10 VARs Who Stood The Test Of Time, And How They Did It4:00 PM EST Fri. May. 28, 2010
With the recession hopefully behind us, many solution providers are beginning to look for ways to once again grow their businesses. Some VARs are forging that strategy for the very first time. For others who have been through several economic downturns, it’s old hat. CRN thought it would be interesting to talk to several longtime solution providers, executives who have been at it for more than 20 years in many cases, to find out the keys to their longevity and what tips they have for solution providers looking to not only survive, but thrive. Here’s what they had to say.
President, Sirius Computer Solutions
San Antonio, Texas
We always reinvest in the business. We’re not pulling cash out of the business every year. A lot of partners, I’ve seen operate the business as a personal piggy bank. When times are tough, we have ability to double down. We have the balance sheet to support the tough times. That’s served us well. When economic times are tough, we’re very focused on our [days sales outstanding], how well we collect money from our customers, and what is the true credit worthiness of our customers. Good customers in the past, they may [now] have their own economic hardships. We don’t want to become part of that problem. We make sure we focus on creditworthiness of customers, examine what their current situation looks like.
Another thing we do which may seem counter-intuitive is focus on watching costs, not just during difficult times but all the time. We've used down times to reinvest in people. There are a lot of opportunities when firms are laying off. If you have a strong balance sheet and are willing to invest, you can improve your hand by adding quality people. Certainly we’ve done that in the last [recession] and we did it during the whole dot-com bust. When we came out of the dot-com [era], we really grew the business quickly.
President, Computer Connections
What’s kind of funny is we tend to thrive a little bit in a recession. I think it’s a good time for a smaller company. That’s when your bigger competition is on the ropes. There are opportunities if you’re nimble during a recession. Other companies are focused on survival, not trying to eat your lunch.
We focus in on key products and services that are bringing in money, get rid of the things that are not. We’re always trying to remain relevant. Whether it’s recession or times are booming, staying relevant is key. You can go broke in a booming economy if you don’t have something of value for customers.
Five years ago, we were focused more on building PCs and wiring infrastructure. Now, we’re more about managed services and remote backup and help desk services.
If you solve problems for clients and save them money, that’s what we’re in this business for. Bring technology to clients, brings them maximum benefit they can get for it. That’s what recessions turn you towards. How are we going to bring value for something they pay money for? Not just, 'You need servers because it’s time.' Why? Justifying it to clients. The tougher times are for them, more we have to focus something they find of value.
President, System Source
Hunt Valley, Md. Founded: 1981
The No. 1 thought is protecting our long-tenured staff and their families. While some VARs use fear as a motivational tool, we find that completely offensive and ineffective. All we can do is provide a person a job they want to keep, and they will work day and night with all of their skill set. One of the ways we do that is we don’t use commissions or variable compensation. If you had a salary that protects you and your family during downturns, you’d work to keep that, and our staff does. The net effect is long-tenured managers that create stability in the business.
Taking that a step further, we offer a complete solution to at least our SMB customers. In order to do that, we need a learning center, presentations, sales operations, a data center. We do that under one roof. It’s incredibly complex and hard to run, but with a long-tenured staff it’s not as hard.
We also minimize impact on the staff with layoffs and other things. There have been studies done that layoffs have a secondary impact. For every person you lay off, [there's a chance] another person will quit at some point soon. We try not to touch that button.
We try to have a cultural match between personal and business. We have a fun committee. It’s a grass roots committee, not a management committee. Today we’re doing hot dogs, chili dogs, kraut dogs. That’s one of many activities each year where we create a culture where people might have fun.
Vice President, Technology Solutions, International Computerware (ICI)
Be strategic with your vendors. The ability to partner with the right vendors can enable you to do some cross-pollination of teams. We have certain engineering teams that try to address market trends. Product vendors can help with that without even trying. If it’s a new offering, we’ll embrace it and vendors will work with our engineering team and it becomes a new offering or new vertical do for our customers.
About three years ago, I had a meeting with EMC executives. I said, 'We have a managed services division that helps customers manage infrastructure, backup, virtual storage.' We petitioned EMC to put together a bundle we could take to customers’ sites to make sure backup is working. This led to more services in 2009 and that was our best year in business. We were able to get there because we had a proactive managed services team. And it always led to product sales too.
We had to hire, reallocate and retrain resources. The biggest thing is reallocate. We have very low turnover, less than two percent of our engineering staff. We create opportunities for them to expand. We give them opportunities to be pre-sales and help architect a solution, then they implement it, then they can be proactive doing managed services. Our engineers through growth and development have taken to it. We hired two guys away from customers. One of the main reasons is they wanted to get beyond the data center and be helping on front-end design, but also do proactive support on the back-end.
Alexander Open Systems (AOS)
Overland Park, Kan.
Going back to the last [recession], we used it as an opportunity. We didn’t go out and do cost-cutting. We used it to hire better people. Some candidates were more expensive, but people were better quality, with better certification and, more experience. That’s one of the most important things. We have continued to invest heavily in training and certs. We did not back off from that. In fact, we increased our investment there.
