Despite Recession, VARs Project Moderate Growth In 20092:27 PM EST Tue. Feb. 17, 2009
Although economic growth is challenged by the downturn, most VARs (63 percent) nonetheless project growth of at least 4 percent in the next 12 months, according to a survey of 177 solution providers conducted by Everything Channel, the parent company of Channelweb.com.
The No. 1 way companies will finance moderate growth is through business profits. That's different from two years ago, when most respondents said growth would be self-financed. Fewer solution providers are looking at taking out personal loans. Vendor financing has trended upward slightly from two years ago.
Most solution providers said they would be considering expanding regionally in the next three to five years. Going public is not a popular option in 2009, as only 5 percent of respondents were considering losing their "private" status. A significant number -- 28 percent -- are considering selling their businesses.
Targeting new markets with existing solutions and expertise was the primary go-to-market growth strategy for 39 percent of the survey respondents.
However, a healthy number of VARs are focusing on new customers to increase their reach (28 percent), while the remaining respondents said they'd be expanding product lines and selling to new vertical markets.
Finding new business was by far considered to be the key to growth in the next 12 months by VARs. In fact, finding new business was considered the most critical factor in business success by 39 percent of respondents anticipating growth in 2009. Those VARs also agreed that managing cash flow was important (17.5 percent), as was articulating measurable, actionable goals (16.3 percent).
It's not surprising that in today's economy, customers are not as eager to replace products or increase services as they might be during less turbulent times. Among all the types of VARs surveyed, the vast majority -- three in four -- complained about customers delaying purchases. To compound matters, once a deal was struck, many customers were slow to pay, leading to the third-ranked obstacle: cash flow problems.
Solution providers indicated they'd be growing market image and presence in the next year, perhaps in an effort to help attract those sought-after new customers. Nearly 70 percent said they'd grow their company's market image and 68 percent said they would increase marketing activities. The Web didn't go unnoticed: 32 percent said they'd include search engine optimization in their growth strategies.
VARs have an eye toward improving business processes as a main way of managing costs during the next 12 months. In that regard, they are not much different from their customers in wanting to contain costs and maximize technology they've already employed. Further, costs that are not fixed -- such as energy and travel -- will be closely monitored, and nearly one in five will renegotiate leases or other long-term fixed costs.
The federal sector offers the most opportunity for growth, according to solution providers. However, the state, local and public health-care sectors also are looking rosy, respondents noted. The recent stimulus package passed by Congress should give solution providers reason to remain optimistic into the distant future.
Small businesses of between 20 and 90 employees seem to be the sweet spot for VARs looking for growth. Fifty-nine percent said they expected growth to come from these small businesses. In fact, while 59 percent see growth of at least four percent in this space, "very aggressive" growth is expected by 14 percent of respondents overall.