Blog #5 of a 6 part series on The Future of the VAR, by Luke Norris – CEO and Founder of cloud provider, Peak (getcloud@ powered by peak .com) November 20, 2013
All indications point to a short three to five year window before traditional VAR sales slow to a trickle and dry up. But, this isn’t the end of the VAR story. In fact, VARs should consider this the beginning of a new era and capitalize on it now. Thanks to their tight, long-standing customer relationships, no other segment of the channel is better positioned to prosper in the cloud.
By scaling their business on top of a cloud infrastructure such as Peak’s, VARs expand their geographic footprint, take advantage of up-selling and cross-selling opportunities, and create recurring revenue streams on high margin cloud products. Cloud profit margins up to 75% are commonplace for Peak’s White-Label Program partners. What’s more, they achieve those profits without capital expenditure.
Because the cloud is such a consultative service, protecting customer relationships is crucial to profitability and long term viability. To own the customer, VARs must control the sales process. That includes selling the cloud under their own brand, managing their own contracts, and becoming the customer’s trusted cloud advisor. VARs should also provide Tier 1 support. Some cloud providers manage the Tier 1 support desk, taking the reseller out of the service equation. Peak resellers, on the other hand, take those support calls and strengthen customer relationships. What’s more, they can manage a crisis during an escalation rather than being completely dependent on third party resolution. Lastly, considering the fact that most profits will be gained through new cloud-enabled offerings, VARs should not allow themselves to be restricted to a handful of managed service providers, hypervisors, backup services and so on.
QUESTIONS TO ASK POTENTIAL CLOUD PROVIDERS:
- Do you have a direct sales channel?
- Who owns the customer relationships?
- Who manages the contracts?
- Who takes Tier 1 sales calls?
- What restrictions are in place regarding tools and managed service providers?
- What sales training and sales support is provided?