If you work in information technology, you have heard the terms value-added reseller or VAR, and managed service provider or MSP. This article discusses the differences between a VAR and MSP and the benefits and disadvantages of each.
In the IT industry, a VAR is a company that buys third-party products – whether they be hardware, software and/or networking; adds value to these products with additional features, software, integrations and professional services, and then resells them for a profit to its end-users as an integrated, turnkey solution.
Distributors and original equipment manufacturers (OEMs) use VARs as a sales channel to get their products to end users. The VAR buys products from a third party at a discount, which helps the VAR’s profit margin. The VAR then makes additional revenue by adding new features – such as out-of-the-box integration, software, consulting, training, and other professional services – and then sells the product to the end-user at a higher price. The goal of the VAR is to provide a “one-stop shop” to support all their customers’ IT needs.
A VAR relationship typically lasts for a few months after implementation. Many VARs make recurring revenue by offering additional products as they become available; but the relationship between the VAR and the customer is transactional.
An MSP is a company that manages all or part of an organization’s IT infrastructure, including hardware, software and security. The specific service offered is customized to each customer’s needs and is typically dependent on the size of the customer’s IT staff and budget. Small-to medium-sized businesses can cut costs using an MSP because they do not have the budget or labor to maintain all or part of their in-house IT infrastructure. Larger organizations rely on MSPs for more specific services that would otherwise take internal IT staff away from more critical tasks.
MSPs charge an upfront fee for service and then a flat monthly fee, making the cost predictable.
What are the differences between a VAR and an MSP?
A VAR adds value to a distributor’s or OEM’s product and then resells the packaged product for a one-time price. A VAR can also sell maintenance and other professional services, but these services are performed at the customer’s site.
Alternatively, an MSP offers its customers a service to manage part or all their IT infrastructures. As a result, the MSP can offer competitive pricing for ongoing service because their cost is lower due to economies of scale. They also use technology that is designed to deliver these services remotely for multiple customers.
Benefits of using a VAR
Organizations looking for one-stop shopping for complex systems and/or customized applications tend to use VARs because of their unique requirements. Many VARs specialize in certain industries and can provide highly customized, industry-specific solutions. VARs can also provide installation, configuration, implementation, training, ongoing solution support, technical support, hardware/software upgrades and consultation, as well as integration and networking services.
Disadvantages of using a VAR
When compared to purchasing directly from the vendor, VARs will be more expensive; do not typically provide deep discounts; and do not know the products as well as the vendor. VARs deal with multiple vendor products, so while their technical expertise is wide, it is not as deep as that of a vendor who only deals with one or a handful of their own products. As a rule, vendors are big brands and typically larger and more financially secure than many VARs. However, given the unique services VARs can deliver, the advantages of using a VAR can outweigh going directly to the vendor.
Benefits of engaging an MSP
Contracting with an MSP provides a business with many compelling advantages that include:
- 24/7 IT global support
- Temporary or permanent IT staff augmentation
- Access to IT experts from different technical disciplines
- The ability to easily scale technical resources up or down as business conditions dictate
- Eliminating the need to hire internal IT experts to free up the internal IT team to focus on the core business
- Improving business continuity with service level agreements (SLAs) that document the MSPs’ obligations
- Mitigating data loss with managed backup and disaster recovery services
- Better budget management with a pay-as-you-go service
Disadvantages of engaging an MSP
Despite their several advantages, MSPs may also come with challenges. For example:
- Dependence on the SLA can put a business at risk if the MSP fails to meet their terms.
- Most MSPs manage their clients’ IT infrastructures remotely. A client will pay extra if they need onsite support.
- Some MSPs use proprietary technology/tools, which can make it difficult for clients to get access to their data should they decide to terminate the engagement.
- It can be expensive to start an engagement with an MSP, but the rate of return on investment (ROI) can be substantial when you consider that the client does not have to purchase new technologies.
- Not every MSP can support all technologies and applications, so you will need an alternative solution or service to support out-of-scope services.
What type of clients do VARs and MSPs serve?
Larger organizations tend to engage VARs, which are typically larger organizations themselves. VARs also tend to specialize in industry-specific solutions and can develop unique ones for industries that have special requirements. In some cases, an MSP may have specific requirements for customized products and will look to buy their products from a VAR.
MSPs tend to be smaller organizations that work with small-to-medium-sized businesses (SMBs) – providing managed services for part or all their infrastructures.
An MSP and VAR Solution – Acronis Cyber Protect Cloud
When it comes to cyber protection, both VARs and MSPs should use Acronis Cyber Protect Cloud, an integrated solution that provides backup, disaster recovery, next-generation anti-malware, email security, endpoint protection management, vulnerability assessment, and patch management capabilities to detect and eliminate threats before they damage your customers’ environments. It is the only managed service solution that natively integrates cybersecurity, data protection, and endpoint protection management to protect endpoints, systems and data. This combination eliminates complexity to more effectively mitigate and/or eliminate risks for VAR and MSP clients, while keeping costs down. It provides:
- Backup and recovery with full-image and file-level backup and recovery to safeguard data across more than 20 workloads – with near-zero recovery point objectives (RPOs) and recovery time objectives (RTOs).
- Cyber protection at no additional cost with a next-generation behavioral detection engine that stops malware, ransomware and zero-day attacks on your client’s endpoints and systems.
- Protection management that enables thorough post-incident investigations and proper remediation.
Today, many VARs do not offer managed services, but some are looking to improve their business metrics and grow, so they are adding managed cloud services to their portfolios. VARs wishing to stay their present course are also purchasing Acronis Cyber Protect Cloud on behalf of MSPs or businesses and are relinquishing the management of services to their partners or businesses.