Written by David Tebbutt, Strategy magazine 01/91 item 02 - scanned
VALUE ADDED RESELLER
n. singular. A merchant of computer goods who adds value to the sale by providing advice and after-sales support.
Martin Banks believes that VARs are often better than using an internal department to install a system and argues they can bring a wealth of expertise and flexibility.
Ten years ago, the personal computer appeared and brought in its wake the 'computer store'. Now, you can walk down any high street and buy a personal computer as you would a can of baked beans.
Now, this off-the-shelf approach may well suit individuals or small businesses, but those business users who need support and service for their information systems need to find somewhere else to go shopping. What are the options?
Corporate personal computer buyers might feel it is better to deal directly with manufacturers, but this is only an option for the largest of customers and for simple reasons. The personal computer's key advantages over other IT systems are low cost and high performance, which means manufacturers have to sell large quantities to make a return. Unless a customer orders personal computers by the thousand, the manufacturer has to increase the cost of each unit
There needs to be a bridge between the manufacturer and the corporate user. It is the Value Added Reseller (VAR). But the VAR is much more than a bridge. The key to what most VARs offer is in the words 'value added' giving advice and support as well as selling the product
The decision to use a VAR, like any important business decision, needs to take into account the advantages and disadvantages, and the strategic significance of the system to be installed. For many companies, making the decision to install a strategically important system is a fearful one; with, amongst others, worries about losing control of the job.
The company could use its data processing or information management department to install the system, because it will know what the company needs. But there is no guarantee it has the technical expertise to do the job. If your solution needs special expertise, it is often better to go to a VAR than to attempt something yourself. Horses for courses, naturally.
Ensuring the VAR you need is available when you need it needs careful planning. You should also build relationships with the right VARs. Most of them know their role is not to sell you a personal computer as a normal high-street dealer might, and they understand they have to invest time in developing the right solution.
They know it can take 18 months between first discussions and installing the system time taken to build relationships and define your needs. Eighteen months might seem a long time, but it must be traded off against a VARs expertise. For example, I know of several companies that have planned large corporate networks using their data processing department. They got the network software and applications running only in theory, for they understood nothing of the cabling, building regulations, and computer systems architecture needed to link the workstations. A good VAR will bring this type of expertise.
They also bring flexibility. One VAR may have expertise in networking; another may be good at creating large on-line transaction processing and accounting systems. All will be able to provide service, support, and training. For each specialised computer application, there is a VAR to service that need.
Perhaps the most important area of flexibility is where a VAR services your needs as your business changes. In quiet periods, the IT running costs are minimised, and when you need new systems due to upgrades or business expansion, it is quicker to use a VAR than to build an in-house team. If expansion entails opening new offices, in the UK or abroad, some of the bigger VARs can meet that need as well, managing your requirements centrally, but servicing them through their local outlets.
As with cleaning, catering, product styling, and many other services, most companies now find it cheaper to use external suppliers. With the growth of specialist VARs, using a supplier to service your IT systems now falls into the same category.
THE DOWNSIDE: Dramatic cuts in hardware prices and rising interest rates are forcing many resellers to the wall. Not geared to the Dixon's 'pile 'em high and sell 'em cheap' style of operation, they can no longer survive on the profits from hardware and packaged software sales alone. Only those resellers which give the customer something more than just boxes off the shelf, and offer skills which are unavailable or in short supply within the client's organisation, will survive. They are the Value Added Resellers (VARs) of which some have already decided to forget about selling the boxes, and now sell only consultancy and support.
So if a VAR can supply support and the skills your organisation lacks, it seems a good idea to use one. The trouble is that just about anyone can call themselves a VAR They don't have to belong to the British Computer Society, and even if they do, it is no sign that they give good service. Unlike accountants, architects and engineers, they need no professional qualifications. So why do people trust them? The witch doctor syndrome.
People in primitive societies are awe-struck by witch doctors because they alone appear to understand the mystical side of life. Similarly, people who are unfamiliar with computers tend to be awe-struck by anyone who understands how computers work. Like the primitive peoples which place their trust in witch doctors, they place their trust in computer 'experts' more out of faith than out of reason.
The only way to decide whether to trust a VAR is to speak to its customers. Make sure the VAR understood their business needs and supplied the right products and services. Your company location is important, too if you want country-wide support, you may find yourself with a very limited choice of companies. If you're buying only a few standard packages and hardware and merely want it supported, you could sign up some local VARs. But if you expect one VAR to develop and install new systems, you need to know about its national support capabilities.
Another problem is that a VAR will often recommend only the solution it happens to be authorised to sell. I was talking to a VAR the other day about the systems he had installed. Although he said he was supplier-independent and could give unbiased advice, every system had been written using a particular, limited database package. When I asked him why this was so, he said: "Because it can solve any problem a customer can throw at me." In truth, it was the only package in which he had expertise, and he used it to solve any business computing problem even if the package was inappropriate.
Another reseller always tells companies to throw out their minicomputers and mainframes, and replace them with Macintosh personal computer networks. His experience is solely with personal computers. It is bad enough him being blind to the fact that the mini and mainframe may still have a part to play in the computer systems of the future, but he is also convinced that the Macintosh is the answer to everyone's computing needs. As much as I like the Macintosh (I'm using one now) I take exception to such a blinkered view.
You need to examine the bonafides of a VAR much more closely than you would your other suppliers, because it can bring your company to its knees. If you entrust a 'mission critical' application to an outsider, you need to be certain they can fulfil their obligations on time, within budget, and to the required standard. Meeting these conditions is crucial; so often will you find yourself being let down in one or another of these areas.
I suggest you treat a VAR as you would a new member of staff. Interview them properly, establish their depth of knowledge and understanding of the areas in which you need help, and get references from their previous and existing clients. Do not assume that simply because they are computer wizards they will be of any use to you.