For these vendors, it's no longer an uphill battle to get noticed
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With the economy lagging, many solution providers say it makes sense to look at more vendors in a given technology product category as a means to reduce costs, make more margin and provide more choices to customers.
"The government space is already price-conscious anyway, but even more so now," said Nancy Hedrick, president and CEO of CSI Technology Outfitters, an Easley, S.C.-based solution provider.
CSI Technology Outfitters is a big Cisco Systems shop, but recently became certified in HP ProCurve networking products as well. The primary reason was to offer a lower-cost alternative to customers, Hedrick said.
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"The local [government] and K-12 space is very price-sensitive and they don't always need the full-blown features of the Cisco product set. Typically, if you stack them side by side, there are differences [in features], but for our clients, price is important," she said.
Hedrick is hardly alone. CRN's 2009 Channel Contenders survey shows that solution providers consider dozens of alternatives in 14 product categories, and that they know what they want. Nearly two-thirds of all respondents said their vendor evaluation process takes less three months before adding an alternative or emerging vendor to their product portfolio. One-third of the respondents said the process takes less than one month.
Solution providers also rely on a wide variety of ways to gather information regarding alternative vendors. Trade publications, including CRN and CRNTech, was the most cited way to evaluate products, chosen by 58 percent of the solution-provider respondents. Other top information-gathering avenues included word of mouth (53 percent), search engines (52 percent), distributors (51 percent), electronic newsletters (49 percent), third-party Web sites (46 percent), trade shows (44 percent) and Netseminars (40 percent).
Joe Quaglia, Tech Data Corp.'s senior vice president of U.S. marketing, said economic pressures are forcing VARs to look for lower costs and better margins, which means more attention paid to contender vendors.
"As margins erode, there is more competition. Resellers can make more money and not pass the Cadillac pricing to their customers," Quaglia said. "Those forces are working together to make tier-two and tier-three [vendors] more valuable than they have ever been." As a result, Tech Data is looking at new vendors more than it has in the past, Quaglia said. "I work with our IT department. We have lots of companies trying to get access to our IT folks. I don't put everyone in front of IT, but where the market is corresponding, we're looking at more products," he said.
In a growth market, it's easier for companies like Cisco Systems Inc., San Jose,Calif., and Hewlett-Packard Co., PaloAlto, Calif., to maintain robust market share, but when the economy turns sour, those companies face more challenges hanging on to business, added Quaglia.
"In good times, those [leading] vendors are able to get those solutions procured. Now, the ROI timeline is much shorter. CFOs are not approving anything with over a six- to 12-month ROI. In many cases,VARs have to go with a smaller-tier vendor," he said. "The cost savings along on some of these [contender products] forces [market leaders] to come to the table with better value-to-price ratio."
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