The VAR Kickback System and How You Can Make a Good Living from Vendors
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I talk about this a LOT and it can be hard to understand what I mean. It seems shocking that I often say that the average SMB IT shop is "taking kickbacks" or something very similar to it and how could that be possible. I want to use an example to show how this works and to what I am referring.
John is an IT manager, he takes a job at Bob's Crab House to head up IT. John, as a normal employee, has two big things that he wants from his job - to make lots of money and to not have to work much for it. John, like most people working in IT, doesn't have the full breadth of experience and knowledge to really evaluate the needs of the business and doesn't want to pay expensive experts to "do his job for him" as this would expose this knowledge gap to his employer and make his employer ask themselves why they pay John when they could just pay the consultants directly instead for less than half the cost.
This leaves John in a precarious position. Admitting he's not an expert at the level necessary to make company-scope IT decisions could prove his undoing and take away the high pay and cushy job he wants. And taking the time to think about and learn all that stuff is... well a lot of work and he would rather not do all that work. What is he to do? He worries...
Along comes a salesman from a VAR. The salesman talks to John and listens to his worries. "Fear not, John!", he says, "because all of that hard IT thinking that you are being paid to do you need not do, I'll do that for you!" John is relived, not only will the work get done for free, but now John doesn't have to think about anything or do anything at all! This salesman is literally willing to do John's job for him! Perfect. Could it get any better?
Of course, one of the most important pieces of John's job as the IT manager is to oversee and manage the relationship with any IT resources that the company interacts with. So he has to ignore that piece of his job to have this relationship, but he looks at other companies like his and they all seem to do the same thing, so who is going to question him, this is just how things are done!
So through this system, John earns a nice paycheck for a job he isn't doing. Since there is money going to John and he's looking the other way and not doing his job, we can see this money as a kickback, just one being funneled through the hands of his employer. The vendor, with John's assistance, is able to sell the company all kinds of hardware, software, support, and services that are not needed or that are at inflated rates and so is getting loads of money that they should not be receiving.
If the employer tries to audit the system by looking at the products purchased, they will have little or nothing to tell them that something is amiss. There is no means of looking at other businesses and comparing network designs. And if they attempt a "real audit", most anyone that the bring it will somehow either be from a business that does the same thing and has a massive interest in acting like this is normal and acceptable, or is hired through the system itself like if John or the vendor bring in the auditor.
As the CEO, the only means of truly auditing the system is to ignore the IT aspects of it and look at the business relationships and determine, if possible, whether or not John is honestly doing his job or if he has handed it off to someone. If you lack visibility into John's decision making, you might have no way to prove if John did his IT job, or if he sold out the company to the VAR. It all looks the same from the outside. If an honest auditor is found, they might be able to tell that ridiculously bad decisions were made and demand that John explain himself; but this is something very few auditors are capable of doing and something extremely few companies are willing to do. The situation is just horribly uncomfortable at best and unlike something like direct cash theft, it's never quite possible to actually prove it, no matter how obvious it is. It's socially acceptable to claim abject incompetence as an excuse and so, everyone does.
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The problem here is that everyone is incentivized to play along, even the CEOs in most cases. Everyone has something to gain whether it is being able to hire cheaper people, not having to do their own jobs well, or whatever that even business owners with their own money on the line can find themselves feeling like the system isn't "that bad". The desire to "get something for free" can be so strong that even the person getting screwed might get sucked into it (in which case it's not unethical like it is when it is someone paid to protect against this scenario that takes advantage of it.)
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One of the keys here is looking at what some key roles of the CIO are. Some of the most important things that CIOs do are...
- Make key IT decisions and/or acquire the right people to make key IT decisions.
- Ensure that IT processes are good.
- Protect the company from bad IT decisions or actors.
In the case of having a VAR "do their job" for them, they actually skip all three of these three key responsibilities. Instead they use their position to generally create an appearance of doing these, while actually doing either nothing, or actually doing the opposite of them. This is where we get into serious ethical breaches.
It's like hiring a guard for your store, then it turns out the guard is the one who called up the thieves, told them to meet them out back, and turned off the cameras while they emptied the till.
