Virtual partners provide national service coverage, without the headcount

MSPs that sell to service providers, marketplaces help local VARs fulfill national contracts, even outsourced marketing give channel companies a way to grow without crushing themselves with the expense.

Offshoring and Internet-based, direct-sales-driving disintermediation have taken their toll on the channel during the last few years.

But the same capabilities that once encouraged customers to go directly to manufacturers for their hardware, or to India for their IT services, are giving channel companies a chance to remake their businesses as well.

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"We're at an interesting crossroads. Offshoring capability is fundamentally changing the way these guys can charge for some pretty complicated services," according to Charles Watson, vice president of marketing for Blueroads Inc., which develops channel-management software that allows it to work closely with both value-added resellers (VARs) and technology vendors.

But flat-earth strategies work within the U.S. as well, according to reports from IDC analysts Marianne Hedin and Christina Richmond.

Service networks such as Tech Data's TechSelect, Ingram Micro's Ingram Micro Services Network and even Computer Associates' Insight are moving into territory traditionally held by IBM, Accenture and other global services companies, the analysts said.

By doing so they expand their own markets, as well as the opportunities of their customers, by providing a central clearinghouse for service requests and service-contract sales.

One more purely market-oriented approach comes from companies like OnForce -- an online services marketplace that lets VARs hire each other to complete their own support contracts.

Another comes from channel-outsourcing companies like ServiceKey Technical Management Solutions, which provides break/fix, online backup, support and even marketing services that VARs can use to expand their own capabilities.

Taken to extremes, this could allow a VAR to operate solely as a sales organization, using outsourcing service companies to provide most of the services it sells, filling in with one-off work orders for specific tasks not covered by the usual outsourcers.

Companies that provide outsourced services to service companies have been around a while, as have contracts between VARs whose skills complement each other and who can agree to fulfill different parts of a single contract.

Marketplaces such as OnForce are different, however, because they expand the market to allow almost any service company to ally with any other on work that ranges from traditional on-site support or integration of IT equipment, to installation of home audio and networking setups, according to Kurt Scherf, a services and home-networking analyst at Parks Associates in Dallas.

OnForce takes a flat $11 fee for each work order a company files. After the work has been finished and approved, it takes 10% of the fee from the company that did the work.

The service has more than 10,000 individual service providers connected to its network, most of whom work at VARs or other service providers, according to Paul Nadjarian, senior vice president of marketing and product at the New York-based company.

And it's those VARs that are providing the most significant use of OnForce's network, according to Hedin and Richmond, who describe OnForce as a kind of virtual staff source for traditional VARs.

Rather than bid only on the local part of a customer's business, some VARs are using OnForce and other service networks as a way to put feet on streets too far from their home offices to be reachable any other way.

"If you are a 20-person company in the channel," Nadjarian said, "to ramp up the services side of your business, you have to hire more people. That doesn't have to be the case. You can go after national contracts, and fulfill them without hiring nationally."

Besides giving geographically limited VARs the ability to service national customers, networks like OnForce, TechSelect and Ingram Micro Services Network give VARs a chance to make their own staffs more efficient.

"When you ask 10 [channel] companies the utilization rate of their technicians, it's always between 40% and 60% -- and the 60-percent guy is a rock star," Nadjarian said. "There's a lot of excess capacity out there, and until now there hasn't been a mechanism to match unfulfilled demand with excess supply."

About $30 million in service contracts flowed through the OnForce network during the last 12 months, and the company has been doubling in volume every year, Nadjarian said.

OnForce signed a contract last month with InstallerNet, a similar network that is focused on installation and integration of home-entertainment and car-audio systems.

But its bread and butter comes from mainstream corporate IT services, such as jobs to pull cable at remote offices -- a glamorless task that is one of the indispensable capabilities of a national IT service providers.

"And business development -- there's a company called MarketStar -- you can say you want to build a federal systems channel, or an SMB channel, and they'll go out and recruit all the VARs, train all the VARs, and manage it for you," Watson said. "Technology is changing the way these companies work together."

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