Are 40 Percent of VARs Doomed?

VARs heard a familiar but important message today during a luncheon hosted by Do IT Smarter near Philadelphia: Without a managed services framework in place, roughly 40 percent of solutions providers will go out of business within the next year, according to research from Gartner Inc.

I'm often skeptical of research, and I think Gartner's estimates are a bit high. But the main thesis -- traditional VARs are in trouble -- rings true to me. While traditional VARs are treading water, the most successful managed service providers have doubled or even tripled their revenue in the past year, according to our recent MSPmentor 100 research project.

The model for successful VARs has evolved from product-led services, to projects without product resale, to on-site managed services, and now to remote managed services, notes Todd McKendrick, VP of Do IT Smarter, one of the top-ranked companies in our MSPmentor 100. "Your brand [rather than a vendor's name] is the most important brand in your customers' eyes," McKendrick told attendees.

Still, McKendrick and other guest speakers at today's luncheon noted that the transition to managed services involves some key challenges, such as:

  1. Allocating time for the transition
  2. Educating each audience and addressing executive team concerns; sales team member concerns; and service team member concerns.
In particular, solutions providers need to help their sales team members adjust to steady, predictable commissions rather than big, lump-sum checks. Similarly, VARs much avoid the "superman" mentality, when IT support pros crave customer praise for correcting a major technology issues. With managed services, many of those big IT fires won't occur, noted McKendrick.

Effective marketing is another key challenge. Do IT Smarter strives to address that issue by providing its MSP partners with marketing collateral, Web content, and consistent customer messaging. The master MSP also works with Xerox (to offer Xerox PagePack managed print services) as well as MX Logic (email defense).

The MSP luncheon is continuing, and MSPmentor will return with additional live reports later today.
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