Modern business runs on technology, and a comprehensive strategy for IT service delivery is key to the functionality, profitability, and scalability of any enterprise. In the business-to-business world, the two most common models for IT solutions providers are the Value-Added Reseller (VAR) and the Managed Service Provider (MSP). While there may be some overlap between the two, VARs and MSPs offer fundamentally different types and degrees of service.
In this article, we'll review the key attributes of both models so that, as an informed CEO, you can choose the model that best fits your organization’s current and ongoing IT needs.
The key elements of business IT
Your company’s information technology system is an interconnected network of components and capabilities which, working together, store, manage, process, and communicate data. The basic elements of a business IT system include:
- Hardware—the physical components of your computer systems like monitors, keyboards, webcams and other media devices, processors, integrated circuits (IC), and circuit boards.
- Software—the sets of instructions that operate the hardware, like your operating system (OS).
- Applications—the programs that allow users to interact with the computer and perform certain tasks like word processing, accessing the internet, manipulating graphics, and sending email.
- Databases—the system for organizing and indexing data so that it can be searched, managed, and mined with optimal efficiency; examples of databases include Access and SQL.
- Networks—the hubs, devices, and infrastructure that link individual computers so that they can share resources and communicate with each other.
- Desktop support—the support team of specialists who can diagnose and resolve technical issues, failures, and downtime of hardware, software, and networks.
- Data protection/backup—the system and capabilities put in place to provide for comprehensive data backup; this mitigates the risk of data corruption or loss.
- Security—the provisions, programs, and systems that protect your IT and data from cyber-attack, hackers, ransomware, malware, and other security threats; security can include antivirus programs, firewalls, and more.
- Management—the ongoing monitoring of your IT system (hardware, software, networks, databases, applications, backup, and security) to ensure continual health and full functionality through proactive measures, timely troubleshooting, and optimization of IT system components.
When considering how to optimize your IT systems for the most efficient usage, all of these elements must be taken into account. And that brings us to the question of the two most common models for IT solutions providers: VARs and MSPs.
The VAR model
A Value-Added Reseller (VAR) purchases hardware and software from third parties at a discount, uses them to create customized packages tailored to the needs of individual businesses, adds extra services or features, then sells the repackaged products at a markup.
The extra services or features are the “value-added” component, and may include a limited number of consultations, or a finite offer of help with installation and implementation. VARs derive their profit largely from the sale of products, however, not long-term service, so their engagement with customers tends to be more transactional and limited to specific events like migrating to a new system. And while they can generate ongoing revenue from license renewal fees, they generally do not offer ongoing monitoring of systems.
The MSP model
A managed service provider (MSP) takes over the monitoring and maintenance of an organization’s entire IT system for a monthly fee. While MSPs can sell products and set up systems, they derive their revenue largely from providing long-term service, so their engagement with customers is more in-depth and focused on supporting overall business goals with the efficient and uninterrupted operation of the company’s IT system.
An MSP focuses on proactive and preventive measures to avoid the occurrence of IT issues, and the prompt remediation of any problems that do occur. Often, issues are either avoided or resolved before end-users are even aware of them. MSPs maintain your IT remotely, provide continual network monitoring, security, backup, disaster recovery services, and maintenance of hardware, software, applications, networks, and databases.
Deciding between a VAR and an MSP
How does a CEO looking to optimize her organization’s IT decide between a VAR and an MSP? The following are a few considerations to help you decide which might be best suited to your business needs:
What is the state of your current IT team? Do you have the in-house capacity for continual monitoring and troubleshooting of your entire IT system? If you do, the more limited transactions of buying hardware and software as needed from a VAR may suit you best. If your IT team is not equipped to maintain 24/7/365 uptime and troubleshooting, an MSP may be of greater benefit to you.
What provisions do you have in place for data backup and cyber security? If your system is safely backed up and has adequate security from malware, ransomware, breaches, and cyber-attacks that can evolve in keeping with increasingly sophisticated challenges, you may not need to engage the services of an MSP for this function. If this specialized area is not being handled in-house, however, an MSP can help.
What kind of engagement do you want with an IT solutions provider? Are you simply looking for a reliable reseller of products which will customize hardware and software to your needs? A VAR is your better bet here. Are you looking for an ongoing partnership that provides monitoring, maintenance, and peace of mind when it comes to security, backup, and uptime? An MSP is designed for long-term support of enterprise IT systems.
CEOs seeking to advance their organizations are faced with a myriad of decisions, but the choice between a VAR and MSP is an especially critical one as it goes to the heart of how you maintain and optimize business operations, functionality, and security. Knowing the difference between a VAR and an MSP is the first step to determining which is best suited to provide your company with the degree and scope of IT services and support you need to drive long-term productivity and profitability.
Image credit: (Piqsels @ Creative Commons)