From VAR to MSP: Cloud Gives Resellers a Break in Business Models

To make the most of the opportunity known as cloud computing, Managed Service Providers (MSPs) and Value Added Resellers (VARs) need to up their game when it comes to providing services.

Many VARs are changing their business models to compete in this rapidly changing landscape. For example, Trustmarque made the transition from VAR to service provider, and attributes its growth in a tough market to its ability to adapt to the cloud computing model.

To make a successful transition from reseller to service provider required investing in the right people, according to Scott Haddow, CEO of Trustmarque.

“Investment in people and our service proposition has led to progress in a challenging market,” Haddow said in a recent interview.

A managed services strategy was paramount to sustained growth of the business, according to Haddow, who expanded the firm’s headcount by 21 percent as the company introduced a wider range of cloud services, including asset management and procurement in addition to shoring up its enterprise applications.

The managed services model offers benefits to both MSPs and their customers right out of the gate. The advantages of this business model go well beyond hype – market research shows this industry is set to continue following a rapid growth pattern.

A recent Infonetics (News - Alert) Research study shows manufacturer-provided services for the enterprise will become a $25 billion market by 2016. The study found that revenue from manufacturer provided maintenance and support, professional services and hosted and managed services increased by nine percent during 2011, reaching $17 billion.

However, financial considerations and staffing issues are two big contributing factors that prompt companies to make a cautious move into managed services, according to a recent CompTIA study.

“It’s difficult from a financial perspective to make a big turn like this overnight,” said Carolyn April, director of industry analysis at CompTIA (News - Alert) “They have to keep that part of the business that’s paying the bills running while they slowly phase in managed services.”

Among IT channel companies not offering managed services, four in 10 say they are waiting to see the impact that cloud computing has on the managed services market. And despite the cloud-related uncertainty, a slow start to managed services does not the majority of channel companies will never adopt them. Nearly two-thirds of survey respondents said they plan to begin offering some level of managed services within the year.