Vertical Values

But the payoff often justifies such efforts. For example, Evan Leonard, president of Chips Computer Consulting of Lake Success, N.Y., says his company's ability to sell to its top vertical markets, such as real estate and insurance, was crucial during the economic downturn and helped Chips remain profitable.

Many VARs are adopting approaches similar to those outlined in "Find Your Niche" (page 56) and are studying target industries, retraining their sales forces and achieving new vendor certifications for technologies that match up well with those target industries, such as security, financial services and health care.

F.I.T. Communications of Tampa, Fla., for example, is taking a stronger focus on the health-care industry and has found demand for security solutions steadily increasing during the past year. "Business has been going very well this year so far, and demand is continuing to increase," says Jeffrey Pennett, president of F.I.T. Communications. "We're getting more and more interest from health care because of the industry's need for security."

Pennett says health-care companies big and small are under tremendous pressure regarding new compliance regulations, such as HIPAA, which concerns patient records and privacy. To help get his foot in the door, Pennett says he and his staff offer clients a free virus scan and security report at the first meeting, which he says usually translates into business contracts.

Selling into a vertical can be challenging even after you've targeted the market and made lengthy preparations. Tyler Dikman, president of Cooltronics, also based in Tampa, built a vertical-market program last year around higher education, dubbed Cooltronics On Campus. The solution provider took its PC business, which is based on Dell desktops and notebooks, to college campuses and set up computer-store booths at the schools. "College kids usually aren't going to spend a dime on their computers, so we targeted the parents during things like orientation and welcome weekends," Dikman says.

Cooltronics sold about $100,000 worth of PCs and accessories last semester, but the program didn't do as well as Dikman hoped: Dell didn't support the program because the vendor said it violated Cooltronics' reseller contract, which prohibited sales to higher-education clients, and many schools shunned Cooltronics' booths because the solution provider was competing with campus bookstores, most of which have exclusive agreements with PC vendors. Nevertheless, Dikman says he'll continue his program. "We've made some improvements," he says, "and if we can market better to parents, we think we can hit it."

Honing in on specific vertical markets can also lead to big changes. Some VARs have altered their product lines and solutions approach in pursuit of more lucrative customer segments. F.I.T. Communications, for example, has traditionally done more business in the SMB market. As a result, Pennett signed a new partnership with SecurePoint, a security vendor based in Denmark that specializes in lower-cost firewall, VPN and virus-scan software and appliances. Pennett says he plans to drop one of his larger security vendor partners in favor of SecurePoint because the company's products are a better match for his market.

And what are the vendors looking for in channel partners? Many up-and-coming ISVs, networking companies and computer makers are specifically targeting resellers with a distinct proficiency in a handful of, or even just one or two, vertical markets.

For example, eSoft, a security vendor based in Broomfield, Colo., recently introduced a flagship appliance product for secure content management called InstaGate SCM. Reid Hislop, vice president of marketing at eSoft, says the company is now honing in on channel partners with backgrounds in financial services and health care. As a result, eSoft signed on Sysix Consulting of Oak Brook, Ill., which fit the profile. "ESoft knows security, and they've got a good product," says Bill Yassinger, vice president and general managing director of Sysix. "We think the relationship is going to be great for business."