Inevitable Expansion

Travis Dennis is a classic small VAR. His company, Sebring Technical Services in Atlanta, generates about $3.5 million a year in one-off engagements and ongoing services. Once, he couldn't imagine having customers outside his immediate metro area, but today, Sebring has 70 customers nationwide.

While managed services can be delivered to any part of the world from a central location, Dennis has no plans to plant Sebring's flag on foreign soil. Nevertheless, he foresees a day when he may not have a choice.

"I'm competing against the Wypros of the world, the Indian powerhouses of the world, and they're more efficient," Dennis says. "Even when they decide to come stateside, they tend to be lower in pricing by importing goods and engineers at a lower rate."

As the world economy becomes increasingly flat, U.S. solution providers are faced with foreign competition and international opportunities. IBM, Symantec, Microsoft and Cisco have programs and objectives for leveraging their American resellers to develop overseas business. And, as Dennis foresees, domestic channel companies will be forced into international waters because foreign competition coming to the U.S. will require them to look for new revenue streams.

An exclusive VARBusiness IQ survey found that 18 percent of respondents are conducting business internationally, reaping nearly one-fifth of their revenue overseas. Selling internationally doesn't mean simply shipping a box to Canada or Mexico. Many VARs are doing business in Europe (38 percent), with Asia (10 percent) and South America (8 percent) trailing behind.

"We're seeing more and more partners go global, and I think that's having a big impact in terms of how we, as companies, approach the partner community," says John Thompson, vice president and general manager of HP's Americas Solution Partners Organization.

Solution providers reaching across the oceans find new business challenges: Foreign statutory and business regulations, import tariffs, travel visas, currency exchange rates, differing business cultures. The top two obstacles: no insight into international markets and the cost of international expansion.

Most solution providers going global are doing so on their own, but a sizable number are looking to their larger, multinational vendors or foreign counterparts to blaze the trail.

"There are no boundaries with the office and corporate walls," Dennis says. "It's just as easy for me to service a multinational client as it would be in the states."

See the full results of the VARBusiness IQ survey on the globalization of the channel.