The Perfect Storm


I have been on the road talking to vendors and VARs for the past few months, and I have one observation: You are getting slammed from all sides. Never in my career have I seen so much turmoil in economic markets coupled with radical changes in technologies. Both are forcing you to rethink your business models and the investments you need to make in your businesses. In many ways, it makes for the perfect storm.

Being squeezed on price and margin is nothing new, but this hyperfocus on ROI is going to continue for quite some time. And while
you expect it from clients, ROI seems to also be coming from the vendors as well. As they look at their investments and their own profit margins, I have heard similar messages: They are going to pare back the number of solution providers they have. Other vendors are going to focus on making investments in much fewer SPs, and only the ones that they believe are giving them a real return on their channel investments. What's more, some vendors have said they are going
to strip certification from VARs who don't make the proper investment in their technology. The bottom line: If you are carrying a certification and making a small transaction here and a small transaction there, you may not be able to market a vendor's certification in the future. As everyone is looking inward, like the customer, you need to prove your worth to the vendor.

What's more, there has never been more competition in the market, especially around IT infrastructure. At first glance, this may give you a little breathing room and choice in terms of what you offer to the customer. But this battle of the data center is having other repercussions, and VARs are stuck in the middle. Some aggressive vendors are pressuring their VARs to sell their complete solution. Unfortunately, the vendors are forgetting that the value-add of the solution provider is pulling together heterogeneous solutions. And they forget that users want choice.

This economic storm is more than a tempest in an IT teapot. VARs are struggling with rising health-care costs for their employees, and many feel that the stimulus package reached Wall Street but has yet to reach Main Street. And while we've seen an uptick in enterprise spending, SMB spending has still not taken hold. Furthermore, as states experience budget shortfalls, they, too, are trying to find potential revenue windfalls. One idea is to tax managed service providers. Traditionally, laws have stipulated that there are no taxes on services rendered by professionals, but many states
are looking at changing the law.

Finally, let's move to new business models. According to research from
Everything Channel's Institute for Partner Education & Development,
there is a real disconnect around cloud adoption. Customers are more open to adopt cloud services than VARs. Even though there is a lot of transition to models with recurring revenue such as managed services, the thinking around cloud is still nascent.

So even though there are challenges like never before, there are also opportunities with new models and new business problems to solve. The reason we are all in technology is the pace of change and the excitement that innovation brings to society. Change, yes. Boredom, no.

BACKTALK: Kelley Damore is VP, Editorial Director
for Everything Channel. You can reach her via e-mail at
kelley.damore@ec.ubm.com.