When we last fielded our State of Technology: Peripherals survey a year ago, the theme that emerged most prominently from a range of solution provider responses was: "The box is out. The solution is in." Well, that notion wasn't just a cute catchphrase then, and it's certainly not now.

With continuing economic downturn expected to keep budgets squeezed and morale skeptical in 2009, it's the box-pushers who sink and the true solution providers who swim -- and thrive. How well can you deliver?

"Delivering product efficiently to save costs, that's what makes the deal," stressed Curtiz Gangi, director of IT channel sales at Eaton Corp. "If you've mismanaged your business, you've mismanaged your business. That's a cold, hard way to look at it, maybe, but it's the truth."

The economy was certainly on solution providers' minds this year, with 78 percent of those surveyed in the 2009 State of Technology: Peripherals survey picking economic downturn as one of their top three inhibitors to growth, alongside aggressive pricing/commoditization (87 percent) and competition (72 percent).

More than 60 percent of the 774 North American solution providers surveyed said that in the past year the way they sell peripherals had changed significantly. Thirty percent said they sold few peripherals direct and referred many customers to DMRs; 35 percent said they made recommendations and let customers fulfill peripherals sales through their own sources. Another 22 percent said they have more leasing options available for peripherals than they did a year ago.

The game is changing. And yet, more than 68 percent of solution providers surveyed indicated that vendor direct-sales organizations were still their greatest source of competition for peripherals, followed by many of those same business DMRs like CDW Corp., PC Connection Inc. and Insight (58 percent), e-tailers such as Tiger Direct, Newegg.com and Amazon.com (54 percent) and brick-and-mortar retail outlets like Best Buy (45 percent).

New advances in everything from 24-inch, single-panel desktop LCDs to rack enclosures are making products in each of these areas more sophisticated and, in many cases, more affordable. They're part of a whole much greater than the sum of its parts: a total solution. Understanding how that solution comes together could be the difference between losing a sale by hawking hardware, and winning the sale by telling the story.

"It's difficult to get rich selling racks," said Philip C. Smith, vice president of sales

for Datec Inc., a Seattle-based solution provider. "But if you understand racks and are willing to tell a story about them, then they become a reasonably important part of a cost-effective solution."

Solution providers said the ability to upsell (59 percent) was the greatest growth opportunity for peripherals. "Small" is also considerably big for peripherals solution providers: 63 percent of those surveyed said it's in small businesses of between 20 and 99 employees where peripherals innovation counts most, followed by lower midsize businesses (100-499 employees) and very small businesses (5-19 employees).

In lean times especially, a vendor's channel program has to inspire confidence.

"It's about innovating," said Marc Wolfe, CEO of ProActive, a solution provider based in Oakland, N.J. "It's not just about improvement for improvement's sake. The larger a company gets, the easier it can be to become disconnected with the channel. ... They deal with only the largest and more enterprise-specific accounts. We deal with the enterprise, too, but we try to deal with solutions as if they're going to a small division of that enterprise. I'd like more of our [vendor] partners to appreciate that."

Understanding the channel, VARs said, means understanding what solution providers need to make those sales.

"They're in dire need of marketing support," said Jackie Paralis, senior marketing manager of channel development and programs at Mount Laurel, N.J.-based Oki Data Americas. "They tell us, 'Give me leads.' Customer retention is on their minds. ... Solution providers' biggest fear is customer retention, not necessarily new customers."

Although the list of major vendors with hands in peripherals casts a wide net over the technology industry as a whole, there's but a handful that solution providers have consistently told VARBusiness are the best around when it comes to offerings, channel support and understanding of how peripherals are sold through the channel effectively.

One of those, solution providers have been telling us for a while now, is APC.

APC and Rob McKernan, president of the vendor's North America business, bested the competition among preferred vendors in both the power protection/management and racks/rack accessories categories of the survey. Those high marks continued a streak of strong showings for APC in Everything Channel research throughout the past 12 months; not only did the West Kingston, R.I.-based vendor do well in the 2008 Channel Champions and 2008 Channel Affinity index, but McKernan was also named to the list of the 2008 Top 25 Channel Executives.

