Synnex VARs Say They're Stronger, More Profitable Than '09

Synnex solution providers are stronger now than they were six months ago and they expect a solid increase in profit margins this year, according to a realtime poll of VARs taken at the Varnex Spring Conference in Orlando on Monday.

The economy was already in recovery last November, but 23 percent of the 200-plus VARs surveyed said their companies were much stronger than last fall. Another 59 percent said they were moderately stronger. Ten percent said they were unchanged, 5 percent chose mildly weaker and only 2 percent said their business was significantly weaker now than last November.

A panel of solution providers joined onstage by Bob Stegner, senior vice president of North America marketing at Synnex, agreed with the findings. "We've come out [of the recession] much stronger than we went in. Last year, nobody knew what was going to happen. We focused on our core business, services, and we're stronger today," said Steve Gay, managing partner at Strategic Sourcing, a Columbus, Ohio-based solution provider.

"In Q4 last year we were doing pretty well, but we've been able to keep the pipeline solid," said Don Zurbrick, sales and marketing manager at Big Sur Technologies, a Tampa, Fla.-based VAR. "We never had any customers say they were not going to [buy IT]. They were hodling their breath. Now they're starting to see others save money [through new technology]."

Meanwhile, 18 percent of VARs at the show expect a healthy uptick in margins compared to 2009, with another 43 expecting a moderate increase. An additional 25 percent expect margins to be in line with 2009, 11 percent expect a slight decline and 3 percent expect a significant decline.

"Our focus has moved from commodity services to higher-end services," said Paul Whalley, vice president of Whalley Computer Associates, Southwick, Mass. Connecting Point of Las Vegas has seen an uptick in services because customers want more remote monitoring and other services to help keep costs under control, said Lester Keizer, CEO. "Our clients want enterprise level stuff, but they need budget pricing. Because of that we've seen a big uptick in IT controls [services]," he said.

Remote monitoring and other managed services was chosen as the second fastest-growing area for VARs, according to the poll. Thirty-nine percent said they see the most growth in servers/storage, while 38 percent said it was managed services. After that, the drop off was significant with peripherals garnering just 8 percent, networking 5 percent, systems 4 percent, software 1 percent and all other technologies 9 percent.

"Managed services is interesting because it drags everything else with it," said Zurbrick. "Tyically, we go in and offer managed services and then we're becoming their IT department. It's a natural progression. We get their servers an dother stuff that we don't normally chase that much like desktops and printers."

NEXT: Top Priorities, Hot Verticals

VARs were also asked to select their top priority for 2010 and 46 percent selected expanding into new vertical markets as their choice. Next, 38 percent chose adopting new technologies while 10 percent picked managing cash flow better and 7 percent had improving cost containment to maintain current customers. Health care is the vertical market being most looked at, with government customers right behind, said Strategic Sourcing's Gay.

"Those are the two most significant markets out there. With new technology there's so much going on: biometric needs, virtualization. There's a tremendous amount of activity bridging hardware and software together," Gay said. "You have to be on top of several platforms, like data center, client, single sign-on soutions. Thos are the things we're stayin on top of for the growth we're seeing."

Zurbrick said Big Sur is bucking the trend by reducing the vertical markets they play in and looking to get deeper in the ones they're keeping. For example, real estate is out as that industry has been especially hard hit in this economy.

Connecting Point's Keizer said education has been a "godsend" vertical market through the recession. "We've done well not going to larger school systems, but those in the middle of nowhere with 1,200 to 1,500 students. They're looking for help and they need help," he said. "But you can't be everything to everybody. Pick one you do well and focus on it. That will help you set the pace for the marketplace," he said.

Finally, the solution providers at Varnex said their companies need more marketing help coming up with funding (43 percent) than with getting good vendor lead lists (18 percent), event management (13 percent), advertisting (10 percent), e-mail blasts (10 percent) or direct mail/newsletters (6 percent). Synnex's Stegner noted that more vendors want to see a clear return on any marketing dollars they provide to VARs for investment.

Whalley added that his company has reengineered its marketing strategy to great success over the last three years. "We were spending $100,000 on advertising, marketing. We cut all of that and hired two fulltime [marketing] people and we went from $1 million in new business to $6 million in new business a year. We've got partial funding for one of those positions [from vendors] and we're looking to get both of them. If you can show that you can generate revenue, vendors will give you money," he said.