Beyond the VAR 500

The VARBusiness 500 is like a gigantic high-tech machine. Viewed as a single entity, its cumulative sales would exceed those of General Motors, No. 1 on the

Fortune 500, by a margin of $30 billion. Collectively, the VARBusiness 500 generated $191 billion of qualifying revenue in 1998, up a massive 24 percent from $155 billion the year before. By comparison, GM posted growth of just 3 percent last year.

1999 marks the fifth year we have assembled the VARBusiness 500 and the 11th consecutive year we have ranked VARs, systems integrators, consultants and IT services providers in North America. Because of this extended history, the ranking serves as an excellent barometer of broad industry trends, even though it is confined to the biggest among reseller enterprises.

The research project truly is a continual work in progress. Each year we aim to cast the net a bit further, and with each successive issue the ranking becomes that much more comprehensive. Yet, candidates for the VARBusiness 500 evolve constantly and defy attempts to be circumscribed. Consequently, our realistic objective is to generate an ordered listing of the major players in the indirect channel that represents a point in time.

Growth has always been a prominent feature of the VARBusiness 500, and the current crop of finalists delivered a stellar performance. This is evident at the top, where the very big among the 500 are putting on weight at a hefty clip: Sales of the dominant 10 tipped the scale at $95 billion, compared with $78 billion in 1997, and accounted for nearly one-half of the overall total. In addition, membership of our Billion Dollar Club of companies reporting revenue into nine figures climbed to 34 in 1998 from 26.

IBM Global Services, Somers, N.Y., in first place for the fourth straight year, generated revenue of $29 billion in 1998. That's a massive figure, equal to the total sales of the bottom 250 companies on the ranking. Elsewhere among the top 10, Stamford, Conn.-based GE Capital IT Solutions grew by 38 percent, enabling it to snatch the No. 3 position from Andersen Consulting, Chicago, which dropped to No. 4 amid 25 percent growth. Houston-based Compaq Services, the services division acquired last year with Digital Equipment Corp., appeared at No. 5, the same slot occupied by its predecessor. Unisys Information Services, Blue Bell, Pa., and Inacom Corp., Omaha, Neb., both climbed a few notches into the single digits.

The smallest members of the VARBusiness 500, however, got bigger as well. Bringing up the rear on the ranking is AppNet Systems Inc., a Bethesda, Md.-based software VAR with an e-business focus that posted $17.7 million in revenue during 1998, up 28 percent from $13.8 million for the 500th company on last year's VARBusiness 500. Funded by venture capital, AppNet has aggressively pursued a string of acquisitions during the past year to bolster its e-profile.

But growth remains a pervasive characteristic of the entire group. The 1999 Fast 50, which pits companies of all sizes against each other, was paced by Eden Prairie, Minn.-based Digital River Inc., a Web integrator making its first appearance in the VARBusiness 500. This nimble upstart was founded in 1994 and grew by nearly 750 percent between 1997 and 1998 to $21 million. Fourteen of the 50 showed growth of at least 200 percent last year, compared with five in 1997. Finally, the median company on the Fast 50 grew by 156 percent, outpacing its 1997 counterpart by more than one-third.

Should your company be among the VARBusiness 500? Absolutely, for any VAR of sufficient size. But don't be intimidated by the escalating sales of the smallest member. Every thriving reseller deserves to be on our radar screen. To participate, simply complete the online entry form located at www.varbusiness.com, or contact Andrew Vogel at avogel@cmp.com to receive the form by e-mail.