The Industry's Biggest VARs Take Center Stage

The VARBusiness 500 list is eagerly anticipated, but especially so this year. After months of careful research, our editorial team has arrived at this year's top revenue-performing solution providers with some startling findings. First,

let's answer the question most asked: "Just how did all the M&A activity impact the list?" Well, not as much as many believed it would. This year, 89 percent of 2004's VARBusiness 500 members have returned. In addition, the VARBusiness 500 cited four main companies as most important to their businesses: Microsoft, HP, Cisco and IBM, in that order. The next tier includes Sun, Dell and Oracle, followed by Veritas, EMC, Intel and Symantec.

Those vendors and many others helped the VARBusiness 500 generate $334 billion in total revenue in 2004, up 3.1 percent and outpacing the growth rate from the previous year. Of note, growth rates between 2000 and 2003 slowed considerably after the group posted gains of 20 percent in the mid- to late-'90s, so 3.1 percent growth is nothing to sneeze at if you consider the group in aggregate added $10 billion in sales.

No. 1 on this year's list is perennial winner IBM Global Services, which racked up sales of $46.2 billion--accounting for some 14 percent of the VARBusiness 500 revenue. In addition, it got a bit tougher to make the list this year. No. 500 went to Consistent Computer Bargains (hey, if the name works, don't change it) of Racine, Wis., with sales of $18.5 million; last year's cutoff was $15.3 million.

It's hard to pin down exactly where the VARBusiness 500 focuses its technology efforts, but the four most important areas emerged as building solutions around Intel-based servers, storage hardware, networking equipment and security software. That correlates nicely with the vendors these VARs are partnering with. The VARBusiness 500 also told us it is building a significant solutions business in the areas of RISC-based servers, security applications, infrastructure apps, PCs and good ol' printers. It's interesting that as revenue for the group as a whole rose, so did its interest in carrying a broader technology portfolio. If the past few years were ones of specialization, this year we saw a greater diversification. Twice as many firms were selling printers, and server engagements rose dramatically, as did storage and networking. When we asked the VARBusiness 500 which single technology rose in importance year-over-year, the answer was storage hardware, then security software and VoIP.

Are you keeping a close eye on up-and-coming companies? If not, you may miss out on opportunities to add margin and, perhaps, bring some new opportunities to your customers. One way to track companies we call "The Alternatives" is to watch their sales performance through the major distributors. Tim Curran, executive director of the Global Technology Distribution Council, which represents the industry's largest wholesalers of IT products, crunched numbers on companies with wholesale revenues of less than $70 million per quarter and found a few worth taking a look at.

LaCie, for example, is in the competitive-display and external-storage market. The interesting twist to this company is that it employs Porsche Design to design its products. Then there's Dymo; with RFID and scanning technologies driving demand for labels, it is not surprising this company is having success in the channel with a focus on what it calls "labeling solutions." Third is Asus, which, as many know, supplies components and motherboards to systems builders and is enjoying a surge in business through the channel as a result of a strong demand for desktops and server-based products. Rounding out the top five are two companies in the networking space: Transition Networks, a subsidiary of Communications Systems, sells connectivity gear that allows different vendors' networking components to work together. And F5 Networks is one heck of a channel success story, competing against the likes of Juniper and Cisco, with a concentration in traffic management.

Tom Hull, the executive running sales for the publicly held, $200 million F5, says more than 95 percent of the firm's revenue comes from the channel. The company's main product has a great name, Big IP, and is contributing greatly to the doubling of F5's quarterly sales. "We are a company that is playing with giants," Hull says aptly. F5 may not be a company familiar to many in the channel, but it is recruiting partners and expects to become more aggressive on the marketing front.

Let me know which vendors are growing in importance to your business and what you think of this year's VARBusiness 500 at rdemarzo@cmp.com.