Overview: The Big VARBusiness 500 Picture

How much is the VARBusiness 500 worth? In terms of annual revenue, it's a whopping $344 billion. In other words, it's greater than the gross domestic product of Poland, and three times greater than the economic output of all of Central America. It's an amazing number when you consider VARBusiness changed the methodology of the VARBusiness 500 for the first time in its 12-year history. Vendor services divisions--such as IBM Global Services and Hewlett-Packard Services--were moved to their own list. (See "VARBusiness 500: The Methodology.")

This year, the VARBusiness 500 welcomes 113 new companies--the biggest freshman class in the list's history. (Read "The Freshman Class of 2007.") Why all the new arrivals? A combination of the methodology change, a banner year for mergers and acquisitions, and natural attrition.

Slide Show:
Spend The VARBusiness 500's Money

One of the more significant results of those changes is the crowning of a new No. 1 company, Electronic Data Systems (EDS), which took over the top spot vacated by IGS. After years of shaky revenue and miscalculation of the offshoring trend, EDS is rebounding and is stronger than ever. (Read our profile here.)

The churn of so many companies wasn't enough to dampen the collective growth of the VARBusiness 500. When last year's list is normalized for the new methodology, we see that the VARBusiness 500 collectively grew 18.6 percent.

Where is all of this money coming from? The big integrators and consulting services is one of the biggest sources. The Billion Dollar Club has 15 new members. The 57 companies that comprise the Billion Dollar Club account for $277 billion in combined revenue--or 81 percent of the total VARBusiness 500.

That figure shouldn't diminish the significance of the $67 billion generated by the remaining 443 companies. The 100-plus newcomers added more than $34.7 billion to the VARBusiness 500. Just to make this year's list, a company had to have revenue greater than $24 million--up 14.2 percent over last year and a record threshold for the list.

M&As played a significant role in reshaping the VARBusiness 500. Major deals--such as EDS' acquisition of MphasiS and Presidio's acquisition of Solarcom and Networked Information Systems (NIS)--eliminated more than 50 VARs from the ranking. (Read "Merger Mania Among the VARBusiness 500.")

The VARBusiness 500 had 349 companies with gross revenue increases and only 125 that posted revenue losses. Fourteen companies posted triple-digit growth, 239 enjoyed double-digit growth and 96 had single-digit growth.

The fastest-growing companies of the VARBusiness 500 are MetaSolv (No. 239), which saw revenue climb 259 percent from $26 million to $92 million, and Presidio (No. 72), which through acquisitions increased its gross from $216 million to $695 million. (Read "VARBusiness 500 Power Movers.")

Products, Technology and Vendors
We asked the VARBusiness 500 why their customers buy from them. The self-perception is a strong reflection of their trusted adviser role. Nearly all said that it's their reputation and loyalty to customers.

"Customer satisfaction with our services is huge for us," says Rudy Casasola, Presidio divisional president. "It takes a long time to build a reputation, but you can lose it overnight."

More than 80 percent said it was because of their brands--sold or recommended. Price was the last consideration, showing that quality of products and great customer services still triumph in the channel.

Maintaining solid relationships with customers requires staying on the cutting edge of new technologies and services opportunities. Nearly seven out of 10 of the VARBusiness 500 companies are always on the lookout for new technologies from either existing vendor partners or alternative vendors.

Products must have superior quality--that's obvious. But new technologies must satisfy their technical needs or fill holes in their product offerings. Many solution providers are building specialty practices around technology or verticals. Most will first look for a technology that completes or enhances their existing product families before taking on a new technology that requires a specialty practice.

Of all the technologies flowing through the channel, security software, storage hardware, network applications and equipment, and enterprise software applications top the list of products that VARBusiness 500 companies expect to add in the next 12 months. (Read "VARBusiness 500 Tech Picks.")

Vendor brand is an important consideration for solution providers. Microsoft, Cisco, HP, IBM and Symantec have the strongest represented brands among the VARBusiness 500. Not surprisingly, those are the same vendors that solution providers say drive or offer the most profitability for their businesses. (See "VARBusiness 500 Vendor Profit Drivers.")

"Not only is it important to have new products to drive new business, it's also the commitment of their field team, which goes with us to the customer [and meets them] face-to-face," notes Laurie Benson, CEO of Inacom Information Systems (No. 319), an HP Gold Partner. "It's a big deal--they're there, in person, talking about solutions and showing commitment to them."

When asked which vendors are most important, VARBusiness 500 companies said--in order--HP, Cisco, Microsoft, IBM and Sun.

In the coming year, VARBusiness 500 companies anticipate the strongest services growth in consulting (88 percent), managed services (50 percent) and IT outsourcing (33 percent).

NEXT: Going vertical for growth.