Are Agents, VARs Converging? ScanSource, Intelisys Partners Weigh In

SCANSOURCE/INTELISYS CHANNEL CONNECT — For hybrid distributor ScanSource, the process of moving its massive base of VARs into its Intelisys cloud agency agency business has just begun.

ScanSource and Intelisys executives are evangelizing a partner model that delivers all types of things technology customers demand, including hardware, software and cloud services. That also includes moving more of partners’ overall business to recurring revenue streams. ScanSource gross profit derives 24% from recurring revenue; president John Eldh said he’d like for that number to approach 30% in the next three to five years.

ScanSource’s John Eldh

“It’s early days. We have 30,000 partners and 540 of them have made this move to hybrid partners. We are trying to meet partners where they are as quickly as we can,” Eldh told Channel Futures.

Conversion

Intelisys’ John DeLozier

John DeLozier, president of Intelisys and ScanSource’s modern communications unit, said his team eyes huge opportunities on getting partners to increase deal size.

He said ScanSource stands alone from its competition in its ability to create a hybrid distribution machine. On one hand, ScanSource possesses both its own history in hardware resale and Intelisys’ history in the agent channel. On the other hand, it holds a partner base of more than 30,000. As a result, DeLozier said his team is looking in the mirror to see what it can do with its existing partners.

“The competitors don’t have the customer base, and they don’t have the heritage. So for us, it’s a matter of conversion and less about recruitment,” he told Channel Futures.

2 Worlds

The effort to promote hybrid distribution looks different depending on the partner. VARs and agents differ significantly in their traditional technology portfolio, delivery model and supplier relationships.

ScanSource’s Tony Sorrentino

“It’s very different for an agent to come into the hardware space and for VAR to go into the agent space,” said Tony Sorrentino, ScanSource’s president of specialty technology.

Historically, agents (more contemporarily referred to as technology advisors) make their core revenue through recurring commissions billed by the suppliers they refer to their customers. Originally these sales revolved around long-distance telephone services and other traditional wide-area networking services, but they have evolved to include cloud communications like unified communications as a service (UCaaS) and contact center as a service (CCaaS), as well as cybersecurity. They have historically leveraged supplier contracts from technology services distributors (formerly master agents) such as Intelisys.

Value-added resellers, on the other hand, sell on margin and typically involve themselves in the physical implementation process. They have historically leveraged supplier contracts through distributors like ScanSource. However, in the case of ScanSource, VAR partners originally sold automatic identification (Auto ID) and point-of-sale (POS) equipment.

Challenges: VARs Adding Agency and Cloud

The pandemic played a big role in making more VARs see the value in moving their customers from on-premises phone systems to UCaaS.

“I think a lot of the communications resellers were hesitant to embrace cloud early on, and then COVID hit and really forced their hand. The folks that thought that they could ride it out suddenly had to help their end customers get their people up and running working from home. They really had no choice,” Sorrentino told Channel Futures.

But several reservations remain; for example, the agent model’s reliance on suppliers presents concerns.

“A VAR has technical staff, and they roll in trucks, and they’re turning screwdrivers. An agent is purely a sales organization. They really rely on the supplier to do a lot of the heavy lifting,” Sorrentino said.

Consider the VAR that has driven a large amount of business through a single client. Reducing the space between the customer and the vendor could raise concerns.

“He’s not going to just lightheartedly let some supplier come in. Because he’s built his business around this customer, if he loses that customer, he’s in trouble.”

Another voiced concern is invoicing. Agents historically do not bill the client for services sold; vendors do that.

“I’ve had conversations with a lot of our VAR customers that said, ‘The invoicing in the agency model comes from the supplier, not from not from the seller, and it lessens my value if my name is not on the invoice.’”

Sorrentino said ScanSource has developed …