4 Trends Putting the ‘Value‘ Back in Value-Added Resellers

The world of value-added resellers (VARs) is being turned upside down. The old model of simply bundling some services on top of a software package and calling it a day is no longer enough. To stay relevant and competitive, today‘s VARs need to adapt to tectonic shifts in the technology landscape and rethink their approach from the ground up.

At the root of this disruption are four key trends reshaping the industry:

1. The explosion of front-office SaaS development and spending
2. The rise of freemium models making software cheaper than ever
3. The evolution of software to be more intuitive and user-friendly
4. Changing priorities of SMB execs from point solutions to integrated growth

Let‘s dive into each of these trends, examine the challenges and opportunities they create for VARs, and explore how forward-thinking companies are adjusting their strategies to come out on top.

Trend 1: The Front-Office SaaS Boom

It‘s no secret that cloud software has been experiencing a period of massive growth in recent years. But what‘s particularly eye-opening is how much of this growth is being driven by applications aimed at enabling front-office functions like sales, marketing, and customer success.

A recent report by CITE Research found that the number of marketing technology solutions alone grew by 22% in just the last year, now encompassing over 8,000 distinct apps. And it‘s a similar story in sales tech, where the vendor landscape has expanded by 25% annually since 2017.

The overall picture that emerges is of a new generation of SaaS across the full scope of the front office exploding onto the scene:

Function	Number of SaaS Solutions
Marketing	8,000+
Sales	950+
Customer Success	300+

This unprecedented variety of tools offers exciting possibilities for sales and marketing leaders looking to add new capabilities – but it also creates some daunting challenges. With so many point solutions to choose from, simply figuring out which ones to buy and how to integrate them into a cohesive stack has become a huge headache.

As Scott Brinker, VP of HubSpot and editor of the Chief Martec blog, explains: "The good news is that there‘s an amazing array of powerful tools out there for nearly every front-office use case you can imagine. The bad news is that assembling and maintaining all those different products into a well-oiled machine is incredibly difficult and time-consuming."

This is where the opportunity lies for modern VARs – not just reselling software, but helping companies navigate the vast front-office landscape and build the right integrated growth stack for their needs. VARs who can provide real expertise and guidance in this area – and handle the actual work of stitching different systems together – have a huge opening to deliver value.

From what I‘m seeing, some of the most promising spaces for VARs to focus on within this trend include:

• Revenue operations (RevOps) platforms that unify data and processes across marketing, sales, and service
• AI-powered sales enablement and coaching tools
• Verticalized marketing automation and CRM solutions for specific industries
• Advanced customer analytics suites providing a unified view of the customer journey

The key is to think less in terms of individual products, and more in terms of integrated capabilities that drive real business outcomes. By acting as expert architects helping to design front-office technology strategy from the top down, VARs can become indispensable partners to their customers.

Trend 2: The Freemium Revolution

Another megatrend upending historical assumptions for VARs is the rise of freemium go-to-market models in SaaS. Pioneered by the likes of Dropbox, Evernote, and Slack, this approach makes the core version of a software product available at no cost, aiming to entice users to eventually upgrade to paid plans with more advanced features.

Freemium is proving to be a highly effective strategy for gaining rapid adoption. Customers who may have balked at paying for an unknown product are much more likely to try it out when there‘s zero cost or commitment. And once they‘re hooked and see the value, converting them to premium subscribers becomes a straightforward upsell.

The data shows just how pervasive this model has become. As of 2020, 32% of SaaS companies were offering a free trial or freemium version, up from just 15% in 2015. And those who have deployed freemium are seeing real results – on average converting 15-20% of free users into paying customers and reducing overall customer acquisition cost (CAC) by 15%.

This creates an obvious challenge for VARs, who have traditionally made their money by getting a cut of software licensing fees. When the baseline product is free, that revenue goes out the window and puts significant pressure on already-thin resale margins.

But freemium also opens up some interesting possibilities for VARs willing to get creative. Here are a few potential plays I see:

• Building premium managed service wrappers around popular freemium products (e.g. offering expert onboarding, customization, and support for a free CRM tool to make it "enterprise-grade")
• Developing custom add-ons and integrations for freemium products that can be monetized separately (e.g. industry-specific reporting templates for a freemium BI tool)
• Leveraging freemium offerings as a foot in the door to pursue larger upsell/cross-sell opportunities with account expansion over time

The key is to stop seeing freemium as a threat, and start thinking about how you can harness its adoption benefits while still extracting revenue in different ways. Those who figure this out will be well-positioned to thrive in an increasingly free-first software world.

Trend 3: The Age of User-Friendly Software

When was the last time you used a piece of business software and thought "Wow, that was incredibly intuitive and easy to figure out!"? Sadly, this reaction is still all too rare. But leading SaaS companies are working hard to change that.

