Over the last few years, there has been a new trend in the market where companies are willing to pay for managed services. This new trend is attracting a lot of VARs (Value-Added Resellers).
Since VARs primarily focus on hardware, the profit margins are pretty thin. On the other hand, MSPs (Managed Service Providers) are scaling and booking more profits easily. Hence, many VARs look at MSPs and wonder if they should join them.
Even the profitable VARs with good growth and margins want to expand their products and services by becoming MSPs. If you also plan to move from VAR to MSP, this guide is for you.
Today, we will look at managing a smooth transition from VAR to MSP.
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Understanding the Difference Between VAR and MSP
Many people need clarification around VAR and MSP as there is some overlap between the two roles. However, these are two different entities.
A Value Added Reseller (VAR) is a company that buys technology products from manufacturers and adds value to them. The value addition can be bundling technology products with additional services or features before selling them to end customers.
VARs typically work with a wide range of technology products and vendors. This normally involves hardware products providing customized solutions that meet the specific needs of their customers.
On the other hand, a Managed Service Provider (MSP) is a company that provides proactive management and support services for technology products and infrastructure. MSPs typically work with a narrower range of technology products and vendors. They generally deliver ongoing services that help customers optimize their IT infrastructure and increase efficiency.
While there is some overlap between the two roles, the main difference is that VARs focus on selling products, while MSPs focus on providing ongoing services and support for those products.
On a deeper level, MSPs also have a more active role in the day-to-day management of a customer’s IT infrastructure.
Advantages of Becoming an MSP
- Recurring Revenue: Most MSPs work on a subscription-based model. It means they can rely on recurring revenue. This can provide a more stable and predictable income stream than traditional break/fix IT services.
- Scalability: The end goal of every business is to grow. By becoming an MSP, you can scale your business by adding new clients and expanding your services.
- Proactive Role: MSPs have a proactive role in the day-to-day management of a customer’s IT infrastructure. This means they can prevent downtime and keep the business running smoothly.
- Long-term Client Relationships: By becoming an MSP, you work closely with the clients and can build long-term, meaningful relationships with your clients. This can lead to repeat business and referrals, which can help you grow your business over time.
Transitioning from VAR to MSP: How to Manage?
If you also want a recurring income stream and to grow your business, it is best to transition to an MSP.
However, you must plan and execute everything carefully to ensure a smooth and successful transition. Here are some tips to help you manage this transition smoothly:
Review Current Business Processes
Before you dive into the world of MSPs, you must assess and review your current business process. As mentioned, VARs focus more on selling technology products, while MSPs provide proactive management and support services for technology products and infrastructure.
As a business, you need to identify any areas that require any changes or find new areas necessary to align with MSP services. This process needs careful administration as it involves developing new service level agreements (SLAs), service delivery frameworks, pricing models, and customer support processes.
Don’t Go Overboard with Services
Many VARs tend to make the mistake of getting overboard with their services. If you are transitioning to an MSP, you should start slow and begin by offering just one service.
These services can be disaster recovery, data backup, or cybersecurity. The goal is to keep it simplified at first and then expand gradually.
Map Out a Dedicated Plan
Transitioning from a VAR to an MSP is a significant change. It requires careful planning, so you must create a detailed plan outlining the steps, timelines, and resources needed to transition.
It is important to note that you should also maintain a steady line of communication to keep customers, employees, and vendors informed of the changes, as it can be confusing for them.
Train Your Employees and Expand (If Necessary)
Transitioning to an MSP requires employees with different skills than a VAR business. The entire core of an MSP depends on the service that employees from the company can offer.
Hence, it becomes vital to train your employees on the new service delivery model and ensure they have the necessary skills and knowledge to deliver MSP services. This includes technical training, customer service training, and communication training.
In some cases, you might need to hire more employees to provide your services.
Establish New Partnerships
While MSPs work with limited vendors and partners, you must identify the correct ones. When partnering with new vendors, it is crucial to remember that your new vendors and partners have the resources that will support your MSP services.
Inform the Customers
Your business will go through many changes when you transition to an MSP. This transition can be confusing for many customers. You might also face pushback related to the revised costs.
This is where communication comes into play. You need to communicate the transition to your customers, highlighting the benefits of the new MSP services. You can also justify the new cost by highlighting the benefits of your new services.
Monitor the Journey
In the world of a data-driven market, it is not wise to just go with your instincts. If you are transitioning from a VAR to an MSP, monitoring the entire progress throughout the transition is vital.
It will help make the necessary adjustments. You need to track customer feedback, service delivery metrics, and financial performance to monitor your transition journey.
Final Thoughts
Transitioning from VAR to MSP can help you get new and higher recurring revenue. It also offers more scalability and the potential to expand and grow their business. With the right steps, you can easily transition to an MSP. Make sure to offer quality services with educated and skilled teams. We hope this guide helps you with a smooth transition to MSP.
