MSP vs VAR: What is the Difference?
In the world of partner programs, there lives a vast lexicon of terms that can get confusing. Some types of partners have similar tasks, but very different names and approaches to selling. One role that continues to evolve is that of the value-added resellers (VARs).
Many resellers are finding themselves on the precipice of change. Increased competition, SaaS, and freemium software are all signals of a quickly shifting landscape.
In response, many VARs have chosen to focus on increasing profits and business stability. In some cases, this has led to them pivoting to a managed service provider (MSP) model. So, how do these two roles truly differ?
MSP vs VAR: Primary Differences
When it comes to a VAR vs MSP, the largest discernible difference is their involvement with the end-user.
VARs usually operate on a transactional basis (per seat or license) or on a short-term contract (like 6 months). By contrast, MSPs typically operate on a long-term basis (annually) or with multi-year contracts. The tenure of their relationship is very open and they act as the SaaS frontline for clients.
VARs revolve around events, whereas an MSP provides services at a steady rate. However, with the advent of SaaS and cloud technology, the lines between the two roles have significantly blurred.
An MSP is often marketed to a small business as an outsourced IT department. Some MSPs specialize in a specific vendor, industry, or software group, but the majority segment themselves by location. Although there are some large MSPs, most are relatively small with 20 employees or less.
VARs, on the other hand, mostly serve large enterprises, and tend to be comprised of bigger companies as well. They are also more specialized, typically by vendor and industry.
Although a VAR provides products a customer can find elsewhere, adding managed services will increase your value proposition to customers. In terms of resellers, VARs also tend to have the most sales and marketing experience than other tech entities.
VARs are well-positioned to reach success on a business model of recurring revenue. They work to understand the importance of proactive communication and efficient processes.
An MSP offers enhanced sales with increased profit margins and customer satisfaction. They are great for building deep and long-lasting business relationships and setting up predictable revenue streams.
In some ways, an MSP provides greater value to customers and more financial stability. They also promote expanded product offerings, with a slightly different approach than a VAR.
While both VARs and MSPs stay in business by helping customers find, customize, and manage software, their approach to doing so and the models they use to get there, differ greatly.
The VAR business model focuses on the discovery and onboarding process of new technology (both hardware and software). These companies will receive discounts on SaaS products, and provide recommendations, customization, and management options to their clients. Some VARS will also establish an ongoing maintenance agreement, giving them the benefit of monthly recurring revenue (MRR).
However, when it comes to stability and ongoing revenue, MSPs are usually the ones building long-term relationships. They act as the SaaS frontline for clients and do this by managing the use and security of the software/hardware. They also have a big hand in operations, which makes them vital to a partner’s success.
Since most MSPs work on a subscription basis, they benefit more from predictable income streams than VARs.
Offerings and Services
Another key difference when it comes to examining the roles of an MSP vs VAR, simply comes down to what they do.
A managed service provider is a vendor that provides ongoing services for however long the contract states. Although software is usually part of the package, it isn’t a requirement. Some contracts, called SLAs (Service Level Agreements), will cover the IT services of technology a customer already owns.
MSPs are known for offering:
- Support and maintenance for hardware/software
- Data storage and backups
- Cloud services and system migrations
- System and infrastructure management
- Network security
A value-added reseller is one that acquires, sets up, and configures a combination of technology to meet a certain business need. They are also available to provide infrastructure technologies for startups and small companies.
VAR tasks can include:
- Setting up server rooms
- Installation and migration
- Adding phone systems or cameras
- Configuration and support for a platform
- Creating dashboards and workflows
- Training programs
After a system is setup up, the VAR contract usually ends. The customer is left to manage everything, with occasional calls to the VAR when needed.
So, who is the best at selling your product? That all depends on what you are selling. If the product needs a lot of customization, it may be better to sell through a VAR. They will have extensive expertise in developing items tailored to customer goals.
If the products you sell require tech support and ongoing maintenance, it may be better to sell through an MSP. They will offer packages with 24/7 support for customers, no matter where they are located. They are particularly beneficial if you don’t have the staff to handle tech and operational issues.
Ultimately, it’s about which service provider will add the most value to your sales funnel. If you have lots of end-users that aren’t tech-savvy, you will benefit from an ongoing arrangement with an MSP. The same goes for installed applications with high availability requirements. They could benefit from 24/7 support.
However, if you’re running a well-oiled machine, a shorter contract may benefit your pocket the most. Perhaps customization on the front end is all you need for added value. In that case, a VAR would be your best option.
Also know, in the end, you can choose to try both out. There is no one-size-fits-all solution or laws stating you must choose one. It may be that your product benefits best from a multi-faceted approach.
Paying attention to unique customer needs, knowing your product, and setting forth a strategy will help you make the best decision on a successful partnership. Understanding each role is a good start.