September 16, 2019

2020 VAR Industry Trends: How Value-Added Resellers Can Drive Growth in a Changing Market

Article

As we make our way into Q4 of 2019, the new year looms large.

While both consumer and business technologies evolve rapidly, the products, services, and support that VARs provide will also need to change and adapt to meet evolving needs

In this post, we’ll look to 2020 and highlight first some of the broader trends shaping the VARs industries and then the specific trends within the growing software and technology ecosystem verticals. They present both challenges and new opportunities. 

Trend #1: Direct Vendor-to-Customer Relationships

VARs are experts at guiding customers through an existing product from the original manufacturer. From complex software usage to valuable add-ons and customizations, VARs have traditionally established direct relationships with customers who couldn’t find that one-on-one experience with the vendor. 

Today, the role of VARs are changing as vendors reach out to customers directly, via direct sales, offering them that personal relationship. This process cuts out the VAR as the middleman, which means VARs now have to compete directly with vendors. 

Trend #2: Pricing Transparency Driving Competition

Customers no longer approach a vendor or VAR without prior knowledge of pricing. 

Online review platforms and comparison sites make it easier than ever to compare various prices across different VAR solutions and direct-to-customer options. This puts increased pressure on VARs to offer the best pricing on their products and services to beat out the competition

Trend #3: Availability of Cloud Computing and Hosting

Before, VARs could host solutions on their private cloud for customers.

That has all changed.

Public cloud hosting options now saturate the market, making it easier than ever for customers to set up a solution in no time, and often at significantly less cost than a private cloud solution.

Trend #4: Increased Focus on Security Solutions

As security breaches become more and more common, especially as many industries shift to the cloud, cybersecurity spending is expected to more than double general IT spending this year. 

According to Gartner, worldwide spending on IT security will grow by 8.7%, while general IT spending will increase by just 3.2%.

Increased Focus on Security Solutions

At least 50% of the security market will be service-based by 2020, meaning security-as-a-service models will be more in demand. VARs who offer advanced security features like encryption, password protection, and risk assessment will have a competitive advantage.

Trend #5: Growing Need for Infrastructure Ecosystems and Integrations

As operations shift to digital solutions in all departments, businesses are adopting a number of distinct software to run different needs, from CRMs and accounting software to dedicated security service providers and project management solutions. This scattered environment needs to transform into a seamless infrastructure businesses can rely on.

VARs who can provide value to companies by handling integrations and communication between various pieces of software will be more and more sought after.

Trend #6: Solutions-Based Approach to Sales and Marketing

Across all industries, customer data will drive decisions from sales to marketing. VARs can focus less on selling features to companies; rather, they need to offer a tangible business solution for the customer’s needs. Within the sales pipeline, this means communicating with leads who are already familiar with the products but need a specific outcome.

For marketing, highlighting the relevant business pain points can be effective in drawing interest.

Understanding the customer’s problems and providing one-on-one relationships will remain key to both acquiring and retaining long-term customers.

Vital Software Trends That VARs Should Watch

Zooming in from the macro trends that are changing the VAR and customer relationship, one particular shift in the VAR market is notable for its impact.

Software is eating the world, as Marc Andreesen once wrote.

And it has, in the VAR industry, too.

Increasingly, the physical hardware that’s being offered to customers is just the tip of the iceberg for the overall technology solution. Most of the customer value stems from advanced software that connects devices, integrates systems, performs advanced analytics, and any one of a million other functions that businesses now rely on.

Trend #7: Software is getting cheaper and easier to use.

Software design trends today focus on creating an intuitive user interface. Easier-to-use means more customers. Due to this development, the reliance on VARs to onboard and set up software has diminished in recent years. 

On top of that, prices have gone down drastically. Proprietary software built by companies like Microsoft and Dell no longer cost the same, and many software developers now offer similar products at competitive prices using a freemium model. Offering a well-designed product at an attractive price is the key to software sales in 2019. 

Trend #8: Front-office spending on SaaS is growing.

Based on current projections, companies are allocating more and more of their budget on SaaS and the next few years show no signs of stopping. Data from Statista reveals that 78 million SaaS workloads were installed globally in 2015; that number is expected to grow to 380 million by 2021, indicating a 387% growth rate in a six-year period.

A report from Blissfully shows that software spending has increased year-over-year since 2010 with an average spending of $136,000 per company. Furthermore, the data suggests that companies now allocate more budget across all departments, when previously the bulk of spending was on Engineering. 

Trend #9: Cloud, IoT, Big Data, and Mobile are transforming businesses.

Cloud

When we look at enterprises in particular, the cloud adoption rate is at an all-time high. A survey by OpsRamp found that every organization was using the cloud in some capacity with 84% planning to increase their cloud use in the next two years. Another 75% indicated that they use more than one cloud provider for their infrastructure.

As cloud computing offers businesses flexibility and opportunities to scale, VARs who haven’t done so already should also shift their focus to cloud-based solutions.

IoT & Big Data

A relatively new player in the market, IoT technology will play a larger role in the near future, particularly in industries like manufacturing, healthcare, consumer electronics, and transportation. In vast, complex environments involving multiple stakeholders and large volumes of data, IoT solutions with big data capabilities can streamline communication and data efficiency. 

VARs that can leverage IoT and big data in these sectors will gain a big competitive advantage by helping their customers run their operations more effectively.

Mobile

Lastly, the popularity of mobile is hardly news in 2019 but further growth spurts can be expected in certain areas. According to a GSMA Intelligence report, five countries will account for 1.6 billion new mobile users between now and 2025, with China and India leading the group. 45% of global internet users will comprise of those with mobile-only access.

Furthermore, the effects of newer technologies like 5G and IoT remain to be seen, offering more opportunities for growth for this platform.

Trend #10: SMBs think about growth and scaling rather than one-stop solutions.

When selling to SMBs, VARs should keep in mind that growth is the primary concern for SMB decision-makers. There’s a more comprehensive approach to accelerating growth that considers solutions for marketing as essential to sales growth, investment in back-end operations influencing the front-end, and engineering as essential to operations. 

If VARs can provide services that will increase growth for businesses rather than focusing only on a single solution, they will be able to attain more SMB customers.

What Does This Mean for Value-Added Resellers?

Easier accessibility to software has transformed the VAR industry. If a VAR’s role was to explain technological points to the customer, now their role is to explain how those features and solutions contribute to the overall growth of the business in the long run. 

VARs need to adjust to these changes by rethinking the value they can offer customers. 

If customers no longer need someone to explain software features to them, what do they need? Shifting the “value” in VAR to a long-term solution provides a new opportunity for growth. By thinking about business solutions, VARs can gain customers who will continue to rely on their support as their business grows, rather than dropping off after the point of purchase.

One advantage VARs can leverage is to communicate how their solutions and services tie in directly with the customer’s business goals. Rather than selling individual features, VARs should favor a customized approach that delivers an intimate understanding of the company’s pain points and what it will take to solve those problems. 

That means emphasizing front-office solutions that will change the business’s operations as a whole as they move to a digital-first approach. No department is immune from the imminent digital transformation. If VARs can place themselves in a position to help businesses through this fundamental change, it will open up big avenues for long-term growth.