MicroAge finds a Sweet Spot At Midmarket

Think of a large reseller or systems integrator such as MicroAge Inc., and you think of it selling to like-sized end-user clients. Increasingly, however, the problem even the largest VARs are beginning to face is that those large clients are entering direct-buying relationships with vendors that cut them out of the loop.

As they realize some high-end accounts are moving to a direct purchasing model, larger VARs and integrators are starting to look downstream for their sales. MicroAge Inc. chairman and CEO Jeff McKeever, for example, says the midmarket's 500- to 10,000-seat businesses are his company's sweet spot today. Only 20 percent of MicroAge's customers fall into the large category. Sixty percent of its clientele is in the midsize space, with the remaining 20 percent falling in the small-business arena.

MicroAge, Tempe, Ariz., changed its business philosophy last year when it examined its capabilities, the strengths of its competitors and the needs of the marketplace it serves. "These [midsize] customers may be too big for a local VAR to service because they often have multiple geographies they need to be serviced in,"

McKeever says. He says MicroAge is well-positioned to serve this space because of its acquisitions of regional service providers.

"We felt we were the right size and had the right capabilities to compete in this marketplace,"

McKeever says. He believes the midmarket space is dramatically underserved. "That's both the challenge and the opportunity," he says.

Another opportunity is deciding whether to serve small-business customers. "When you look at less than 500 seats, you're looking at companies buying maybe 10 to 15 systems a month or fewer, and they tend to have limited budgets," McKeever says. "You have the Internet and other direct marketers, as well as consumer electronics stores such as CompUSA, really positioned for that size customer."

Although only 20 percent of MicroAge's customers fall into the small-business category, representing roughly 10 percent of the company's revenue, McKeever says he wouldn't leave them. "Those are tomorrow's midsize clients," he says. "If you turn them off, you miss an opportunity to serve them as they grow. Yet it's difficult to serve them profitably today. It's a delicate balancing act."

One way MicroAge maintains those relationships and still makes money is by making use of its e-commerce offerings to help the smaller customer become as self-service-oriented as possible until it moves into the midmarket range.

The key to determining which markets to serve has been to focus on profitability. Both the small and midsize business markets offer an integrator plenty of opportunity. "But it's not about how much business opportunity there is," McKeever explains. "It's how you make money at it."

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