How solution providers are seeking and selecting alternative vendors
Everyone can name the market leaders in different technology segments. Hewlett-Packard has overtaken Dell in PCs and is the undisputed market-share leader in printers. Microsoft holds the title for operating systems. Symantec stands at the top of the hill for antivirus software. Cisco Systems is king in data and voice networking. And EMC ranks ahead of all others in storage hardware.
Alternative vendors are basically everyone else. An alternative vendor is a nonmarket-leading vendor (by share), an innovator and start-up/entrepreneur. Alternatives are characteristically more nimble than their larger counterparts, bringing solution providers innovative technologies and channel programs that pay higher dividends. Alternatives, however, typically don't have the brand presence, market reach or capacity to threaten market-leading vendors in most short-term measures.
Some will claim that you always want to go with a market leader, but many solution providers are finding success with alternative brands and technologies. Alternatives provide them with products--hardware and software--that complement the technologies offered by market-share leaders. And, in many cases, alternatives give solution providers products that offer higher margins and better sales opportunities.
VARBusiness, in its second annual Alternatives Study, delved deeper into commoditized and leading channel technologies to see how solution providers perceive alternative vendors. Specifically, we excluded the vendors we felt were the leaders in both market share and channel programs. We then asked solution providers which vendors they consider alternatives in 10 key technologies: data networking, servers, wireless networking, security software, security hardware, storage, voice networking, laptops, displays and printers. The result is this special report on the 100 alternative vendors that solution providers need to know.
NEXT: Macro trends.
We'll begin with some of the macro trends revealed by the survey--the motivations VARs have and challenges they face in working with alternative vendors.
Across the board, pricing opportunity plays a big role in solution providers' consideration of an alternative vendor. Market leaders tend to be more rigid in their pricing, setting standards and requirements for how much solution providers can resell their products. Solution providers also said alternatives provide better margin opportunities.
On the other hand, solution providers generally ranked service opportunities among their lowest considerations. This comes as a surprise, given the relatively higher margins they earn on services sold in conjunction with hardware and software packages. This disparity could reflect that some solution providers are still trying to squeeze margins out of traditional hardware and software products.
Other considerations for adopting an alternative--and there's no surprise here--are gaining access to innovative technologies and beefing up product portfolios. Some market leaders have built their success on being the best in a key technology or with a specific product, but fail to innovate to cover all the niches in their technology set. Alternative vendors often gain a foothold by filling the gaps left by larger counterparts.
Product performance and capabilities varied in importance in the 10 different technology categories surveyed. One possible explanation is that solution providers will seek a vendor that doesn't have all the capabilities and high performance of a market leader because their clients can't afford top-line technology or don't need all of its capability. Oftentimes, market leaders are disrupted by alternative brands because the alternative products exceed the market's needs in both capabilities and price. Alternatives give solution providers a choice in right-sizing their solutions.
Who searches for alternatives? By and large, it's executives (35 percent) and technical managers (33 percent), followed by sales and marketing personnel (22 percent).
Solution providers are seemingly always on the prowl for an alternative vendor that's going to bring value to their business. Nearly half of solution providers surveyed said they're looking for alternatives on a daily (9 percent), weekly (14 percent) or monthly (20 percent) basis. A nearly equal number said they'll seek an alternative on an "as needed" basis. While "as needed" may sound ambiguous, it shows that solution providers will gravitate toward an alternative when opportunities present themselves.
NEXT: Survey methodology.
VARBusiness designed the 2007 Alternatives and Emerging Vendors/Products research survey instrument. The survey was then conducted on the Web in December (December 6 to December 15, 2006 using Insight Express, an online Market Research firm. VARBusiness partnered with Answers Research, a Solana Beach, Calif.-based business intelligence and market research firm, to review the questionnaire, process the data and analyze the findings.
The respondents to this survey are IT solution providers at the executive, corporate and technical management levels within the channel community.
Survey participants were obtained from the CMP Channel Group circulation database of channel firms. A total of 281 respondents completed this survey, yielding a margin of error +/- 5.8 percent at a 95 percent confidence interval.