The cloud business is fast paced. So fast paced that it reminds you of a time-lapse video of the sky changing from sunrise to sunset. And that’s cool to watch.
Change is constant for cloud businesses. And keeping up with change helps them define the direction they are going to and swiftly respond to emerging and future needs. Depending on the goals for growth and their approach, all IT businesses are unique but share the objective to be successful and valuable to their customers. Different types of cloud businesses – such as VARs, Resellers and MSPs – face different challenges in achieving their goals. But what does the future look like for each category of cloud business, and what is better?
Although the lines between MSP and VAR seem to intersect lately, it is, ultimately, the direction of the business that defines the differences. But ‘let’s take a closer look and see the distinctive characteristics of MSPs VARs, and Resellers to better understand their differences and similarities
What is a Managed Service Provider (MSP)?
A Managed Service Provider delivers services, such as network, application, infrastructure, and security, via ongoing and regular support and active administration on customers’ premises or in their MSP’s data center (hosting). They have the task of remotely managing their ‘customers’ IT infrastructures and/or end-user systems. They cater to a client base of businesses, from small to large (SMBs, SMEs), or even government, with SMBs being the majority of their clientele.
Although varying per geography, MSPs report that the largest percentage of revenue comes from managed services, which are crucial to MSP maturity. They offer qualified, full IT support to their clients, security included. Partnering with tech vendors, they are able to provide various and even tailored solutions to their customers, differing by their needs and vertical. Operating with long-term contracts, an MSP creates a long-lasting relationship with their customer, alleviating the complexity and minimizing the cost of managing technology, which SMBs typically find challenging. With this model, they guarantee their MRR (Monthly Recurring Revenue).
What is a Value-Added Reseller (VAR)?
A Value-Added Reseller is a business that adds features and/or services to hardware and then resells it to companies as an integrated solution delivered turnkey to the customers. A VAR bundles software with the supplied hardware. Usually they cater to specific verticals, and they specialize in their products and vendors. They typically generate revenue from flat fees. Therefore, the relationship with their customer is terminable.
Usually under short-term contracts, they undertake the migration or implementation of new hardware and software, so they typically follow a project-based business model. The VAR sees to the project, and once completed, the transaction is finalized. In terms of licensing, they sell software licenses or seats to the customers, and the customer owns the license thereafter. The customer, in most cases, has their own IT experts, with the cost and manpower this entails.
Hence, overall, VARs onboard the customer and see to the full implementation of software. Some however do have maintenance agreements, securing this way an MRR. They can also add cloud computing reseller programs to their portfolio of services and provide additional support and functionality when selling these services under their own brand, thus generating profit.
What is a Cloud Reseller?
A Cloud Reseller is a company that purchases services from a cloud provider or distributor and then resells them (with added profit) to its own customers. They can resell mostly all cloud computing services such as software, infrastructure, storage, services, etc. If the cloud computing reseller is working under a white-label reselling program, they can rebrand and resell the cloud products or services as their own.
A cloud reseller acts as a valued-added reseller (VAR) when they combine and/or complement the cloud product/service with additional value or functionality. They generate profit through commission and margins, depending on their relationship with the vendors and the volume of services they resell. They join a partner network that belongs to a company and are part of an ecosystem of IT Sellers.
The game-changer. Software as a service (SaaS) is the way of delivering applications over the Internet—as a service, that allows users to access the service from any device with an internet connection and a web browser. In this web-based model, software vendors host and maintain the servers, databases, and the code that makes up an application. Can be especially advantageous for small businesses because it provides access to expensive, high-powered software that might have been otherwise unobtainable through conventional purchasing methods. Also, the subscription-based method eliminates the potential financial risk of expensive software. To put it in one sentence, it made the single purchase a thing of the past and replaced it with a recurring subscription.
So where do you stand?
MSPs are able to prosper by acting as the SaaS lead over the long term for their clients. By managing the use and security of their ‘clients’ software, hardware and operations, they become vital to their ‘clients’ success and even expansion. Since most MSPs mostly work on a subscription basis, they are able to gain stable MRR and grow.
This drives many VARs to explore the transition to the MSP model. In this case, as mentioned above, if they do establish agreements with their clients, they can examine their MRR potential before switching to MSP. That, of course, will not come without challenges. There would be upfront investment to consider, training needs to be highlighted, the strategy of building customer relationships outlined and tested, and of course, the ability and commitment to deliver ‘what’s promised.
Το face the challenges and successfully switch to the MSP model, it is vital to select the right tools and services. Partnering up with a dependable source is what will make the difference between a turbulent and a smooth transition. A partnership with interworks.cloud will secure the tools and guidance you need and help you address the challenges you face as a service provider. Book your demo so you can have all the information regarding the benefits of our solution.
As we aim to help IT sellers from growth to scale, you can count on our expertise and focus that will save you important time and energy. So you can relax and watch that time-lapse video feeling confident you have taken the right direction.
An MSP sells subscription-based services to companies in a long-term relationship, securing MRR.
A VAR sells bundled hardware and software to the customer overseeing the implementation in a finite, project-based model.
A Cloud Reseller purchases services and sells them to customers, profiting by margins.
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