Solution Providers Will Emerge Stronger After Attacks4:17 PM EST Thu. Oct. 04, 2001
In the aftermath of the attack on the United States, times have not been easy for solution providers. Business has been impacted by a ripple effect that rolled through most industrial and service sectors, shutting down spending all along the supply chain. Pity the poor VAR who counts major publishing companies, advertising agencies, airlines or travel shops as his main customers. Businesses focused on those sectors are charting dramatic downturns since Sept. 11. Complicating matters is the cloud that currently hangs over the economy. That won't lift anytime soon, economists tell us. The guesstimates by today's leading experts plot a rebound to start sometime in the latter part of 2002.
Clearly, that means several months of rough sledding for you, not to mention the vendors that rely on you as their indirect sales channel. As we all know, cash is a scarce commodity for IT solution providers. As one of the members of our advisory board bluntly puts it: "Many [solution providers] do not have the resources to continue. These guys are counting on the next project deposit to make payroll. The recent tragedies have stalled things long enough for another round of failures. Some of these guys need to change their core competency. With limited financial resources, they will fail midstream due to the capital required."
While that may sound shocking, this insightful individual describes a scenario which has been playing out in the solution-provider community for years. Since the early 1980s, most businesspeople involved in this industry have struggled with the same exact issues and, to the surprise of many, have succeeded. However, this downturn may be unlike past ones mainly because the economy was heading into a mild recession just before the attack on America propelled it into a deeper tailspin.
Just think of all the issues solution providers were grappling with in the days prior to the terrorism. For one, channel conflict had reached a fevered pitch, with vendors asking their collective constituency of MBAs to figure out just how to sell cooperatively with the channel. Second, HP and Compaq, whose product sales help many solution providers pay the bills, decided to merge. Finally, we can't forget about the changing customer base. Our research definitively shows that solution providers were engaging daily with line-of-business managers--both the techies and not-so-techies.
So you may subscribe to the theory that everyone is just plain confused at the moment. You may well be right. But a just-completed proprietary study conducted for VARBusiness by Reality Research (owned by our parent company, United Business Media) shows that just prior to the attack on America, the solution-provider model was on solid footing and poised for a solid rebound.
Interestingly, it seems that in the days prior to the attack, lack of capital was not as pressing an issue as you'd think. Only 7 percent of more than 1,000 solution providers in our study cited financing as something they needed most from their vendor partners in the coming year. They were much more focused on finding new customers, improved communications and technical training.
Broadly speaking, the research shows average gross margins for solution providers had edged up slightly over last year, and engagements in emerging technologies--especially wireless--had increased. The median revenue figure had jumped year-over-year as well. A large majority of solution providers were also expecting to add new product lines to extend their core competencies.
In this issue of VARBusiness, we touch on one of the data points derived from that study--the surge in wireless deployment and support among solution providers. It's the first of many stories you'll see from us in the coming months based on that research. We have also decided to go back to the solution-provider community to quantify just how much their outlook has changed post-attack.
How has your business been affected by the changes that have swept through America since Sept. 11? Please let me know at email@example.com.