Next Generation VARs: Tuned In

One of the new breed is Alani Kuye, the 28-year-old president and founder of Phantom Data Systems in Norwalk, Conn. A hybrid of sorts, Phantom considers itself a "solutions-based" company that serves its clients' document management, data storage and recovery needs. The firm uses some mainstream vendors—like Intel—but also employs technology from Linux vendors, such as Red Hat, and alternative vendors such as Katharion and Intronis.

"Alternative vendors help us sell innovation. They know we are selling ourselves as a VAR," Kuye said. "They are more open to disclosure of long-term plans. The household names are not."

Slide Show: 7 Young VARs To Watch

When these innovators take on the more traditional role of solution providing, many"but not all—are choosing open-source vendors because they say these vendors are more accessible, more amenable to change and more dedicated to their partners' success.

"For example, Adtran gives you everything you need, from the API to the product spec, business plans, contacts," Kuye said. "They want to know, do we want to deal through distribution? Or direct? That's a value proposition. I don't have to go through distribution. We can tweak the product, and Adtran will still support it."

Make no mistake: These new VARs do not want to sit around and wait for vendor-generated leads to ring their phones. They want to be in the mix, in the know and in the thick of their customers' business plans.

"We help clients in preparing their multiyear IT budgets," said Gary Tonniges, 37, president of TriQuest, another next-generation VAR that focuses exclusively on services. "We prepare information for insurance companies, most disaster-recovery plans, and we sit in with strategic planning sessions with customers. We know the company's strategy before the line troops do because we are part of the planning process. It is like a marriage."

Though TriQuest is a Microsoft-certified partner, the integrator and MSP is largely vendor-agnostic. One reason many large vendors never get to the altar with these new VARs, Tonniges said, is due to the tremendous emphasis on meeting requirements and getting certifications. That can be off-putting, even for companies with deep pockets.

For Phantom Data and other companies like it, that type of investment is not practical, and underscores how much more big vendors need to learn about their much younger partners.

Not all next-gen VARs view certifications and big-name vendors with disdain, however. Altos Technology Group is an Enterprise HP partner, a Citrix Platinum Partner and a certified Microsoft Gold Partner.

"We have every certification in the world," said Brady Flaherty, 35, principal at Altos Technology Group, a Sacramento, Calif.-based IT consultant that provides comprehensive enterprise infrastructure solutions. "The main reason for our success is our IT focus, not a sales focus." And a good way to advertise that focus is by attaining certifications.

Next: Dot-Bomb Refugees Dot-Bomb Refugees
Many of these young VARs lived through the tech bubble, which climaxed in 2000 and burst in 2001. Back then, they may have been at their first jobs or working during college. They had learned that the "get big fast" strategy so popular at the time was flawed, and that moving quickly to react to market forces did not require acting recklessly. Ambition had found a few boundaries, and they included formal business plans, not ones scribbled on cocktail napkins.

Chris Cunningham is the 25-year-old president of C3. Cunningham founded the solution provider in 2001 after working for a failed Internet company. He, like many of his ilk, started working in technology as a teen.

"During high school, I did consulting; I had a decent client base. When I graduated high school, within three days I had a job that was great for 18 months," he said. Then the company went under and Cunningham went on unemployment. "I started helping friends and family with their computers," he said. "I got an office, had two or three customers, then five, 10. Today, we have 500."

Among those 500 clients are very low-end customers (mom-and-pop shops) to high-end clients for which C3 does general computer consulting. That includes content filtering services, particularly intrusion detection and network management.

"We're not interested in being a hardware reseller," Cunningham said. "We will order or advise on product, but we have zero margin on product; that's a cutthroat business."

Slide Show: 7 Young VARs To Watch

TriQuest's Tonniges agreed: "We take no ownership of hardware and software. We're completely independent of that and have been for four years. The margins just fell apart. CDW, etc., get better pricing, and maintaining licensing agreements takes a lot of time." The company reviews its product lists periodically to ensure its recommendations are up-to-date.

C3, TriQuest and other new-breed solution providers offer MSP-type offerings, which provide a recurring revenue stream. They also provide an open door for additional offerings, as small customers often look to their solution providers as a trusted resource for information on how to grow their businesses.

These integrators are acutely aware that there is a large opportunity to remedy growing customer dissatisfaction with IT services.

"There is huge customer dissatisfaction, whether that's with cell phone providers or IT. There's no difference," Flaherty said. "We offer white-glove service; complete, consultative selling. There's no phone queue here. Everyone picks up the phone: 99 percent of the time you will get a person."

Next: The Customer Connection The Customer Connection
Identifying underserved customers is a linchpin to many of the young solution providers' success. For example, small, local retailers have long bemoaned that big-box stores like Wal-Mart and Target have encroached on their territory, and now shopping online presents additional challenges. The 24-year-old CEO of Yodle, Nathaniel Stevens, recognized the challenge and is now out to make local businesses boom. Stevens is positioning Yodle as the means by which local businesses will get noticed among all the competition: "This is a $20 billion market, and the Yellow Pages model is not doing the job," he said. Yodle's goal is to get small businesses' phones to ring, get them the exposure they need locally to get people walking into their shops.

Stevens grew up in Connecticut in the world of family-owned business—a car dealership, a segment that is marketing- and advertising-intensive. After high school, he took his early experience in working there, and then eventually packed his bags and attended the Wharton School of Business at the University of Pennsylvania. But, like many of his compatriots, that degree got put on hold in 2005 when the entrepreneurial bug bit.

