SPECIAL REPORT

The transformation of government VARs

It's not enough to be just an order taker

Change is nothing new to resellers. It’s an inherent part of their daily operations as part of the ever-evolving technology industry.

But in recent years, they’ve found that their traditional role of packaging and delivering products to government customers isn’t enough. Suddenly, staying competitive – and in business – meant changing their whole business models.

Today, value-added resellers (VARs) need to become business partners with government customers and their vendor and manufacturer collaborators alike. This means offering holistic solutions and continuing support for them rather than dropping off an order and moving on to the next.


 

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Driving this change is the government’s need for the latest technology paired with a lack of expertise to handle it, said Mike Greaney, Force 3’s chief revenue officer. Vendors want to focus on designing products and technology so agencies are asking resellers to do more.

“We’ve taken on a greater role than we used to when we were just kind of a fulfillment mechanism,” Greaney said. “We were a contract vehicle for our customers to buy through. We were a conduit for our manufacturers to introduce their products to the end customer. Now we’ve taken on more of a role of a business partner with our customers and our manufacturers.”

Another VAR, DLT Solutions, is also moving toward a solutions provider role.

“I view our role as becoming that intermediary between a very complicated customer environment and problem set and very broad-based solution capabilities to the vendor trying to play eHarmony.com between those two to construct the right solution for the government’s problems,” said Rick Marcotte, DLT’s chairman of the board, president and chief executive officer.

And as intermediaries, VARs must become technical, he added. That’s why DLT started offering around-the-clock U.S.-based support center, a Cloud Advisory Group and increased training.

Carahsoft Technology has doubled its solutions portfolio in the past five years, said its president, Craig P. Abod. To handle that growth, its workforce has gone from a handful of employees in 2004 to more than 400 today.

“We've evolved an entirely new business model for the government IT market,” Abod said. “Under this ‘partner-of-partner model,’ we are now supporting literally hundreds of resellers who bring specific value-add to the transaction, whether it be deep knowledge of the agency, the technology requirements, the implementation services needed or the expertise in specific technology manufacturer to bear in service to an agency’s needs and mission. We have built out an ecosystem to help support whatever dimension of IT procurement the government agency needs.”

PCMG Inc. President Alan Bechara said adding partners is crucial to success.

“In business, it’s almost the opposite of what you’d like to happen because that increases your cost,” Bechara said. “The more specialization and more relationships mean you’ve got to automate as much of it as you can and streamline a lot of your processes to be able to be nimble.”

Red River is diversifying its portfolio through new partnerships, said Jeff Sessions, senior vice president of corporate strategy at the company, which has expanded its customer base and moved toward solutions, services and business systems.

“Markets are getting smaller, much more complex and we had to bring more value to our customers and our partners in order to be relevant,” Sessions said. “Previously we’d just sell a bunch of products to particular people within the government to have a function. Now technology is the underlying function of everything.”

Affigent is taking a different approach.

“We are streamlining our partnerships to a more strategic group of partners,” said Affigent’s Kim Boarts, vice president of enterprise solutions. The company has aligned with about 25 core partners with whom it’s investing engineering resources and pre-sales technical expertise, she added.

“There needs to be a greater understanding of the customer environment, of the customers’ business processes and needs so that you can deliver the correct solution -- the correct being not just the cheapest,” said Vic Berger, Affigent’s principal technologist.

Focus on Training

A main way resellers are meeting the requirements of the new solutions-based business model is through skill sets, both educating current employees and hiring new ones with fresh knowledge.

The need for more expertise comes not only from customers but partners. Technology companies are more often demanding that the resellers that represent them maintain proper certifications and engineering competencies.

“That has not always been the case,” DLT’s Marcotte said. “In the old days, if you had a contract vehicle, they would almost look the other way in terms of whether or not you even knew what their product did. Now you have to have the proper number of engineers certified, testing certifications, sales competencies, tests, people passing, recordkeeping. That’s a big change.”

At Affigent, Barger has taken to training engineers not only on the technology but on what effect it can have in a workspace.

“We also have done a lot of process training, so the engineers are certified in ITIL,” Barger said.

Force 3 has prioritized hiring employees with skills others at the company didn’t have. “We needed people with business skills in addition to hiring some really top-notch engineering talent,” Greaney said.

But the expense of training is straining resellers, he added said. As a result, he anticipates a weeding-out period and consolidation as companies rebrand themselves. “This isn’t going to be for everybody,” he said.

Resellers are already seeing the benefits to teaming with multiple manufacturers to produce a solution.

“The beauty of what we can do is we can provide and have the ability to provide our partners, our customers best-in-class solutions that could be a combination of five or six different vendors,” said Michael Humke, executive director of the vertical markets, health care and public sector unit at Ingram Micro, a technology wholesaler.

“None of us can be a jack-of-all-trades, but you have to be close to enough to figure out, ‘OK, what can we do, what do I need to go team or subcontract on?’ That’s where the game is,” added Bechara of PCMG Inc.

A Vendor’s Perspective

Despite their name, VARs were historically not seen as adding value to the customer, said Growson Edwards, executive vice president at MicroPact, a provider of software for business process and case management that teams with resellers to distribute its products. That’s changed now.

“MicroPact can’t be experts in everything, and we can’t have all relationships in the world, as much as we’d like to, so we believe in leveraging our corporate community for bringing that value,” Edwards said.

The company has become more selective about its partners and is shifting toward midsize firms and away from large integrators. “We’re not just signing up any company that wants to be a reseller,” he said.

He’s looking for partners that want to invest in making a center of excellence out of MicroPact’s offerings rather than just take orders.

The state of the VAR remains in flux even as firms push these changes.

“Many manufacturers are using fewer VARs than before and are becoming very careful about who they select and why,” said Mark Amtower, a government marketing consultant. “Most need a mix of small and set-aside VARs as well as the larger VARs.”

Five years from now, he expects to see more specialty VARs. “I also expect to see fewer overall in the government market, at least fewer making money,” Amtower said.

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