The focus is more on managing our margins. Last year profit was up 60 percent. The year before it was up 40 percent. We got our margin up to where it should have been in the first place. Our [sales] growth from 2002 to 2007 was 42.5 percent. We’ve been flat [in revenue growth] the last few years, but focused more on margins. We increased our EMC business by 50 percent and EMC margins are very good.
We’ve got huge investments with VCE VMWare, Cisco, EMC. [We have] a huge investment in Microsoft. We’ve hired 20 people in the last year and put more emphasis on services and paying more commission on services.
President, Network Management Group
I’ve survived as a computer reseller in this industry for almost 30 years by applying basis business management skills to our everyday business. Don’t let lawyers, CPA’s, bankers or industry pundits run your business. Seek a balance and don’t move too far towards the shiny ball they put in front of you each couple of years. If I’d listened to the industry experts who told me to stop selling product I’d have been out of business long ago. Finding a niche in your market and being willing to become an expert in a ‘vertizontal,’ if you will, has also helped.
Becoming part of industry peer-to-peer groups like [True Profit Group] and Heartland Tech Groups] also allowed me to share and receive best practices information with other resellers. I think having a go-giver attitude towards my customers, associates, and other resellers has paid huge dividends over the years.
Vice President and CTO, Jack Henry & Associates
I think there are a few things that are critical to our continued success through the various economic cycles. First and foremost, we attempt to take the long-term approach to challenges or opportunities. We cannot or should not overreact to economic impacts. They could be short term or long term, you normally never know how long these things will last. During these cycles we, like everyone else, have to make prudent business decisions that consider the cycle we are in but if we are only focused on the short term, we will never reach our long-term goals.
We have focused on staying true to our strategic vision and use that as our compass. We do believe that our approach to fully integrated solutions and creating efficiencies for our customers along with our unyielding commitment to customer service continue to set us apart in the industry. We focus on our customers and our employees. By doing that, we believe our shareholders will be rewarded.
President, Connecting Point of Greeley
Founded: 1982, purchased by Warner in 1985
Connecting Point has survived and flourished for over 25 years because we have embraced the changes in our industry and have not been afraid to change our business model. We have changed our business model three times and are really in the midst of a fourth change.
We began as a traditional computer reseller [selling hardware, software and supplies in a retail environment. In the late 1980s, [margin] pressure from the large format retailers drove us to change our model to a business-to-business company that focused on network integration. This model served us very well through the ‘90s, but we were too much at the mercy of the market, the economy and client purchasing and refresh cycles. In 2003, we made a quantum leap into the managed service business model. The goal was to create a recurring revenue model and provide truly proactive services instead of the more reactive and project-based services that we had been providing up to that time. This resulted in increased profitability and much more predictable results for our company. It also has created more client intimacy than we have ever experienced.
From the managed service platform the next logical evolution of the business is to move to a cloud computing model. We are focusing on providing our clients infrastructure as a service with a hardware as a service option for lessening the capital outlays that have been the norm in the past. This model builds off of and enhances our managed service offering.
Chairman and CEO, Lilien LLC
One of the key things is we stick to our core business and try to do that really well. When you have challenging times, it’s harder to make new investments in new business areas. When things get tough, you go to your core and excel at it. Our core is enterprise servers and storage and the services that surround them.
During this recession, it didn’t go away but it shrunk a little bit. [Industry wide] that business went down 10 percent, but there’s still a lot of business out there. It didn’t disappear. You just have to fight harder to make sure you keep it.
Going back to the dot-bomb [downturn], when that came along we’d just hired a bunch of people to expand the business in the network management field. We took a bigger hit then. We dropped 60 percent and we took our lumps. The thing we learned was to focus on the core business and that’s what we did this time around.
We didn’t do any pure layoffs this time. We just tried to cut costs. We made some changes out of efficiencies and processes than scale back and lay people off. We did take a top line revenue hit, but we still remained profitable. Businesses in the recession really need to look at efficiency and [ask], "Do you really need to be doing the things the way you’re doing?"
CEO, Melillo Consulting
I don't know if there’s any one secret to longevity. We’ve done a good job hiring quality people over the years. I truly believe that at the end of the day, we have a team of people better than competitors. That certainly helps.
We run a business. It’s not a mom and pop shop, but we put energy into treating employees right. We try to create that stickiness.
For 22 years, we’ve been successful. Not every quarter or every year, but by and large we’ve been successful. We’re aggressive but not overly aggressive so when the downturns hit it hurts us but it has not killed us. Each one of has produced four or five years of solid business on the way up. Each time [a downturn] comes, we brace ourselves and get through it and pick back up on the other side.
Fundamentally, it’s the same business as it was 22 years ago. We’re solutions-oriented, selling hardware, software and services. The solutions have changed dramatically. Your focus changes with that. Some of the products have become more standard, more commoditized, and you have to know that. When you’re selling big iron and it’s complex there’s a lot of margin in it and you can sell that one way. As you sell other pieces of the portfolio, it’s more transactionally oriented, but not as complex and you don’t want to spend the same amount of time on that sale.