Growth Engine

As always, a number of significant mergers and acquisitions made their mark on the VARBusiness 500. Agilysys (2008 VARBusiness 500 No. 68) was the most active buyer, acquiring InfoGenesis, Stack Computer and Innovative in acquisitions worth in excess of $200 million, and selling KeyLink for $485 million. Capgemini (2008 VARBusiness 500 No. 6) scored the largest deal, reeling in Kanbay for a cool $1.25 billion. Logicalis and Incentra were also players, each bringing two companies into their respective families last year.

BlueWater Communications (VARBusiness 500 No. 467) was the fastest-growing company on our list, with revenue that increased 1942.3 percent. It is the first year on the list for the New York-based VAR. The 2-year-old solution provider, founded by former Dimension Data CEO Bob Cagnazzi and other Dimension Data alumni, focuses on lifecycle applications and helps clients build unified communications strategies.

"There was a real need in the marketplace to deliver solutions that unified communications," Cagnazzi said. "There had been technical migrations but not business migrations. CIOs, COOs, CFOs said they had not seen business benefits, no total cost of ownership benefits."

ITT Defense (VARBusiness 500 No. 20) and DST Systems (VARBusiness 500 No. 70) both showed phenomenal growth of 220.7 percent and 220.5 percent. Other companies that grew at a greater-than-200-percent clip were Maximus (VARBusiness 500 No. 82), Verio (VARBusiness 500 No. 116), Megapath Networks (VARBusiness 500 No. 199) and Visionary Integration Professionals (VARBusiness 500 No. 217). In all, these fast-growing VARs brought in $21.74 billion, and grew at an astounding 68.4 percent.

Companies buy from the VARBusiness 500 for various reasons: These solution providers have good reputations, they carry well-known and trusted brands and offer high-quality service at a reasonable price. The idea that customers are engaging with VARs for projects that show a concrete return on investment is evident, too, in the top technologies solution providers are recommending. Bread-and-butter technologies, such as backup and recovery, hubs, switches and routers, and enterprise storage are top of mind, with basic security and midrange servers close behind.

Of all the technologies integrators see growing in importance, VARs say storage solutions are tops, with virtualization software coming in a close second. According to D&B's Global Database, virtualization is a potential $10 billion market. As more companies face compliance regulations and exploding data capacity requirements, virtualization will grow in importance to solution providers, particularly as customers do not have the in-house technical expertise to build what they require.

"Business projects that are specifically geared toward solving problems are the solutions that are more apt to be approved," said Joe Mertens, president of Sirius Computer Solutions. "Other, more general ones will be pushed out further."

Although all vendors supported by the channel contribute to VARs' profits, certain manufacturers stand out. In particular, Buffalo Technology, BMC Software, SAP and Western Digital were among the vendors that VARs credited with attracting customers. Interestingly, Apple and Dell were in the top 20 list of vendors mentioned by VARs.

Overall, the 2008 VARBusiness 500 represents the very finest of what the channel has to offer. It reflects the diversity of solution providers--those that are public and those that are private and perhaps family-owned; those that cater to specific technologies and others that take a more broad-based approach; and those that embrace enterprises as well as competitors that specialize in catering to small and midsize businesses.

Next: 2008 VARBusiness Methodology