The VAR Quagmire

The topic of the Value Added Reseller (VAR) can elicit powerful emotions among information technology professionals. Some people find them to be valuable partners, others consider them parasites on the buttocks of humanity. Love them or hate them (I have felt both, sometimes for the same reseller), they are a fact of life in this industry.

Right now I’m feeling a little bitter about the whole construct, mostly because of a recent difficulty I had trying to obtain price quotes for an IDS refresh. As many do, I work for an organization that requires competitive bids for large purchases. Personally, I don’t have a problem with this requirement, because I would bargain with the Dalai Lama himself over a pint of yak milk if I thought I could get a better price. And I don’t even like Yak milk. I can’t really help myself, it’s the thrill of the hunt for me. But I recently struggled to obtain price quotes on the product in question because of the way the reselling process works.

Luckily, I’m acquainted with a former sales rep who explained the VAR rules to me. The whole thing left me pretty frustrated with the current system, wondering how anyone ever manages to work for a VAR without hanging themselves with an Ethernet cable. I’ve decided to include portions of what he told me below.

Today, deal registration is the key status a reseller company secures to achieve for a particular opportunity at a particular enterprise.  In order to obtain a “deal registration”, the reseller must bring a technology requirement and
revenue opportunity to the manufacturers attention which was previously nonexistent.  If the manufacturer has existing knowledge of the technology opportunity, which is often the case, the manufacturer will either award the deal registration to a preferred reseller, or allow no deal registration whatsoever.

So “deal registration” offers a competitive advantage, translating to:

 …8 to 10 additional percentage points from the standing partner discount,creating a price disparity “advantage” versus all other aspiring resellers, or in another model, deal registration reduces the discount extended to all of the aspiring resellers except the awarded, registered reseller, creating a price disparity “advantage” because the non-registered aspiring reseller costs are higher by comparison to the costs the registered.

Okay, this explains why obtaining a price quote from a VAR is difficult when they aren’t the incumbent.

In the absence of a deal registration, the lowest cost to a reseller is based on the tiered status of their partnership with the manufacturer. Silver partner, gold partner and platinum partner are examples of some of the designations often used to describe these tiers, with each ascending “rung on the ladder” providing a more advantageous reseller costs for the manufacturer’s products and services, for example, silver partnership tier might produce 25% off list price, gold at 30% off list price, platinum at 35% off list price, etc.)

If I am to unseat an incumbent reseller, I must have been awarded a “deal registration” by the manufacturer being considered.  If not, I am relegated to the role of providing the second or third quotation, really just a formality or courtesy to procurement departments who require multiple quotations in order to award a P.O.  Purchasing then awards to the “winning” bid, which, of course, will be the “registered” reseller 100% of the time.

What a racket. My take: The vendor has created an ecosystem which is a right old mess and they’re the only ones who come out on top.

One thought on “The VAR Quagmire

  1. one of my customers was wise to this and had the vendor I was working with price it with deal reg to a VAR they like to deal with. They then shopped VARs and forced us to match the dealreg points across all of the VARs attempting to get the deal. the original VAR had marked it up like 3x so it worked out great for the customer. Gave the sales guy heartburn but ykno.

    you are one of the strongest ladies I know. they want your moneys – leverage the technology vendor to crack the VARs.

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