March 1, 2012

VARs Face Challenges in Supporting UC

What can you expect when buying unified communications solutions through a value-added reseller (VAR)? A full UC solution from a single vendor or multiple vendors' products integrated together?

In the first case, the VAR has fewer integration and implementation problems but might not deliver the best selection of features and functions. In the second, greater complexity in terms of implementation and integration could tax the VAR's knowledge and expertise. If cloud-based UC services are an option - a relatively new venture for VARs - you might select a cloud-only service or a hybrid approach (i.e., some premise-based solutions and some cloud solutions).

An IT VAR is a business that buys hardware, adds features (typically software-based) and/or services, and sells an integrated turnkey solution to the enterprise. The added value commonly includes professional services such as implementation of the solution, integration with the enterprise's existing environment, customization, consulting, training and support for managed services.

Changing Business Models

Many enterprises view IT not as a critical component of their business, but merely as a tool that supports their business. Cloud-based solutions, which can be cheaper than premise-based ones, are naturally very appealing to enterprise management. Furthermore, enterprises can divest themselves of their UC services by contracting directly for cloud services, thereby eliminating the VAR from the sale.

Thus the opportunity to sell cloud-based UC services rather than exclusively premise-based systems raises new challenges for VARs who are used to doing business in a traditional way. Should UC be sold as a service where the VAR effectively receives a commission? Or should the VAR continue selling premise-based UC that will produce higher revenue and profit? How the VAR answers these questions will significantly influence the kind of proposal it presents to enterprises.

It's not yet clear how the cloud and the VAR UC markets will coexist. The only thing we know for sure is that changes will be coming.

Possible New Sales Scenarios

Here are some thoughts on what might happen and how VARs might react to various scenarios:

  • The VAR waits to see how the UC market settles, but could be too late to take advantage of potential sales.
  • The VAR packages everything together to win contracts from small and medium-sized businesses because the customer wants one bill to pay and one source for the products and cloud services.
  • The VAR offers multiple UC solutions might attract more customers but risks never becoming really competent in any given product or cloud service.
  • Multiple VARs could sell the same vendor's UC products or services or sell different vendors' products and services in the same territory, making it easy for customers to migrate from one VAR to another. The resulting customer "poaching" could help create competition that will drive down enterprise costs.
  • The VAR could be vulnerable if a large UC cloud provider can deal directly with enterprises. The VAR might find it safer to work with smaller cloud providers - as long as enterprise customers have confidence that the smaller providers will still be in business a few years down the road.
  • If the VAR feels its managed services offering for UC could be jeopardized by cloud competition, it might push for a premise-based solution that won't satisfy the enterprise in the long run.
  • If the VAR loses business to a UC cloud provider, its implementation and support staffs would have to be reduced, diminishing the VAR's expertise to the detriment of the enterprise.
  • The VAR might or might not be equipped to provide training in UC capabilities and features needed to help the enterprise's employees envision how to apply the UC features beneficially.
  • If the VAR is receiving a royalty, it will have to wait some months, even a year, before it can recoup its sales cost for the services sold. This puts the VAR in business with the enterprise - and likely means the VAR will give the enterprise more attention in the interests of maintaining a long-term customer relationship.

IR Prognosis

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