Five VARBusiness 500 Myths

The ink wasn't even dry on this year's list of the 500 largest solution providers and vendor service arms when HP made a bold and sudden $13.9 billion bid for EDS. The move significantly changes the solution provider landscape and, if approved, will position HP Services directly behind the largest integrator in the market, IBM Global Services. More than anything, the deal also shows just how fluid our list really is.

This is the first of five myths we need to debunk concerning the VARBusiness 500.

Myth No. 1: The VARBusiness 500 list never changes. Nothing could be further from the truth. This is a list that is constantly changing because the companies that comprise it are morphing, merging, selling off divisions, getting into new businesses or being bought out. See if you can find any of the companies that populated the list before the dot-com bubble burst. There are few, if any, survivors.

Consider this fact: There are 113 new companies on the list this year.

Myth No. 2: The VARBusiness 500 only sell to the Fortune 500. Wrong, wrong, wrong. First and foremost, the VARs on the list are true to the customers that helped them grow and get on the list in the first place. As startups they just didn't land a huge contract with a Fortune 500 company; they serviced small businesses and continue to do so today. Their clients certainly include large enterprise accounts but a large part of their revenue comes from midsize businesses, which today employ up to 5,000 and have multimillion-dollar IT budgets. VARBusiness 500 firms will tell you that Fortune 500 accounts are the most difficult to deal with and the least profitable of all customers. Yet, an association with them does hold prestige. The facts, however, just don't support any claims that the VARBusiness 500 just focus on large enterprises. You can test this by talking to the largest company on this year's vendor list and ask IBM Global Services which customer segment holds the most promise. Officials there will tell you it's the midmarket.

Myth No. 3: The VARBusiness 500 is made up of vendor services arms that primarily focus on the solution supplied by that particular vendor. That may be the case, but those companies are no longer on the main list. We created a separate list of the top 40 vendor service arms populated by Cisco, IBM, Xerox and others. This enabled us to put pure-play, multivendor solution providers and IT consultants on the main list, where the revenue cutoff actually rose this year to more than $30 million. With the vendors off the list, the VARBusiness 500 today represent a much more diversified group.

Myth No. 4: The VARBusiness 500 only support the product lines of the large IT vendors. There was absolutely some truth to this many years ago, when we had IBM shops or Cisco shops and so on. But those business models could not be sustained. A few years back, Logicalis was HP-only but its CEO, Michael Cox, bought a strong IBM-centric business, giving him more diversity. If you examine the technologies that are most important to the VARBusiness 500—virtualization and VoIP—you will quickly realize that VARBusiness 500 firms are not just beholden to the big vendors anymore.

Myth No. 5: Emerging vendors can't break into the VARBusiness 500. Today's largest solution providers are obsessed with how to differentiate their business and grow revenue. Overall, the group grew 24.3 percent year over year and did so by focusing on niche solutions while supporting many small and emerging vendors. Just look at the vendors the VARBusiness 500 said paid great dividends. The list includes BMC Software, Buffalo Technology, Fujitsu, InFocus and Motorola. Remember that your average VARBusiness 500 executive considers himself an entrepreneur first. Despite a hard demeanor, your VARBusiness exec has a soft spot for a newcomer with a good business plan looking to make its mark.

Robert C. DeMarzo (rdemarzo@everythingchannel.com) is Senior Vice President/Editorial Director of Everything Channel.