"If you don't clearly message your program's value ... you don't clearly communicate how best to engage with your company," McKernan said when asked what he does to keep APC's channel happy. "No one does it perfectly, and if you don't do it consistently in multiple forms ... you get frustration. We have a lot of partners because you can work with APC in many different ways."

The following pages explore peripherals trends in six categories, with technological advancements, sales habits, preferred vendors and expected revenue streams all going under our microscope. Onward.

DISPLAYS

This year, solution providers said that in the display category, standard, single-panel desktop LCDs (19 inches to 24 inches) is the product most likely to see sales increases and offer the best profit opportunities in the next 12 months. Sales increases were also predicted for consumer-grade LCD TVs (32 inches or larger), despite recent research from the NPD Group's DisplaySearch arm suggesting overall LCD TV revenue would drop in 2009 year over year for the first time since LCD TVs were introduced in 2000.

The best opportunity to attach services, solution providers said, is in commercial-grade digital-signage displays 32 inches or greater.

Digital signage, on the whole, is going to get ever more sophisticated, from airports telling travelers realtime flight information and allowing them to order cabs based on revised scheduling, to advanced self-checkout counters at grocery stores. Education, health care and even houses of worship are also to keep an eye on--quite literally--signage opportunities, noted Ashley Flaska, VP of Marketing at NEC Display Solutions.

"It takes a lot of commitment to get into the signage industry," said Andy Teoh, product manager for digital signage at DT Research, San Jose, Calif. "You need to have the skill sets in networking and skill sets in audio/visual. LCD prices will continue to fall and be affordable. As long as you have a good VAR program in the space, you'll be strong when [the economy] starts to look up."

"Good program" means a commitment to innovation but also functionality, said ProActive's Wolfe, who works with a number of displays vendors but said he prefers NEC because of its ability to manage channel conflict and the breadth of its offerings.

As in last year's State of Technology: Peripherals survey, solution providers were less likely to recommend or sell brands that are considered nonchannel or nonchannel-friendly players. ViewSonic Corp. once again ruled the roost in terms of the brands VARs were extremely willing to sell or recommend, followed closely by Samsung Electronics, Sony Corp., Hewlett-Packard Co. and Toshiba Corp.

"We're touching so many different verticals right now and we look to expand and strengthen each one," said Jeff Volpe, ViewSonic's vice president and general manager, North America. "Virtualization and 3-D are just two of the things enhancing new market opportunities. And in digital signage, everything from hospitality to public transportation and small retail spaces represents something where we can play a role."

Dell Inc.'s channel strength in displays and monitors is still a matter of opinion. Thirty-seven percent of respondents said they were not at all willing to recommend Dell displays, as opposed to 7 percent not at all willing to recommend ViewSonic. But Dell was right there at 30 percent alongside ViewSonic (30 percent), HP (29 percent) and Samsung (29 percent) in terms of the brands solution providers said they sold most often. Forty-three percent of solution providers queried said they saw the Dell brand as the least profitable opportunity among major display/monitor vendors, followed by Sony, Acer Inc. and HP.

PRINTERS/SCANNERS

For every assurance that the paperless office has arrived, research houses like Gartner suggest that $96 billion of the world print market spend is still going to office document printing. And while you'd find nary an IT executive who'd disagree that print solutions, like all peripherals, can't just be boxes and must be part of overall solutions, that idea of the solution could mean anything from smart multifunction products (MFPs) to document management.

Document management itself is the area surveyed solution providers see, definitively, as the greatest opportunity in print and imaging to attach services. The technology continues to attract serious VAR attention, as well as attention from HP, Oki Data Americas and Xerox Corp. to Laserfiche, eCopy and newcomers like GoScan. The paperless office? Not such a myth after all.

"The No. 1 thing that these guys and end users are looking for is how can they save money in their operation," said Oki Data's Paralis. "People are going to shop around a lot and when they do spend money, they're going to spend it wisely."

"People look at their print and imaging fleets as the last unaudited costs in IT," said Tom Codd, director of marketing, worldwide sales and services, Imaging and Printing, at HP. "But you have a new breed of workers coming in for whom printing isn't second nature. We have to look at more energy-efficient devices."