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This system basically benefits absolutely everyone in the chain, except for the investors. There is no incentive for really anyone, anywhere along the way, to question or fight it. At every level of management, it's in the interest of everyone to keep the system going. It increases salaries while lowering the requirements for skill, experience, workload, and risk. Why do hard work and take on risks when you can do no work, look the other way, and your boss is more likely to reward you!
The House of Cards problem is a major factor here. Even if people are doing financial audits, it's hard to catch. And when caught, it's often hard to prove. And by the time it is audited, caught, and proven, there is such a good chance that everyone will have already gotten away with it it doesn't matter!
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Of course, there are cases of "real" traditional kickbacks as well. What I gave as an example above works best in smaller to medium businesses. In large one, convincing a business to buy a million dollars of storage or gobs of software licensing that isn't needed, or just accepting inflated prices on purchases can create a windfall of hundreds of thousands or millions for vendors or resellers which can find its way back to the IT purchase approver or influencer. Maybe it's as simple as a few nice dinners or a nice bottle of scotch, maybe it's a golf club membership, maybe its free passes to expensive trade shows, could be a cruise or a vacation, a new car, or a wad of cash. There are many ways, some essentially impossible to trace, in which a salesman could make a bad decision very worthwhile to someone in IT.
Given the often high salaries of sales people and low salaries of IT, this makes the effect much stronger. It might not be the vendor, but a salesman themselves doing the transaction!
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This gets trickier when you add IT Outsourcing factor.
I hope one day we all have cloud wages.
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@emad-r said in The VAR Kickback System and How You Can Make a Good Living from Vendors:
This gets trickier when you add IT Outsourcing factor.
I hope one day we all have cloud wages.
Outsourcing your IT is the only right way for most SMB to get real IT.
They cannot afford it otherwise..
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@jaredbusch said in The VAR Kickback System and How You Can Make a Good Living from Vendors:
@emad-r said in The VAR Kickback System and How You Can Make a Good Living from Vendors:
This gets trickier when you add IT Outsourcing factor.
I hope one day we all have cloud wages.
Outsourcing your IT is the only right way for most SMB to get real IT.
They cannot afford it otherwise..
The thing that confuses a lot of people, is that they don't understand what this means and they think that outsourcing "is" the solution, rather than outsourcing being the only path to the solution.
So many people outsource once, badly, and then think that that somehow shows that outsourcing itself is bad. Yet insource, have things just as bad, and don't make the same logical leap.
It's like driving to the store. The answer is "use a car" but that doesn't mean that buying the wrong car or driving badly isn't still a problem.
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I posted this over on the sysadmin subreddit: https://www.reddit.com/r/sysadmin/comments/8e4oli/is_there_really_a_var_kickback_system_that_it/
Not too many people agree with or like the post...
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@jaredbusch said in [The VAR Kickback System and How You
Outsourcing your IT is the only right way for most SMB to get real IT.
They cannot afford it otherwise..
Why?
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If anyone knows of a vacancy for an IT Manager where you don't actually have to do any work but still get a decent salary then please let me know, I'd love to apply!
It's not a picture I recognise. Every IT manager I know or have met works pretty hard and are constantly having to justify their roles to prevent them being made redundant and/or outsourced. It's not an easy career. Maybe it's common in the US, but if so, it's definitely a harsher environment in the UK.
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@dave247 said in The VAR Kickback System and How You Can Make a Good Living from Vendors:
I posted this over on the sysadmin subreddit: https://www.reddit.com/r/sysadmin/comments/8e4oli/is_there_really_a_var_kickback_system_that_it/
Not too many people agree with or like the post...
Hey @scottalanmiller ... now people on Reddit are discussing you, too. LOL.
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@dave247 said in The VAR Kickback System and How You Can Make a Good Living from Vendors:
I posted this over on the sysadmin subreddit: https://www.reddit.com/r/sysadmin/comments/8e4oli/is_there_really_a_var_kickback_system_that_it/
Not too many people agree with or like the post...
Well DUH, lol. They are the ones leveraging the system. Of course they will react passionately, that proves the point more than disproves it.
