VARs Make Moves To Navigate Uncertain Economy

But the answer isn't merely getting into services, it's finding the specific services that your customers want and providing them in a world-class fashion that demonstrates you understand they are looking very, very closely at ROI.

With typical product refreshes on longer time frames, customers are forced to focus on solutions for specific business problems. Successful solution providers are aligning their investments with that in mind. Says Mertens: "The typical server hardware business will be very challenged in 2008."

Business survival is all about providing mission-critical, necessity services that clients can't live without. In addition, at the end of the day, they need to have bottom-line consequences that are evident within a relatively short period of time, between 12 and 18 months. "IT service providers that own businesses with revenue that's dependent on break-fix or that are project based are more likely to feel the pinch of an economic downturn," said Ronnie Parisella, founder of Primary Support Solutions. "Managed service providers who offer a flat fee for the proactive support of their customers' networks are less likely to be affected."

As belts get tighter, more customers will look at headcount reduction and redeploying staff as a means of cutting costs. VARs that take on those responsibilities, by being MSPs or acting as de facto IT departments, will benefit.

"Companies like ours will be well off because what they do [for clients] is to reduce cost," said Gabriel Rozman, executive vice president at New York-based Tata Consultancy Services Limited (VARBusiness 500 No. 32). "Companies are looking at technology to see how they can use it to reduce costs."

TCS uses a network of IT consultants from India, China, Latin America and Eastern Europe to provide customers services that are often much less expensive than they could provide for themselves. But, experts said, U.S. firms can also provide outsourced services. They may cost a little more than going offshore, but they'll be geographically closer, and still save customers' money.

"Look at all the positives that are out there: We've got incredible people doing incredible things in the U.S. and we should leverage that," said Bob Venero, founder of Future Tech Enterprise Inc., Holbrook, N.Y. (VARBusiness 500 rank 297). "As opposed to keeping everything inside your company, outsource to other U.S. companies."

Providing managed services and other outsourced services is becoming increasingly popular among VARs, Weinberger noted. But there are other trends afoot as well.

"It's true we're seeing more interest in managed services, but we're seeing resellers looking at Google apps also. There is a major push on that," he said. "We see more emphasis on open source. Google will drive that ... it's a slower process than people think, but particularly on the SMB side, it could take off, especially since there are no licensing costs to deal with."

Think Outside The Box

Today's customers, in addition to tightening their own companies' overall spending habits, are smarter than ever, solution providers say. They are asking questions about standard offerings and are asking for alternatives. Increasingly, those alternatives are open sourced.

"Service delivery in the most cost-effective manner with quantifiable ROI is where open source comes into play," said Alani Kuye, president and founder of Phantom Data Systems Inc., Norwalk, Conn. "Any VAR will tell you that services is where money is made, and open source gets you up and running faster than proprietary software."