VARs need to develop their customer service skills if they are to survive, according to ConnectWise CEO Arnie Bellini.
Speaking to Channelnomics at IT Nation in Orlando, FL this month, Bellini said that VARs must be able to make margin not off product, but off their people, skills and services. The CEO also noted that cloud is the reason for this.
"A lot of their meat-and-potato business is infrastructure, and much of that is now migrating to cloud-based solutions and IaaS and public cloud, so they are literally competing with Amazon and others for the infrastructure products that they used to sell under the roof - switches, routers, servers," Bellini pointed out. "That's where all the high margin was in the VAR market place, and as people move to the cloud, the margin's gone, so they have no choice but to start selling the substitute, which is cloud-based solutions, and now they've got to find a way to make money off of it."
Bellini noted that "the only way" for VARs to make money off such solutions is not by putting a mark-up on the product, but via services.
"[They need to deliver] with their people and their talent to get a market, meaning it's product plus solutions plus their services, their labor, how they're putting their special touch on it that gets them their mark up. So they have to get good at customer service is what it comes down to."
VARs with horizontal infrastructure practices are under particular pressure, Bellini noted. He recommended they start thinking about building "high-value, high-margin, high-growth services", the best of which are cyber security, he said. But those VARs that are looking to go down the cyber security route need to ensure they build a successful managed services practice first, he added.
"I would encourage VARs first to build their managed services practice, because a good cyber security practice must be built on top of a good managed services practice. It must be built on top of it, and I'm being very declarative there. People think they can do it the other way, but I say no. If I had to tell you what to learn first, what's the 101 version versus the 201, it's managed services, then it's cyber security."
Solution providers must have "command and control" of their own infrastructure, so that they can set it up properly to be safe, Bellini said. "If I don't control that and I'm the cyber security person and I have to work with whoever to get the infrastructure secure, I'm out of control. I want control of both to invoke the proper security posture - ergo you must become cyber security providers."
He noted that it would be "silly not to" become a cyber security player in today's channel, because of the rate of growth in the security sector.
"It's the fastest-growing part of the market, growing at 17 percent cumulative annual growth rate, versus the rest of managed services, which is only growing at 12 percent cumulative annual growth rate," he pointed out.
To help ConnectWise partners build out a security practice, Bellini said the software vendor will be providing solutions, integrations, tool kits and bootcamps in cyber security. Alongside this, Bellini said ConnectWise is using its purchasing power to exert "serious downward pressure" on pricing, as well as creating new technologies, in an effort to make cyber security solutions affordable for SMBs and profitable for MSPs.
"We're making it cost-efficient for small to midsize businesses [and] we're using our purchasing power and our influence with companies, and we've already been able to take two cyber security services and reduce the price by 1000 percent into three categories already. So it's doable, it's very doable."
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