A few things VARs can agree on: Price, functionality and margin opportunity remain the most important considerations when choosing printer/scanner products, and yes, MFPs, more than any other products in the space, are claiming the limelight. Solution providers see some of the greatest sales increases and the best profit opportunities over the next 12 months in this category in networked multifunction printers and networked color printers.

"Three years ago, it was the move from black-and-white to color. Now it's the move to MFPs," said Vincent DiSpigno, co-owner of Webistix, a Holbrook, N.Y.-based solution provider. Xerox and Ricoh remain his preferred vendors.

"With Ricoh, it's the value product line, and Xerox, the high-end quality product line," DiSpigno said. "I look at others from time to time and they promise this and that, but we're an Apple specialist, and both play well with Macs."

Both Xerox and Ricoh ranked in the top four preferred vendors when solution providers were polled as to how willing they were to sell or recommend specific brands. Oki Data, which in 2008 waved goodbye to retail sales, is also up there. But it's still a matter of HP dominance: Seventy-four percent of VARs polled described themselves as "extremely willing" to sell HP printers--nearly twice the number of "extremely" votes for any other vendor. HP was also tops in the brands VARs said offered the best profit opportunity, at 56 percent vs. Xerox (19 percent) and third-place Canon (18 percent).

It was Xerox that outscored HP in the printing category in Everything Channel's Channel Affinity index in November--measuring what VARs see as important to channel business.

"[Xerox is] definitely putting resources into the channel and providing us with the tools we need," said Kevin Morse, senior partner at Deerfield Beach, Fla.-based solution provider Questing House Technology Partners. "They allow us to open up a lot of opportunities." As for Xerox's ability to siphon some of HP's print market share in 2009, "It wouldn't surprise me a bit," Morse said. "In fact, I expect it."

"HP is our biggest, but that has nothing to do with whether we want that or not--the name sells itself," said Keith Donnagin, president of MCO Computer Supplies, a Glen Burnie, Md.-based solution provider. "Xerox treats us right, and they treat their customers right. Everybody's selling HP, so they don't need to do anything special for the small guys out there."

"We do have an opportunity to leverage this channel to grow market share, particularly in SMB," said Gary Gillam, Xerox's vice president of North American channel operations. "We're encouraged that a lot of these partners are saying we've got to make the move now--the economy seems to be driving a sense of urgency to embrace and transform business."

For its part, Gartner's print analyst team sees a lot of consolidation in the segment for 2009 and beyond. At Everything Channel's 2008 Print and Imaging Summit in Bonita Springs, Fla., in December, Gartner research director Don Dixon suggested Canon had the most to gain by M&A, and that its channels were being "attacked" by its competitors.

"I've advocated some kind of [agreement] between Canon and HP, modeled off the Fuji-Xerox venture. They have complementary product sets," Dixon said at the time.

One to keep an eye on, Gartner analysts agreed, is Lexmark, which cut ties with some of its channel leadership in 2008.

"We need to ensure our organizational structure is aligned with our business goals. In today's economic environment, we need to be vigilant in optimizing operations," said Marty Canning, Lexmark vice president and president of its Printing Solutions and Services Division, in a statement to VARBusiness. "In regards to our focus on the channel, we believe that these changes protect our ability to cover and service existing and potential customers, while at the same time improve our efficiency."

"There's going to be another major acquisition in the next couple of years, unquestionably," Dixon said. "I've advocated for Lexmark to be acquired. They're over a barrel, if you will, and in a precarious position."

It was Ricoh that made the big M&A splash in the second half of 2008, acquiring Ikon Office Solutions Inc. in August. In an interview, Ricoh executives said its channel commitment is as strong as ever, despite the fact that recently consolidating its printer divisions meant the forced exit of former senior vice president and channel chief Ann Moser--one of the most visible channel veterans in the printing and imaging space.

"Our direction never changed even if there were organizational changes," said Matt Sakauchi, head of the Office Printer Business Group and Ricoh's de facto channel chief. "We're going to reinforce our channel support this year. Nothing has been changed."

POWER PROTECTION AND MANAGEMENT

Solution providers, the time is now to build yourself a full-fledged power practice. Elements of the data center that were formerly the province of maintenance--everything from environmental monitoring and rack management--are creating some of the most untapped opportunities out there for VARs who get power.

