Mobile Technology

According to the 2007 CRN Profitability Study, solution providers have seen an average top-line sales increase of 15.6 percent in the past 12 months and an average gross margin of 15.4 percent. Close to three-quarters of solution providers report that mobile technology is of at least moderate importance to their customers, up from 69 percent in 2006.

Why the upswing? "People are talking about it now. Health care and banks and all those customers that weren't talking about it before because everybody was worried about security, everyone seems to be comfortable with security now," said John Gunn, president of ISG Technology, a Salina, Kan.-based solution provider with nine locations in three states. "It was something new for everybody to get used to."

Now that customers are willing, however, it's the size of the deal that determines whether a mobile technology deployment is profitable, Gunn said. "Somebody wanting three access points is pretty tough. You just spend an enormous amount of time making it work, and it's hard to make any money doing that."

The average size for mobile deals in the 2007 CRN Profitability Study was $11,100, down slightly from the previous year. The sales cycle, however, also shrank to two months, down from three months.

Dave Gilden, partner and COO at Acuity Solutions, Tampa, Fla., agrees that the size of the deal determines how profitable it will be for the solution provider. "[Margins] really vary depending on the size of the opportunity. Enterprise and government deals can get quite large, but this problem extends across most business segments. Margins typically fall in line with the rest of our product portfolio at about 12 [percent] to 18 percent," he said. "Certain segments have become commoditized and margins are thin in those. Typically when services are involved, we see good margin."

Next: Mobile technology profitability, by the numbers

Mobile security is the hottest revenue generator for Acuity, he said.

For Steve Beauregard, president of Regard Solutions, a solution provider in Santa Monica, Calif., mobile devices are no longer profit centers, but other opportunities have arisen around customizing them.

"The device business was a very booming business for a number of years and we did quite well with that, but pretty much anything meaningful they've taken direct. The most opportunity is in emerging software development companies, getting in early with them before their products start to go with distribution," Beauregard said. "A lot of those guys you can get margins of up to 40 [percent] or 50 percent because they're anxious to get their products out there."

On the downside, tacking software on to mobility solutions isn't always easy. "You really have to know the technology to go in and make those sales," he said. CRM and dispatch software applications are popular products in that realm, and deals average $50,000 when software is involved, Beauregard said.

"We are actually doing a good bit of custom application development as well, but we are starting to see some situations with customers where there are off-the-shelf packages and we can make good margins representing those products," he said.

At Zumasys, a solution provider in Lake Forest, Calif., mobility deals range between $20,000 and $30,000, and the company grew more than 30 percent last year due in part to its thriving mobility business, said Zumasys President Paul Giobbi.

The company is targeting 50 percent growth for 2007, and reaching into new vertical markets where mobile technologies have potential is part of its strategy.

"We're in the middle of a three-year plan and we're really trying to drive our message into vertical markets where mobility is popular and where other people aren't going— like agriculture, construction, financial services and nonprofit. Most people, when they think of mobility, they go after medical or people with a sales team," Giobbi said. "Just because they're nonprofit doesn't mean they don't have a technology budget.'

To help spur profitability, Zumasys has begun ranking its vendors based on attach rate and profitability.

"That tells us where to spend our energy. For us this year it's people like Symbol and people like [Hewlett-Packard]," Giobbi said.