services. Saavis (acquired by CenturyLink) and Terramark (acquired by Verizon) have recently taken this strategy to capitalize on cloud computing migration.

Where are you in the migration to support channel reach?

VARs and SIs have the following choices to successfully support channel reach:

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