"Things like virtualization and server consolidation have created business and IT trends that all have a power and cooling play for solution providers--and that's pretty dramatic," said APC's McKernan. "Our solution providers are excited about that, but it also leads to their biggest request. They'll say, 'I'm selling a single-phase UPS or individual racks today and I'm getting asked for more sophisticated power and cooling devices and being asked more specific questions about how to maintain them. How do I take advantage of that opportunity?'"

The results of Everything Channel's 2009 State of the Market survey, released in December, hold that of all peripherals segments, uninterrupted power supplies (UPSes) would see the most increase in solution provider sales focus this year.

"We want to create a footprint and help resellers truly build a power practice," suggested Eaton's Gangi. "Power practices are something that have to do with education, not only the products but the services that are associated with them. Power requirements are going to continue to get much more complicated, and that's not something the reseller community has focused on."

In the survey, roughly half of the solution providers picked single-phase UPS as having the greatest profit potential in the next 12 months, and the other half picked it as having the least. (Regardless, the average selling price has declined, they said.)

From a vendor perspective, most of the channel discussion on power management and protection starts with APC, which bested the competition in terms of what brands surveyed VARs said they were most willing to recommend. APC was also tops among solution providers in terms of who offers the best profit opportunity, followed by Tripp Lite Corp., HP, Liebert and IBM Corp.

"APC is the big name out there," said MCO's Donnagin. "We offer a number of brands but everyone knows APC's name. The dealings I've had have been good."

"Certainly, APC is our preferred partner in that space," said Datec's Smith. "I like them fine, but it's not like they're rife with competition. Sometimes they're a mess from a channel standpoint--a lot of it is them not always understanding what the channel does or how they should be involved--but they don't go out of the way to be unfair or anything."

Environmental monitoring--temperature and humidity--is the area solution providers suggested had the greatest level of opportunity to attach services. As the data center gets more sophisticated, its power requirements evolve apace.

"The partners that have been successful are the ones that are either developing their own in-house electrical or mechanical expertise, or collaborating with other types of partners who are electrical and mechanical type shops anyway," McKernan said. "Some of the truly special solution providers out there are really getting paid to do more of the front-end design work as well. A customer says to them, 'Help me design my data center as it is today, and show me how I go about future planning.' That's how you take it from a box sale into much more of a solution play."

RACKS AND RACK ACCESSORIES

In previous installments of the State of Technology: Peripherals survey, VARBusiness has included racks and rack accessories within broader power- or data center-related categories. But it's become impossible to ignore the opportunities racks and rack accessories themselves present for ahead-of-the-curve solution providers; as with power management and protection, there's definitely what McKernan calls "a play" around racks.

"IT resellers still have a very small percentage of business for racks inside the data center," McKernan said. "But it becomes a natural extension as they sell more servers and networking equipment--the ability of solution providers to stack product into a rack, for example. There are a lot of types of solution service opportunities for resellers to start to play in."

"Trying to avoid a $10 million investment in a data center is the challenge [customers] are facing," said John Gromala, director of product marketing for industry standard servers at HP. "Anything they can do to improve efficiency of the data center helps them meet their needs. Plus, every watt that's put into the data center for power is a watt that needs to get cooled as well."

According to survey results, solution providers see rack enclosures and rack power distribution units (PDUs) as, by far, the greatest profit opportunities in the next 12 months in the category, while keyboard drawers represent the least profit opportunity. Rack enclosures, cable management and rack PDUs represent the best opportunity for solution providers to attach services, and the most highly recommended brands for rack and rack accessories include APC, HP and Belkin International Inc.

"The whole monitoring thing is going to be a lot more important," Smith said. "The macroeconomy isn't going to help anybody. But APC excels there -- their racks are clearly the standard."

Energy and manageability are the two ballasts of the data center. Improving efficiency in those areas frees up budget dollars.

"This is a new area for resellers -- facilities and IT have always been somewhat separate," said Chris Samper, worldwide manager, rack and power products at HP's ISS Global Business Unit. "But when they start looking at facilities expertise, they've created one-stop shopping. There's clearly a demand out there now that IT guys can get involved."

