Stepping Up: Leading Public-Sector Channel Programs

As middlemen, VARs take on the burden of some heavy expectations. On the one hand, customers demand timely delivery of goods and services; on the other, vendors want to get paid in a reasonable amount of time. Now factor in the nuances that exist in the public-sector market--such as lengthy sales cycles, quirky buying seasons and picky customers. Suddenly, those expectations become a lot more difficult to meet.

In the fifth annual directory of vendor programs that serve government and education partners, GovernmentVAR highlights 25 solution providers and integrators that offer five-star treatment by accommodating the individual needs of public-sector consumers.

In general, government partner programs tend to share some customary characteristics. They often provide VARs with access to a GSA Schedule, for example, and they usually offer some form of deal registration that provides credit to partners that bring the vendors government opportunities, regardless of whether they win the contracts. While those benefits are important, they're not enough.

"There needs to be some intimacy with the channel," says Rick Marcotte, president and CEO of Herndon, Va.-based DLT Solutions. "The vendors that are taking the time to talk to their government partners consistently become very educated on the unique nuances in the market and do creative things to make them manageable. They recognize that government transactions get complex."

Adapting Lines of Credit

Perhaps the biggest challenge that faces government solution providers--particularly the smaller ones--is staying far enough in the black to keep business running. At a minimum, there are four buying seasons to keep track of and accommodate: the end of the federal fiscal year in September; the end of the state and local fiscal year in June or July (individual states vary); the individual vendors' own year end, and the end of the calendar year, when systems integrators generally make their capital purchases.

While vendors accommodate a large chunk of the upfront costs associated with those seasonal purchases with credit lines offered direct or through distribution, it's difficult to predict what each individual solution provider faces each year.

American Data and Computer Products (ADCPI), for example, counts Raytheon and Lockheed Martin as its two biggest customers. Like most big prime contractors, the companies are typically good about assigning payment. But, as a small company, ADCPI is still challenged with carrying the receivables associated with some of the megacontracts won by the integrators, and the integrators' capital purchases.

"Through Tech Data, I had a $400,000 line of credit, but one order can wipe that out," says Terry Castro, vice president of Tampa, Fla.-based ADCPI.

By leveraging all the vendor and distributor financing options, ADCPI quickly learned to maintain the necessary balance. Specifically, the company negotiated a flooring account with GE Finance about four years ago that pays for all orders received by Lockheed Martin. Basically, the manufacturers' product lines go on the account; GE pays Tech Data, which pays the manufacturer; Lockheed Martin pays GE direct; and ADCPI receives only the portion due. Even channel-adverse Dell allows its products to be resold on credit. "The conditions are not as good as the larger credit lines, but they do at least give us the opportunity," Castro says.

In addition to distributors, many vendors have their own finance divisions that offer similar services--Cisco Capital and NEC Financial Services, for example.

Since ADCPI uses the flooring account for more than half of its business, the company receives special manufacturer discounts or extended net terms.

"Extended terms from any vendor is always a plus for the reseller," Castro says. "The longer you do business with someone, the more they're going to increase your credit line and offer advantages."

NEXT: Fronting Costs

Search GovernmentVAR's 2006 directory of partner programs.