VARs Open To Taking Measured Risks

Risk-taking isn't typically very high on a VAR's to-do list. In VARBusiness' first annual 2006 Alternatives Survey, the results of which will be published in the Feb. 6 issue of VARBusiness, those surveyed expressed a willingness to take guarded risks with new technologies--only if there were logical reasons to do so.

The survey asked more than 315 solution providers of all sizes how they view the market for alternative vendors and how willing or wishful they are to commit to someone other than a category's household names.

Not surprisingly, midmarket VARs proved to be the most adventurous; 21 percent of them said they are "very willing" to take risks, compared to 18 percent of smaller VARs and 15 percent of larger ones. It makes sense for midsize solution providers to stick their necks out a bit more in a crowded market with lots of upside, whereas smaller VARs may not have as much financial or operational ability to take similar risks. Meanwhile, larger VARs have bigger installations and more established processes in place, making genuine risk-taking a more dicey proposition.

When VARs do decide to take risks, such as adding solutions from alternative vendors, it's most often to enter a new market or to fill holes in their product portfolios. When adding products, especially ones targeted at small to midsize companies, cost and productivity becomes a key concern.

"All the stars align around ROI," says Cliff Young, CEO of ClearPath Networks, a managed security services provider in El Segundo, Calif. "The SMB market has been underserved while the technology becomes more affordable."

John Hiraoka, senior vice president of marketing for Epicor, an ISV and Microsoft partner in Irvine, Calif., says that SMB companies often combine high-functionality requirements with limited resources, making them more interested in solutions that work well together.

"The midmarket has the same requirements as the enterprise in terms of deep functionality and vertical focus, but they need more agile, flexible systems because they have much smaller IT staffs and can't afford to lose money on implementations," he says. "Companies are moving away from point solutions to single-vendor solutions targeted at specific markets, so software vendors can't afford to be broad generalists."

But the raft of technologies available in emerging markets, such as security and wireless, makes the VAR's role more important than ever.

"There's far too much technology available, and it's creating a mass of confusion for customers, so they call us to come in and sort it out for them," says William Crombie, former CEO of security solution provider BMD Solutions, which was acquired by FusionStorm last year. "It used to be the security vendors that were driving customers; now it's the VARs who are driving them. The consulting business is growing because customers don't trust big vendors to give them what they need."

When assessing whether to take a risk by adding new solutions, VARs whose customers are the early-adopter types may have the most incentive to push the envelope. Government VARs have long found their clients to be the most keenly interested in--and amply budgeted for--trying new technologies.

"The government will take the lead when the adoption is driven by business value, such as a better network or administrative organization," says Scott Spencer, director of enterprise software and security for GTSI, a government reseller in Chantilly, Va.