"We set a deadline that by the summer of '05 we needed to pay for ourselves, and we needed $20,000 in business to do that within six weeks. If we didn't hit that, I was going back to school. Well, we hit and went beyond that milestone, reaching $1 million in annualized sales," Stevens recalled. Since then, his company has partnered with Google—it uses Google apps to build databases, for example—and has grown 400 percent year over year. To what does Stevens attribute such phenomenal growth? The key, he says, is approaching the local businesses' decision-makers. Once they understand his value proposition, he said, they're on board.

Slide Show: 7 Young VARs To Watch

Alex Federov, 27, is creative director at Fresh Tilled Soil, a Web consultancy and design shop. Fresh Tilled Soil uses Linux Apache, PHP and open-source vendors. When designing a customer solution with those tools, if challenges or questions arise, they, like other open-source users, will rely either on in-house expertise, or reach out to the vast Linux community for answers. Big-name customers aren't shying away, either. Recently, Fresh Tilled Soil used its Rapid Prototyping design process to execute a redesign of the high-level user interface pages and functions for GE Healthcare's Centricity Patient Online Application. Those design and consultative services are where the money is: "We're not making money through selling hardware—we're making money through training, seminars and design," Federov said.

Not only do solution providers such as Yodle and Fresh Tilled Soil work to position businesses high in search-engine results organically (rather than paying for positions), but they also provide Web site design (and redesign) and search-engine optimization. Stevens estimates that only 3 percent of local businesses have any online presence; that leaves a lot of potential business.

Stevens said Yodle formed an engineering and product team that has grown from 20 to roughly 70. "We took in more revenue yesterday than we used to do in a month," Stevens said.

Helping clients get customers to convert from viewers to paying customers is one of the challenges faced by these solution providers. Critics charge that many of these design shops are more interested in winning design awards than in customer retention. But the new kids on the block say that's not true, and why shouldn't a site be designed both to attract customers and facilitate their business?

"We are improving the users' experience," Federov countered. "Content is king; we optimize our customers' sites."

Part of making content king means using it to include customers in the interaction, aside from buying product. The term "Web 2.0" defines a general improvement of the overall online experience. "Web 2.0 mainly gives the user a voice and allows interaction, while getting information from them. Asking customers to post reviews is an example of this," Federov said.

Sometimes, though, feedback is wrong or damaging to a company. Once it's out there, it's public. But that doesn't mean that companies have to be defined by that negative connotation. That's where 29-year-old Nolan Bayliss got his inspiration for Naymz.

"The idea, at first, was simple: Give people a presence on Google, let them own their own Google pages," Bayliss said. "That morphed into the idea of being concerned about what does show up on Google."

Bayliss had witnessed this issue firsthand when he worked for online travel broker Orbitz. A disgruntled customer posted an unflattering review of the company, and Orbitz just couldn't seem to make it go away. About 18 months ago, Bayliss and his two partners left Orbitz to make a go of employing search-engine optimization technology with a twist.

"We use basic search-engine optimization and provide guidance for managing reputations. Naymz is a user-centric site; everyone has a profile, and we provide the tools to control their online reputation. Our customers are mostly young professionals," Bayliss said. "Young people are going out online and damaging their reputations by doing things like posting certain pictures on MySpace and Facebook. We try to minimize the impact of certain citations. We think there is huge potential here as companies become more aware of their online reputations."

Next: Culture Warriors Culture Warriors
Though they differ in approaches and technology, all these next-gen VARs agree that work should be a place where creativity is rewarded and hard work is a regular part of the day. There is an overarching feeling that they are happy to lead solutions-centered businesses and glad to be in the position to create a relaxed atmosphere that fosters creativity and results in profitability.

"I have five full-time engineers, and we use contract help as we need to for projects,"Cunningham said. "I don't want to tax my guys and make them hate to come to work."

That may be the one vestige left of the dot-com boom: to create a culture that works for employees as well as management.

Ronnie Parisella is the founder of Primary Support Solutions. Back in 2000, he worked as director of IT for New York New Media Association, a not-for-profit organization in New York that helped start-ups in Silicon Alley find funding and hook up with venture capital. "It was a great time to be a nerd in New York," Parisella joked. When the economy cooled down a year later, he had to move on, subsequently founding Primary Support.

Slide Show: 7 Young VARs To Watch

"I love waking up and knowing that no one is telling me what to sell or how much I can make," said Parisella, who also spent time in large corporate environments. "We make it a fun environment here. We keep things light. When it comes time for a project, I ask the employees what we need to do. Everything I hated about working for someone, I don't do. I don't pigeonhole; I tell them: 'Here are the reins, go do it.'"

Teamwork is crucial to the success of these companies, and checking the ego at the door is part of that. Think of a harmonious team focused on the goal of profitability and using the individual strengths of each member to achieve success.

"Everyone has core skills; they each know what our mission is, and everyone has a specialty," TriQuest's Tonniges said. His seven-person company prides itself on its profit margin that Tonniges said is much higher than the industry average, and doesn't depend on burning out employees.

Flaherty said his philosophy is to treat Altos' staff the way he'd want to be treated. "My goal is to have people here make more money than ever." Eventually, that will lead to expansion.

And that's one thing this new breed relishes: adding staff. As Parisella said: "I can look at my staff and say, 'Five minutes ago there wasn't a job there, but now I created one.' I love that."