Driven by the need to appeal to less tech-savvy business users and the generally rising bar for digital experiences set by the Apples and Netflixes of the world, enterprise software has been going through a user-friendliness revolution. Clunky interfaces, steep learning curves, and the need for extensive training are no longer acceptable. Users increasingly demand tools that "just work" out of the box.

This has major implications for VARs. Traditionally, a big part of their role was to help customers understand and deploy complex systems – everything from running training sessions to building custom documentation. But in a world where the software itself is highly intuitive and self-service, much of this hand-holding becomes unnecessary.

At the same time, making software that meets sky-high user experience (UX) expectations is incredibly difficult. It requires deep expertise in interaction design, information architecture, user research, and more. Most software companies struggle to assemble all these skills in-house, creating an opportunity for VARs who can lend UX firepower.

Here are a few ways I see VARs adding value in response to this trend:

• Partnering with vendors to provide UX design services to enhance products
• Offering UX training and best practices to help clients get more out of intuitive tools
• Building turnkey "UX accelerator" programs to speed time-to-value for user-friendly products
• Providing ongoing UX testing and optimization to continuously improve in-product experience

To capitalize on this trend, VARs need to develop real competencies around modern software design and user experience. This may require hiring new types of talent and reskilling existing teams. But those who make the leap will find themselves in high demand.

Trend 4: The Move to Integrated Growth Stacks

Perhaps the biggest shift happening in the world of business software buying is a change in mindset among the executive decision-makers. Whereas in the past, VARs could succeed by selling individual point solutions to lines of business, today‘s C-suite is taking a more holistic, strategic view.

Specifically, SMB CEOs and their leadership teams are increasingly focused on driving integrated growth across the full customer lifecycle. They see the traditional silos between marketing, sales, and service breaking down, and want to invest in technology that enables these teams to work together seamlessly to acquire, retain, and expand customer relationships.

Scott Albro, CEO of TOPO, put it well in a recent interview: "The fastest-growing companies are those who have figured out how to align their revenue teams around common metrics, datasets, and goals. They‘re not thinking about individual tools for each function, but end-to-end workflows and handoffs. This is the future of revenue technology."

The data bears this out. In a 2020 survey of SMB executives, 82% said that enabling integrated customer growth was a top priority for their technology strategy. And those companies with tightly aligned revenue teams are seeing real results – on average generating 38% more leads, converting 23% more opportunities, and achieving 27% higher customer lifetime value.

For VARs, this has some profound implications. The old land-and-expand playbook of seeding individual tools and then slowly building a footprint over time just won‘t cut it anymore. SMB leaders want to start with the end in mind and invest in complete growth stacks from day one.

This means VARs need to evolve from product peddlers to solution architects. Some key strategies I see for making this transition:

• Developing deep expertise in stitching together marketing, sales, and service systems into seamless workflows
• Productizing integrated playbooks, templates, and best practices for orchestrating full-funnel growth
• Building managed service offerings around key growth infrastructure like CRM, MAP, and CX platforms
• Partnering with management consultants to provide the strategy and process guidance to make integrated growth work

Ultimately, the name of the game is moving up the stack from tactical to strategic selling. VARs who align themselves to their customers‘ overarching business goals and KPIs will become trusted advisors, not just IT suppliers. And that‘s where the real value lies.

Bringing It All Together

Stepping back, the meta-theme that emerges across these four trends is a fundamental rethinking of what it means to be a value-added reseller in today‘s SaaS-centric world. The reality is that the old model of living off vendor margins is quickly becoming unsustainable. But that doesn‘t mean VARs are doomed – far from it.

The VARs that will thrive in 2023 and beyond are those who embrace a new paradigm – one focused on delivering integrated solutions, not reselling individual products. This means developing deep specialization in the hottest corners of the software market, building out new services and IP, and hiring the talent needed to orchestrate technology to drive real business outcomes.

None of this will be easy – it requires fundamentally reimagining the VAR business model and go-to-market approach. But for those with the vision and courage to adapt, the opportunity is immense. Because at the end of the day, that‘s what being a "value-added" reseller has always been about – finding new and better ways to help customers succeed.

In the coming years, I believe we‘ll see a much sharper dividing line between the VARs who make this leap and those stuck in the past. So which side will you be on? If you‘re ready to embrace the future, here are a few key things to consider:

• Where are you best positioned to specialize within the front-office SaaS landscape?
• How can you restructure your revenue model to thrive in a freemium-first world?
• What investments do you need to make in design and UX skills to enhance the products you sell?
• How can you productize your expertise in building integrated growth stacks to scale your impact?

Answering these questions won‘t be comfortable – but it will be necessary to position yourself for success in the 2020s and beyond. And if you can figure it out, you‘ll be well on your way to putting the "value" back in VAR.