VAR Strategies for Cloud Computing

Limited flexibility and lack of differentiation: Reselling another vendor’s services typically means giving up any say over pricing, margins, and product configuration. You also look basically the same as other companies that resell this vendor.

Potential loss of brand equity: Many hosted application vendors don’t provide a complete “white label” option enabling you to brand a hosted service with your own corporate identity, thereby diminishing your influence over your accounts.

Third-party billing: Many hosted software vendors insist on billing clients directly. However, if a vendor you recommended does a poor job of responding to questions and resolving complaints, you will end up taking some of the blame.

Channel conflict or shutdown: Third-party vendors can potentially use their billing relationship with your clients as an avenue for marketing additional services, some of which may compete with your own offerings. Furthermore, the same vendor that resells hosted solutions to your firm today could potentially switch to a direct-only sales model tomorrow.

Greater control: IT companies that sell their own managed solutions are free to determine their own policies, choose their own product configurations, and set their own pricing structure.

Higher margins and profit: Control over pricing translates into control over margins as well. Some hosted software vendors offer margins as low as six percent to their partners. Companies that host their own solutions, however, routinely earn margins as high as 50 percent.

Account ownership: Companies that host solutions themselves can attach their own branding and handle their own billing. That means no need to share account ownership with a larger third party. It also means you are free to cross-sell or up-sell complimentary offerings and services as you see fit.