Where's the Value Going to Be in Value Added Resellers?
For the past three decades, corporate data centers have been built from appliance-based products—sometimes referred to as “software wrapped in tin”. These appliances are highly optimized for a particular function—routing, storage, security, etc. The companies that make these boxes typically have 65% gross margins, allowing for a relatively high-touch, but costly distribution channel, which is usually a combination of direct sales people, distributors and Value Added Resellers (VARs). It’s a mind-bogglingly big business: Every year, enterprises around the world spend more than $100B on data center gear with this revenue flowing through the ecosystem of VARs and vendors. However, all of this stands to change radically with the onset of the public cloud.
The role of the VAR was to provide coverage in places the direct sales team couldn’t reach, to help with logistics such as warehousing, stocking, and credit checks, and to provide valuable integration and advisory services as an extension of IT teams to make all these complex boxes actually useful for the customer. But, in this brave new world where the cloud is changing the economics of tech, where there are no boxes, where credit is less of an issue, and where the customer can go right to the public cloud and launch a server benefiting from high levels of automation and reduced complexity, where does the VAR fit in? Why does anyone need a reseller?