What Is Your State of Mind?
I don't lead a dull life, but I always anxiously await the results of the State of the Market because it's such a treasure trove of trusted information that can help solution providers make critical decisions about their businesses or gauge the health of their organizations. For instance, you can discover if you're out of step in terms of revenue growth or the mix of revenue you derive from professional services, or if you are missing out on technology that can lure new customers. Use the study like car manufacturers leverage the 130-point certified preowned inspection because you can measure every inch of your organization against your peers or organizations you envy.
So, just what were the most important findings from the study? Without boring you with the stats, let's start with the fact that nearly one-third of the VARs we surveyed expect sales to grow at least 15 percent next year--far outstripping the industry averages. That number demonstrates the VAR community's continued focus on growth.
If you're working for the man, expect him to be even more demanding in the coming year because most VARs say their growth will come because management will spend more time focusing on new opportunities and growth avenues. What I really found amazing was that a big percentage of a VAR's sales came from products or services that were not part of their offering just two years ago. And if you want to get inside their heads today, VARs are studying the following technologies to help grow their businesses in the coming year: blade servers and storage on the hardware side; virtualization and Web services on the software side; and business continuity and voice networking on the infrastructure side. If you line up those trends against some of the real action in the channel, you get a better picture of what's going on and why.
At our XChange Tech Innovator conference, IBM took HP head-on in a battle of the blades just as VMware launched a massive SMB and channel initiative. Less than a week later, Microsoft made its biggest product launch of the year in the unified communications space. The point here is if you're not talking to vendors in those key product and tech areas, then you should pack your money bags like Alex Rodriguez did and scamper out of town because there just isn't much of a future for you. Based on statements by several hundred solution providers, those new technologies are helping them break into new accounts as they compete and expand with their customer bases. The average length of the VAR-customer marriage eased downward year-over-year while the number of active customers soared, especially in the SMB and midmarket space. That translates into some 250 customers for a VAR with revenue between $1 million and $5 million and nearly double that for the big guns.
Before I'm accused of looking through rose-colored glasses, let me tell you that the average solution provider does have his challenges. Most VARs today say their services are under a great deal of price pressure, and when you consider that nearly 50 percent of a VAR's revenue comes from services, that's not a good sign. It clearly signals that today's solution providers must become more specialized and move up the food chain or their future could be in jeopardy.
You'll see and hear a great deal more about the VARBusiness 2008 State of the Market survey in the coming weeks, but let me know if you agree with some of these key findings.
Robert C. DeMarzo ([email protected]) is vice president/editorial director of the CMP Channel magazines.