Beyond PCs

More survey respondents said they are selling networking infrastructure than any other technology area, including the grouping of desktops/notebooks and entry-level servers.

For many VARs, the network clearly has replaced the PC as the core of a solution.

Nearly two-thirds (63.7 percent) of solution providers sourcing through broadline distribution said they are selling networking infrastructure. In comparison, 58.9 percent of respondents sell desktops/notebooks and entry-level servers and 52.1 percent sell client/desktop security.

"That's exactly what we're seeing and what you'd expect to see," said Bob O'Malley, senior vice president of marketing at Tech Data, who was last week named CEO of vendor InFocus (see page 12).

"This industry was built on the PC and that's how, for most of the last 20 years, growth was fueled. Now, all these devices need to communicate and the Internet backbone has the capability to do that. I call it Metcalfe's Law overruns Moore's Law," he added. "[Robert] Metcalfe, a founder of 3Com, said the value of a network is proportional to the [square of the number] of points connected. That places a big demand on transmission of data. As we layer VoIP and video conferencing on top of traditional backbone and using IP as a protocol, you're going to create a lot more demand."

Among VARs sourcing from specialty distributors, 52.7 percent of respondents said they're selling networking infrastructure. That was followed by desktops/notebooks and entry-level servers (47.3 percent), client/desktop security (46.2 percent) and storage management (40 percent).

More VARs are selling networking because the technology is pervasive in every other IT area, said Mike Baur, CEO of ScanSource, a Greenville, S.C.-based distributor. "We found whether it's new physical security, IP video, a compelling story in the security space, VoIP in the communications space, everyone has had to become, at distribution level, more network-savvy. I don't know of any reseller not selling networking as part of the solution."

Among VARs purchasing through alternative sources such as CDW, eBay and Best Buy, networking infrastructure, at 56.4 percent, finished behind systems, at 60.5 percent.

Avnet's networking and security solutions practice is growing at 25 percent, the highest growth of its six solutions areas, said Fred Cuen, president of Tempe, Ariz.-based Avnet Technology Solutions, Americas. "The network is critically important," Cuen said. "We try to bring the best technologies in the fastest growing markets and marry those two together to provide the bull's-eye for our partners to center on."

Looking forward, VoIP will be the area of most investment in the next 12 months for VARs sourcing from broadline distributors (26.1 percent) and specialty distributors (26.2 percent). Networking infrastructure was second for each group. VARs buying from alternative distribution selected networking infrastructure (29.8 percent) as their biggest investment plan.

Keith Priester, IT manager at Noodle Technology, an Oswego, Ill.-based solution provider, thinks VoIP will become more important, but many systems still have too many quirks today. "It's hard to sell sometimes because the technology still struggles a little ... I still think a lot of the companies I support rely too heavily on the phone to make the change [to VoIP] yet," he said.

"I have one [customer] that went [with VoIP] and loves it and wouldn't change from it, but this is an office that is kind of technical. They're technical enough so that if they have issues they'll call the vendor directly or they'll reboot the device," he said. The customer, a brokerage firm, was able to reduce its phone bills from well over $1,000 a month to a flat $500 monthly fee and has had no complaints about quality from its customers, Priester said.

Robert Nishida, president of Blu Ray Enterprises, a Woodland Hills, Calif.-based solution provider that focuses on digital signage, said a lot of his customers don't even worry about PCs anymore. "They want the Cisco, VoIP, Enterasys. I think a lot of these [solution providers] are giving up their desktops/notebooks business because they can't make margin on it anywhere. Where are they making money? Doing deployment on the networks, installing switches and VoIP solutions."

Larry Rine, CEO of Intersect IT Solutions, a Chicago-based solution provider that has focused more on mobility solutions in the last 12 months, said the issue for his company is where they can add the right value. "We discovered that [mobility solutions was] where we could get traction," he said.

"We are very tightly focused on that. We're trying to support remote workers. The core network and its infrastructure and the security are significant pieces to that," Rine said. "We're not out trying to peddle notebooks. We may install some, [but only] to drive what we're doing."

Frederick Johnson, president and CIO of Ross-Tek, a Cleveland-based solution provider, said a lot of VARs are selling networking infrastructure solutions because end users need to upgrade their networks. "Particularly, small and midmarket companies have been slow to do those technology revamps every three or four years. As a result, people are caught behind the eight ball to address their infrastructure needs: The firewalls and VoIP, and getting new servers, cabling—all that was not a priority during the times when they were counting pennies," Johnson said.

For example, Ross-Tek had one client, a $20 million company, that budgeted only $130,000 for IT last year.

"Now you see a little bit of profit happening, and these things that could become a detriment to maintaining profitability need to be addressed. IT consultants are pressing small business management, saying, 'We've held off the last three or four years, you can't hold off another year. We've run out of Band-Aids,'" he said.

"JENNIFER LAWINSKI contributed to this article.