When Building An Overseas VAR Network, Culture Matters

By Tom Brigiotta, Rocket Software

It’s one of the perennial debates among IT professionals — right up there with tabs vs. spaces, Vi or Emacs, and can a computer think?: What separates a value-added reseller (VAR) from a mere reseller? In other words, who is going to be a real partner and who is just going to put your technology in a catalogue?

It’s a long-running debate, to be sure, but when it comes to building and managing sales networks overseas, I believe the answer is quite simple: about 3,000 miles.*

By that I mean the primary — though by no means exclusive — value of an overseas VAR is it sells your company’s product for you in places in which you either can’t or don’t want to set up a sales organization of your own. The key is to leverage that benefit without falling into some common pitfalls of partnering with companies you know little or nothing about.

* The geographers among us will note 3,000 miles is about the minimum distance across the Atlantic those headed to the Eurasian continent from the U.S. will need to traverse.

Why VARs?

The decision to sell your company’s technologies through a VAR, much less which VAR to partner with, is not an easy one. Nevertheless, I believe there are several points in favor of U.S.-based companies looking to expand internationally to establish an overseas VAR program. These benefits include:

• Local market knowledge and relationships: You’re in a new city or neighborhood for the first time: Who knows better which restaurants are worth eating at — you or a local? Even in today’s hyper-connected digital world, business still operates much the same way. Every country has its own distinct business and regulatory climate. Local VARs — the good ones, at least — have an intimate understanding of the IT market in their country or region, including what kind of regulations businesses need to adhere to and the specific needs of industry in that part of the world. In addition, they have existing relationships with local companies and business leaders. Leveraging those relationships to gain a better understanding of local requirements or accelerate your entry into the market can be invaluable.

• Low capital investment: Yes, VARs receive a significant cut of whatever they sell, but think about how much you’re saving in not having to set up a giant office or build customized solutions for every industry in every country. Of course, that’s not to say that there are no costs involved — you still have to train VARs in how your product works, for example — but it’s way less than the costs of setting up a new business branch in a foreign country. Leveraging VARs is a great way to keep your company lean even as you expand your business to include overseas revenue.

Those are just a couple of the benefits of using VARs to conduct sales overseas, and they’re pretty compelling on their own. But this shouldn’t be taken to mean creating and managing an overseas VAR program will be simple. Done right, it’s a great way to grow your business, but there are still some things you need to watch out for.

Avoiding Common Pitfalls

The biggest problem you’ll face with this strategy is choosing the right VAR. Going into another country, it’s hard to know who’s reputable and who’s not. You may be able to ask vendors whose offerings complement your own for advice, but for obvious reasons it’s going to be tough to get vendors who do the same thing or something similar as you to provide you with any insight. And if you’re the first company in your space in that market, which is not unusual, you’re going to be going it alone.

Simply put, there may be no way to know if a potential VAR partnership is the right one. That’s why drafting a favorable VAR contract is so important. Today, it’s common for companies to include stipulations that require the VAR to meet certain metrics in order to renew. These requirements are often included in exchange for concessions on behalf of the vender (for example, allowing the VAR to be your company’s exclusive reseller in that region for a certain period of time). Like any contract with an entity you don’t know well, the important thing is to start with a short contract with clearly-defined conditions of success and go from there.

The other thing — and this is often overlooked — is to make sure that there’s a culture fit. But wait, you might say, VARs are a business relationship. So why am I worrying about culture fit? I’m worrying about it for the same reason anyone worries about culture in any other business context.

Successful companies choose employees not only for their technical skills, but also for their fit with the corporate culture. They do that because, more often than not, it makes for better business outcomes. And there’s no question that it makes working with one another a whole lot easier.

When choosing an overseas VAR, I can’t stress enough how important it is that you consider the business’s mission, sense of community and other “soft” aspects of their organization when deciding whether or not to partner with them. No one wants to be in a place where they have to work with a group of people whose goals are misaligned or, worst-case, diametrically opposed from their own. Making company culture an important consideration from the very beginning avoids this potentially disruptive business problem.

Not only should companies choose VARs whose values match their own, but they should also work to foster a sense of community with their VAR partners. Like it or not, the practices a VAR partner engages in can reflect on your company. Even if your product is ultimately “white-labeled” by the VAR, technical users will still be able to tell which vender provides the underlying software. So if the VAR’s practices don’t match the brand you’re trying to build, that alone can negate all the benefits of working with a VAR in the first place.

One technique that’s particularly effective is to bring all your VARs together for international summits, full of trainings, seminars and networking sessions. Not only does it help keep them engaged and invested in sales outcomes, but it also helps VARs feel like they’re a real part of your company.

Because in a sense, VARs are a part of your company. They are your partner in meeting whatever your business objectives are, just like your in-house employees and contractors. In many cases, VARs function as the public face of your organization, and they may be the only personal point of contact between your company and your end-user. Keeping the consequences of that fact in mind, partnering with a VAR to expand your business overseas can become a highly lucrative, mutually-beneficial relationship.

About The Author

Tom Brigiotta is SVP and Chief Revenue Officer at Rocket Software, a Boston area-based technology company focused on application modernization and optimization, where he is responsible for driving sales strategy and execution.