Big value-added resellers are starting to treat the technology advisor model like a real business line, rather than a side hustle. That's good news for the distributors who got them there, as well as a test of whether those distributors can hold on to them.
Value-added resellers are diving into the commission-based technology advisor sales model as hardware margins dry up, OEMs evangelize recurring revenue, and clients demand best-of-breed vendor solutions.
TSDs have served as VARs’ entry point into the market and hope the push continues, while VARs represent an understated yet hugely strategic revenue source for TSDs. Omdia estimated that 12% of TSD bookings came through VARs in 2024, with VARs driving larger average contract values than other partners.
“The future of the TSD market will be bleak without partnership expansion, so VARs must play a bigger role in it,” Omdia Principal Analyst Devan Adams said.
TSD executives say the VARs are going deeper.
“We're seeing a lot more big multinational, billion-dollar types of VARs say, ‘Hey, this model actually can be really meaningful to us, and we want to invest in it and build a proactive strategy, versus a reactive, opportunistic approach,’” Intelisys President Ken Mills told Channel Dive.
TSDs face a unique balancing act with national VARs: VARs turn to TSDs to quickly enter an agency model where they lack scale and expertise, but may be tempted to sign direct agreements with vendors as their TA business grows. Mills said TSDs need to continue proving their value.
“It's the age-old problem. Any partner that 'gets big enough' and compelling enough for the supplier, does that supplier want to take them direct? That is a challenge for all two-tier distribution, and that remains true here as well,” he said.
The danger of disintermediation is largely contained. The partners Channel Dive spoke to are in no rush to bypass their TSD partners.
“If there’s enough interest from a customer or multiple customers or there’s a market shift, yes, probably the big CDWs and the NTTs are going to find a way to go direct sooner or later when the numbers make it work,” Brandon Echele, WWT’s director of collaboration and productivity, told Channel Dive in a March interview. "But that's only for a handful."
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The back office table stakes
For the vast majority of VARs, including WWT, the TSDs solve administrative headaches they can’t solve on their own.
In the agency model, partners broker products and services from dozens of vendors. WWT, for example, needs access to a full breadth of AI vendors. Adding a vendor requires work. Partners need to draft contracts with each vendor, and they hound them for monthly commission checks. Most prefer to let a TSD handle blocking and tackling.
“I don't want to manage all that shit,” High Point Networks Cloud UC/CX and Carrier Services Terry LaPointe said. “The reason TSDs exist is so I don't have to carry the paper for 20 different suppliers.”
Vendor agreements take time and money to draft and come with strings attached, and some vendors are particularly stringent.
“Do you want to sign up with Lumen, with all the Ts and Cs associated with Lumen and the obligation you'll have to meet the requirements and minimums and to be audited by another supplier?” Mills said.
The answer is “no” for most partners, including the national firms. The same has proven true in the resale world. Mills said it's common for VARs to move to direct agreements in hopes of increasing their margin, find them more arduous than expected and return to the distributor’s welcoming arms.
“They aren't experts at managing commissions and escalations and fixing all of that stuff, and we have the tools and the people and the processes to do that,” Mills said. “I find that most VARs believe that the profit that we keep is a fair trade.”
If VARs do sign direct agreements with suppliers, it will be with specific companies with whom they have significant volume, and that is a slim minority of their line cards.
“We have to make a decision at a certain point. We can't onboard everybody, because it's just too much,” Echele said. ‘Not only the legal time, but then getting people trained up, then you have all these competing offers, and it gets overwhelming.”
Bring in the overlays
Avant President Drew Lydecker encouraged VARs to hire someone who fully owns the TA route to market and can bring the model into deals where colleagues are looking to cross-sell.
Not everyone at a national VAR can learn the TA model. It often involves telco-style products and a set of vendors that are unfamiliar to some VARs. Lydecker was an overlay specialist at CDW in a previous life, supporting thousands of sales reps who didn’t understand the TA model.
“VARs generally never have success [you tell] an account manager who's been selling laptop servers and storage, 'Hey, I want you to start to sell a wide area network and low latency undersea cables and a cage of data center space and 16,000 seats of unified communications,’” Lydecker said. “They're like, ‘Huh?’”
It’s part of a larger act of translation. The TSDs run specialized teams that are trained in “VAR language” to support the overlay specialists, and the overlay specialists support the many account executives at the VAR, Lydecker said.
The engineering angle
Some VARs also rely on TSD’s sales engineers to close deals. That’s particularly true for overlay specialists who are trying to dabble in multiple tech categories.
“Quite frankly, I don't have to learn everything. Because it's too much for too much for one person,” said Tony Nelson, an account executive at a Midwest-based solution provider.
WWT hadn’t historically relied on TSD engineers, but Echele said Softchoice did and WWT acquired it last year.
“Softchoice is saying, ‘Hey, they have some engineering resources that we can tap into around maybe some of the smaller providers that WWT doesn't have onboarded or we don't see in our primary market, which is global enterprise,” Echele said.
VAR sales reps may need to be convinced to use TSD engineers. Large partners already employ dozens of highly certified subject matter experts, Technologent Head of Service Provider Solutions Tim Hammer said.
VAR engineers may, however, need help as they adapt to a new, more collaborative route to market. Partners and vendors in the TA model co-engineer the offering, and the vendor handles support for the client after the sale. VAR sales engineers know how to weave together a technical solution across multiple OEMs, but designing a service outcome is new territory.
“When you hand a customer a really bespoke solution, and then they come and say, 'Well, I need some support here for patching and maintenance.' Well, you built a supercar with a Honda engine and BMW differential. Now you want to take it to O'Reilly Auto Parts and have them fix your car,” Hammer said.
Rather than jumping on customer calls, TSD engineers could train VAR engineers to work differently, Hammer said.
“I haven't seen that approach from anyone. I haven't even seen an informal offering of ‘Here's how we enable engineering teams,’” Hammer said. “It's really more focused around, 'We've got great engineers; you should bring us to the table.' Okay, try convincing my sales rep to bring somebody else to the table.”
