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Acquisition Strategy: Value-Added Resellers (VARs) vs. Original Equipment Manufacturer (OEMs)

When companies are trying to acquire new products or services for their organization (government or commercial) they may have 2 options to choose from: they can choose to do business with an Original Equipment Manufacturer (OEM) or choose Value-Added Resellers (VARs). At first glance, it may seem obvious to work with the OEM and cut out all links between you and the products. In this article, we will discuss why companies might choose VARs over OEMs.

The first benefit of choosing VARs rather than OEMs is the wider range of products available to choose from. OEMs are only going to provide the products that they own and manufacture. However, VARs give their customers access to a plethora of suppliers and manufacturers from which to choose. This is very beneficial to the customer because they have the opportunity to explore different options and a variety of products needed for their task. OEMs are of course going to tell you their product is the best as it is the only one they have to sell. VARs often have several products in the same category and can be much more objective. Doing the market research for you, facilitating product presentations, and being an extension of your purchasing team is what VARs do best.

This leads us to our next benefit which is having access to product combinations. As mentioned, VARs can provide their customers with a wide range of products to choose from. With that being said, VARs also allow their customers to have access to more possible product combinations. For example, here at Carroll International, we provide rapid communication kits (RDCK). These portable kits provide local and international communications and are composed of several different solutions including satellites, antennas, and other solutions. When using OEMs, you would have to create several different acquisitions with several OEMs in order to acquire the different solutions included in our RDCK. However, when using VARs like Carroll International, only one acquisition is needed. This allows customers to choose product combinations to create a package that best suits your company's needs and missions. VARs have the potential to be a “one-stop-shop” for your organization.

Product improvements are also great benefits from choosing to do business with VARs. VARs can help improve OEMs products in order to better benefit the customer. VARs can improve OEM products in many ways such as adding new capabilities to an existing product or combining a certain product with other products in order to increase efficiency and meet your specific needs as a customer. Some examples of our value-adding to products are etching onto the products, imaging computers with software, kitting, installations, custom packaging, customizations to meet international standards, field services, integration, education of the end-user, and technical support.

Customers can also benefit greatly from working with vendor-neutral dealers. As stated above, VARs have access to many different suppliers and manufacturers. VARs that are vendor-neutral can provide their customers with quality products and solutions without all of the hassle. They allow their customers to worry less about negotiating with several OEMs until they find the right supplier. In lieu, VARs are able to contact their subject matter experts and other resources to ensure their customers get the best deal for the product that is best for them. Many times the VAR can offer better pricing than the OEM will offer due to relationship levels and in large companies, there may be several departments that give pricing. VARs normally get channel or wholesale pricing where the OEM direct to customer sales representatives are very well paid and may deliver higher prices due to cover their added cost in the relationship.

Many OEMs have manufacturer representatives that are rarely going to tell you that their products will not benefit you as much as their competitor’s product will. They may not disclose to you that the product that you are interested in is going to reach its end-of-life soon, leaving you with a product that is harder to repair if damaged. As stated, there are vendor-neutral VARs that can provide you with the best advice and product for your company. VARs are focused on making sure no matter what, the products provided will be the best fit for you as the customer, rather than being loyal to a specific supplier or manufacturer.

The last major advantage of using VARs is the fact that a VAR can be used in many different types of acquisitions vs a “one and done” relationship. What this means to the VAR is a higher and more reason to meet the compliance and regulatory demands of the customer. A longer and more efficient relationship is formed between the customer and supplier. Often many OEMs will not even go through the vetting and paperwork to be a supplier to large companies. The VAR being used in many more situations makes for a more effective and often more loyal relationship. Having one level of separation from random one-off OEMs may offer some legal protection as well.

These are just a few examples of how VARs may be more beneficial to you as a customer than OEMs. VARs have the ability to provide their customers with a bigger variety of products and product combinations, as well as personalized advice and product improvements. While it might be hard to pass up small savings to get these benefits, we believe it is very worth the perceived extra cost. In conclusion, while there are places for different types of suppliers and strategies we see the supply chain moving more to the channel and working with VARs as the norm.

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