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@carnival-boy said in The VAR Kickback System and How You Can Make a Good Living from Vendors:
@jaredbusch said in [The VAR Kickback System and How You
Outsourcing your IT is the only right way for most SMB to get real IT.
They cannot afford it otherwise..
Why?
Because you HAVE to either pay way too much, get way too little, or the IT person is just donating their time.
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@carnival-boy said in The VAR Kickback System and How You Can Make a Good Living from Vendors:
If anyone knows of a vacancy for an IT Manager where you don't actually have to do any work but still get a decent salary then please let me know, I'd love to apply!
Those don't tend to stay vacant long. I knew of one paying $150K, if you consider that good, recently. But as you can imagine, people lined up to fill it. Zero technical responsibilities and the old guy was fired for having stolen many hundreds of thousands of dollars and it eventually got "too obvious" to keep him.
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@carnival-boy said in The VAR Kickback System and How You Can Make a Good Living from Vendors:
It's not a picture I recognise. Every IT manager I know or have met works pretty hard and are constantly having to justify their roles to prevent them being made redundant and/or outsourced. It's not an easy career. Maybe it's common in the US, but if so, it's definitely a harsher environment in the UK.
That's a different effect. And to some degree, you are seeing roles that we generally say shouldn't exist that need to defend themselves. That's unrelated to doing a good job or a bad one or the VAR issue or whatever, that's the "a role that doesn't make sense in an SMB problem."
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@scottalanmiller said in The VAR Kickback System and How You Can Make a Good Living from Vendors:
@dave247 said in The VAR Kickback System and How You Can Make a Good Living from Vendors:
I posted this over on the sysadmin subreddit: https://www.reddit.com/r/sysadmin/comments/8e4oli/is_there_really_a_var_kickback_system_that_it/
Not too many people agree with or like the post...
Well DUH, lol. They are the ones leveraging the system. Of course they will react passionately, that proves the point more than disproves it.
MSP says "SMBs should employ MSPs", internal IT says "SMBs should employ internal IT". There's no point being proven either way, just different viewpoints and lots of confirmation bias from both sides.
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@carnival-boy said in The VAR Kickback System and How You Can Make a Good Living from Vendors:
@scottalanmiller said in The VAR Kickback System and How You Can Make a Good Living from Vendors:
@dave247 said in The VAR Kickback System and How You Can Make a Good Living from Vendors:
I posted this over on the sysadmin subreddit: https://www.reddit.com/r/sysadmin/comments/8e4oli/is_there_really_a_var_kickback_system_that_it/
Not too many people agree with or like the post...
Well DUH, lol. They are the ones leveraging the system. Of course they will react passionately, that proves the point more than disproves it.
MSP says "SMBs should employ MSPs", internal IT says "SMBs should employ internal IT". There's no point being proven either way, just different viewpoints and lots of confirmation bias from both sides.
Yes, but one has simple math and logic. The other has nothing. There is no benefit to internal IT. It's costly and risky. MSPs can do anything internal IT can do, at the same price, but has more options. It's literally impossible to come up with any potential benefit to internal IT.
All arguments for the Internet IT model at small scale come from misinformation about MSPs. Like claiming that all resources are shared, that mark up is high, that they are not on site, etc.
Every positive argument for internal IT equally applies to MSPs. but not every MSP benefit applies to internal IT.
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@scottalanmiller said in The VAR Kickback System and How You Can Make a Good Living from Vendors:
It's literally impossible to come up with any potential benefit to internal IT.
Er, ok.
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@scottalanmiller said in The VAR Kickback System and How You Can Make a Good Living from Vendors:
@dave247 said in The VAR Kickback System and How You Can Make a Good Living from Vendors:
I posted this over on the sysadmin subreddit: https://www.reddit.com/r/sysadmin/comments/8e4oli/is_there_really_a_var_kickback_system_that_it/
Not too many people agree with or like the post...
Well DUH, lol. They are the ones leveraging the system. Of course they will react passionately, that proves the point more than disproves it.
Wow. "They"? Reddit is a community just like this one. Just because it's not Mangolassi.it doesn't mean it should just be dismissed. Yes, there are VARs lurking there, but there are also thousands of IT folks of all levels.