Overview: Success of the VARBusiness 500

For the first time in the six years since the dot-com bubble burst, the VARBusiness 500 rocketed to double-digit growth. The collective revenue of this exclusive list of IT solution and service providers totaled a record $378 billion in the 2006 ranking, a 13 percent increase over the previous year.

Look at the numbers. For the first time since 2000, the VARBusiness 500 collective revenue rose by a rate reminiscent of the dot-com heyday. While this year's growth is still just half of what channel companies posted before the dot-com bomb, the overall rate of growth is nearly double that of the whole IT market and more than four times the U.S. economic growth rate. Not to mention, the sum of this year's 500 firms' revenues is more than double that of 1998.

"Everyone did very well in 1998, 1999 and 2000, then the market changed, and nobody bought anything in 2001, 2002 and 2003," says Tom Raimondi, chairman, president and CEO of MTI Technology (No. 175). "We shrunk, but now we're growing again. No matter how tough it got, we always put the customer first. As long as we did a great job servicing the customer, when the budget did come back, we were the first on their list."

The vitality of the channel is reflected in the bulky roster of winners and the thin line of losers. The gainers numbered 407, and 52 percent registered double-digit growth. By comparison, only 82 companies lost ground this year, many only posting single-digit percentage losses.

IBM Global Services remains a fixture at the top of the list with $47.4 billion in revenue, but the VARBusiness 500 is dynamic. It welcomed nearly 50 new companies to the list.

IGS naturally leads this year's billion-dollar club's 55 members, but its 2.5 percent growth pales in comparison to peers such as BT Global Services (No. 6) at 20 percent growth, BAE Systems Technology Solutions and Services (No. 11) with 40 percent, Getronics (No. 30) with 23 percent and Booz Allen Hamilton (No. 53) with 35 percent. The only new member to the billon-dollar club, ChoicePoint, continued its seven-year uninterrupted growth streak with a 16.4 percent gain in 2005.

"We're just trying to do better than we did last year," says ChoicePoint president and COO Doug Curling. "When you're doing double-digit growth, you're pretty much firing on all cylinders."

Across the board, VARBusiness 500 companies continue to raise the bar. This year's list threshold topped $21 million, up from last year's $18.5 million start line. Bigger, healthier companies pushed the VARBusiness 500 revenue average up 14 percent to $756 million.

"The things that soon will get us to $1 billion [in revenue] aren't the same things that will get us to $2 billion. Our objective is to get from where we are to the next level," says Mark Perlstein, vice president of CIBERsites IT Operations at Ciber (No. 59, and the 2005 VARBusiness 500 Company of the Year). "We ask ourselves every day what we need to do to double our revenue."

NEXT: How a switch from vendor ambitions to services provider paid off.