VARBusiness 500: Largest Solution Providers Don't Go It Alone

For the past dozen years, the VARBusiness 500 was seen as a static list of large solution providers that represented the tip of the channel iceberg. Contrary to conventional wisdom, the top solution providers and integrators are more dependent on partnerships with smaller solution providers than anyone previously thought.

According to the 2007 VARBusiness 500 survey, more than 80 percent of the largest solution providers partner with peers or subcontract IT work to other solution providers to service their customers or extend their market reach.

For instance, a $100 million solution provider doesn't just represent $100 million in sales or cash flow. The VARBusiness 500 research suggests that, in this hypothetical scenario, a $100 million solution provider that partners with 10 peers that each represent $10 million in revenue is actually the nucleus for a $200 million channel ecosystem.

Most often, solution providers will engage peers for their vertical or technology specialization. Several solution providers say that it's often more cost effective to partner or subcontract certain technology work than it is to build a practice. Many solution providers will use partnerships until they build a critical mass in emerging technology segments that warrant investment in staffing and resources.

"We all want customers for life. When you partner, the customer just sees you bring value to them," says David Gallo, chief operating officer at Edgewater Technologies in Wakefield, Mass. "We've made decisions about where we want to specialize and things we don't want to own, so we'll partner on those things."

Extending geographic reach is also a prevalent reason for peer partnering. Solution providers will look to peers or smaller solution providers to help establish beachheads in different regions of North America or service customer branch offices in areas where they don't have a presence.

Six out of 10 VARBusiness 500 companies are partnering with peers for their vertical specialization. Having an intimate knowledge of a customer's specific market or vertical niche helps solution providers craft systems that meet their specific industry needs.

"Having vertical expertise takes it up a notch," says Ron Dupler, president and CEO of GreenPages Technology Solutions in Kittery, Maine. "Having solutions and vertical market focus is critical to our business, and our partners are a key component."

When it comes to partnering, VARBusiness 500 companies also look to vendors and distributors to augment their technology expertise and capacity to service customers. The research found that the largest solution providers in North America are most often partnering with vendors, most often through subcontracted work on large, direct accounts. "At the end of the day, the customer is driving almost all of what we're doing. They're looking for turnkey solutions and no one provides it all," Dupler says.

The full VARBusiness 500 ecosystem report will be published in the June 11 in VARBusiness and ChannelWeb.com, and will be discussed at the VARBusiness 500 Conference and Awards, June 11-12, in New York City. For more information about the VARBusiness 500 or to register, go to www.varbusiness.com/var500reg.