"Knowledge is power," Gromala added, "and knowledge of power makes the difference."

PROJECTORS

According to findings from Everything Channel's 2009 State of Technology: Peripherals survey, VARs who work on the projector side have reason to view the glass as half full--however shaky the macroeconomic climate.

The glimmer of optimism is due, in large part, to increasing sales of mobile projectors. The survey found that three times as many solution providers said it has become easier to sell mobile projectors than last year.

As with notebooks, the portability factor is a strong selling point. VARs have noted an uptick in demand in the SMB space as more and more traveling executives need to set up presentations at trade shows and meetings.

Ranjan DeCosta, CEO of OmniPro Systems, a San Francisco-based solution provider, said he is also seeing increasing demand for mobile projectors in the education sector, most notably in the K-12 vertical.

"Most classrooms do not have projectors," DeCosta said. "Teachers need to carry around presentations with them from class to class, which is easier with a mobile projector."

"This is really significant for VARs as educators are asking for them," ViewSonic's Volpe said. "VARs can capitalize on business that they might not have gotten before."

In the survey, solution providers listed ViewSonic as the projector vendor whose brand they would be most willing to sell or recommend, followed closely by InFocus, Sony, Toshiba and LG. The survey also found the top three brands that offer the best profit opportunity are the brands that sell the most often. InFocus took the top spot in that category.

On the flip side, Dell was named as the brand with the least profit opportunity; in fact, only 15 percent of solution providers surveyed said they sell Dell most often. HP, Sony, Panasonic and BenQ Corp. followed Dell, respectively.

Looking into the VAR crystal ball, those surveyed said they expect to see a 50 percent increase in mobile projector sales in the next 12 months, followed by a 32 percent increase in midsize projectors and a 17 percent gain in sales in large, fixed projectors.

DESKTOP EXTERNAL STORAGE

External desktop storage, including USB-connected and LAN-connected devices, remain a best-seller for solution providers, with nearly 45 percent of them selling or recommending the products, according to Everything Channel's 2009 State of Technology: Peripherals survey.

The storage capacity of the devices is the key factor for customers when choosing which model to purchase, followed by price, the solution providers said in the survey. Performance is a distant third, which reflects the fact that many, if not most, of these devices are used for secondary storage or backups.

The capacity variable also feeds into solution provider purchasing plans, as 63 percent of those surveyed expect 500-plus-GB external hard drive sales to increase in 2009, compared to 59 percent who chose LAN-connected storage devices and 53 percent who chose external hard drives of up to 500 GB in capacity.

But that is not surprising, as 64 percent of the solution providers said LAN-connected storage devices offered the highest profit opportunities in the category, followed by 500-plus-GB hard drives. Those devices also offer the best services opportunities for solution providers, although solution providers said in the survey that external desktop storage, in general, is not a great source of services business.

Also not surprising is the finding that USB flash drives, or "thumb drives," have the lowest profit potential for solution providers, especially since those devices are now often given away free-of-charge for promotional purposes.

Brian Lisse, owner of Madison Computer Works, a Madison, Wis.-based solution provider catering to small and midsize businesses, said that, for him, services is the only reason to sell external desktop storage devices.

"We don't make money selling hardware, period," Lisse said. "The real money is in setting it up and training customers, and offering support and other services."

One common service for Lisse is to get customers to move away from external hard drives for backups.

"We use USB external storage for customers for backups, but it's not so robust," he said. "If a customer has a couple of USB drives, why not get them to go with something like an Iomega Rev removable hard drive system?"

Computer Alley, an Ann Arbor, Mich.-based solution provider, gets around the poor margins of external desktop storage devices by custom-building them, said Tony Audas, director of purchasing for the company.

There are several advantages in building such devices, including the ability to offer a better warranty than name-brand vendors and making it easier to do field service on problem units, Audas said.

The shorter warranty of brand-name storage devices compared to the three-year or five-year warranty of bare drives is also why Computer Alley builds LAN-attached storage devices, Audas said.

"We like to put together a package," he said. "We lead with an Intel SS4200 chassis and add whatever drives customers want. We know that Intel will come through on the warranty."