Managing your VAR

Use leverage to sweeten the deal with your VAR

So, you've done your homework and found several possible VARs that can handle an upcoming project. All the signs are positive: the VAR has serviced your area for years with knowledgeable and responsive people, and they're bringing a turnkey solution to your problem. They even seem to understand your business. Now, it's time to roll up your sleeves and start the real work -- bring the VARs in and start the negotiation process. Engaging a VAR isn't difficult, but getting the very best value for your money can be tricky unless you understand your key leverage points. Whether you're looking at your very first VAR engagement, or have been using VARs for years, this article offers some important guidelines that can help you forge the very best deal with a prospective VAR.

Larger purchases mean more leverage

Larger purchases often yield better value than making several smaller purchases over time. For example, rather than just purchasing one storage array for a single site implementation, purchase three storage arrays for all three of your sites at the same time. Or, rather than purchasing 10 hard drives for the next six months of predicted storage growth, purchase 50 hard drives for the next year or two. Any cost savings related to product discounts ultimately translates to real money for your organization.

Larger purchases also bring an opportunity to leverage more of the VAR's personnel or services at no (or minimal) added cost. "If you can put as much as

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possible into a one-time purchase, your leverage goes up dramatically," says William Peldzus, director of storage architecture at GlassHouse Technologies. For example, if you're prepared to purchase and install those additional storage arrays upfront, a VAR may be willing to provide complementary data migration assistance, documentation support, additional training, or commit a technician for on-site support over some free troubleshooting period.

Leverage a long-term partnership

Even if you're not positioned to make large upfront purchase commitments, it may still be possible to realize cost savings or added services by leveraging the potential of a future relationship. If you can demonstrate future growth through additional purchases and are willing to work exclusively with a reseller -- they may be willing to provide additional material, support or add other value to the relationship.

Peldzus recalls purchasing servers for an IT department during a period of heavy Internet growth -- the VAR would actually stock hardware in anticipation of his frequent purchases. "One of the biggest value adds that I got through the VAR is they would anticipate my demand and make sure to have those servers available to me at a very quick turnaround," he says. "Even quicker than the OEM could have done for me directly."

Squeeze the VAR in the middle

Although some OEMs only work through VARs, many OEMs will deal directly with an end user. When discussing the project, ask the VAR to explain the benefits of their model over a direct deal with the OEM. "They'll obviously want to get your business and show the additional value," Peldzus says. In order to secure your business, the VAR may throw in additional documentation, monitoring, troubleshooting or other services that you may not have even considered.

However, this tactic only works when you are actually in a position to deal with an OEM directly. Businesses that are too small to buy directly from an OEM or lack the in-house expertise to deploy a direct purchase should probably forego this tactic.

Look for flexible acquisition and disposition

"VARs usually have the option to be more creative than an OEM does," Peldzus says. So, negotiation should also extend beyond products and services to include a discussion of financing. For example, a leasing arrangement may be more attractive for capital equipment acquisitions. This spreads payments out over the lease, and old equipment can be purchased or replaced at the conclusion of the leasing term (reducing issues of technical obsolescence). In other cases, the VAR may be able to help arrange a loan to make an outright purchase.

Pay-as-you-grow options are also becoming popular. In this model, a product is sold pre-configured with additional upgrades/features that are disabled. The initial acquisition enables the basic system, but the additional capacity or upgrades can be activated on demand for a corresponding fee. This tactic often avoids the lead time involved with ordering, shipping and installation/configuring downtime associated with many upgrades.

Acquisition should also include a discussion of disposition. Determine if the VAR will remove old or obsolete equipment for recycling, and see if the VAR will buy back old or outdated equipment. This is a common practice for VARs that deal in used equipment.

Remember that price isn't everything

Negotiations can often be most effective (and yield the best prices) when VARs and OEMs are most motivated to offer the best concessions. "Know when the VARs' and the manufacturers' fiscal quarters end and look for good deals around the end of a quarter," says Greg Schulz, founder and senior analyst at the StorageIO Group.

However, analysts point out that negotiation isn't necessarily about getting the lowest price -- don't let a deal stall over a specific dollar figure. More often, the objective is to get the most product and service for the money that you're prepared to spend in the first place. Compare bids based on the total job that's being proposed, along with discounts and complementary services offered by the VAR, and make a holistic decision that reflects the total value to your business. ***

This was first published in October 2006

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