Fastest-Growing VARs

That's because the Toronto-based company (VB236), founded two decades ago as a supplier of paper, printer ribbons and diskettes, refuses to set goals around expansion. Instead, it chooses to focus on clients and let demand dictate everything else. "Do a great job first, and then the market will tell you how fast to go," Schweitzer says.

Well, the market must have given Schweitzer some strong signals recently, because his company has seen explosive growth,more than quadrupling sales in less than two years, while growing eightfold in employees, 10 times in locations and 25 times in inventory.

"And add to that probably 30 times in complexity," says the Bronx, N.Y.-born former restaurateur and journalist.

That growth hasn't gone unnoticed. Earlier this year, Ingram Micro named it a top North American partner based on sales, and Cisco tapped it as one of its fastest-growing IP telephony VARs.

The good news is that The RAM Group isn't alone. It's just one of many VARBusiness 500 (VAR500) organizations whose growth in 2001 dramatically outpaced its peers, proving that despite a tough economy, there is still opportunity for growth out there. While the average growth rate of the VAR500 was 5.3 percent last year, 56 companies ripped that norm to shreds, with growth in excess of 50 percent. Of those, 37 are pure-play solution providers whose customer relationships, technology expertise and smart acquisition strategies helped them increase business in a big way. These are just some of their stories.

Slow And Steady To Fast And Furious

Throughout the years, The RAM Group has expanded its offerings to meet specific demands, from delivering paper and supplies to technology reselling to full-blown solutions in everything from servers and storage to security and IP telephony. Ironically, it was that slow, steady progress that opened the door to fast growth by putting the company in a strong financial position when so many others were floundering. "Organic growth was stable, but flat," Schweitzer says. "For us, the big growth was all around acquisitions."

The opportunity came in the middle of 2000 with the post-Y2K, post-dot-com slowdown. While others were bleeding money and defaulting on payments, the modest-sized company had enough cash on hand to pay off vendors and distributors in 25 days or less, granting it favorable pricing. So, when a flare-up of bankruptcies started in the Toronto area, the company had plenty of cash to take advantage of it. "It was all because of what you would call boring growth during the past 16 years," says Schweitzer, whose company also created its own leasing company as a way to get a higher margin on sales.

And because Canada doesn't provide the same bankruptcy protections as the United States, many distributors, vendors and creditors, desperate to protect their interests in these struggling solution providers, asked Schweitzer to consider taking over other companies, collect the money and get it back to them. "The distributors pushed the receivers to go with us because we were able to keep things running," he says. "If you're not running and there is a discontinuation of operations, the receivables are as much a fire sale as inventory is."

So the company went on an acquisition spree, picking up systems integrator Questech, network integrator Genicom Canada, and white-box vendors Cemtech and Bloom MicroTech. "We became the one that could collect the money for the creditors, resurrect the company, keep the employees and do all those things the bankruptcy acts are designed to do," Schweitzer says. "That's what led us to this growth."

Now that the company has had some time to settle down and gain a clearer perspective on its position, Schweitzer is looking to go back into growth mode. And his company is banking on three areas to drive business: IP telephony, security and enterprise LAN solutions. But it has also got its share of challenges ahead, the largest of which comes from vendors who have become more aggressive, targeting new clients, undercutting prices and increasing their own services businesses. "When you add it up, companies like ours are left dealing with midsize and small customers, so the market becomes limited," he says.

E-Business Lives

Jack McDonald, chairman and CEO, has a single goal in mind when he talks about the future of Perficient (VB432): Turn it into the dominant e-services solution provider in the entire central United States, bar none.

The 4-year-old company's strategy is targeting second-tier markets,areas that have many Global 3000 customers, but are under the radar of

the industry's largest integrators. And, while the long-term plan is driving growth organically, recent conditions provided opportunities that were just too good to ignore.

"In the current environment, it's difficult to obtain critical mass through organic growth alone, so we're supplementing that with selective acquisitions," says McDonald, whose company late last year picked up Vertecon in St. Louis and Javelin Solutions in Minneapolis.

While the acquisitions have deepened the company's management, technical expertise and solution offerings, they also brought in a new stable of midsize clients and increased overall revenue by close to 80 percent,from $19.9 million in 2000 to $35.5 million in 2001. Now the plan is to make another acquisition or two, bringing revenue up to about $50 million, and then double that figure by 2003.

Barring any major upswing in IT spending, that kind of growth won't be easy. McDonald knows that, but he's still optimistic. "It has been a brutal environment, but ultimately we feel that helps firms that have been delivering real value for customers over the long haul and will continue to do so," he says.

Whether it meets its goals, it's clear the company is attracting interest from the right people. Just last month, it announced that 2M Technology Ventures, a firm founded by former Perot Systems CEO Mort Meyerson, took a large equity stake in the company. "That's a huge validation of what we have accomplished," McDonald says.

Like others in the e-solutions sector, Perficient saw its share of bad times recently, but it has seen revenue stabilize during the past quarter or two. That will make it easier to adjust costs and get back to profitability,something the company had been doing before the economic downturn.

Perficient's core strategy revolves around the "enabled enterprise," helping clients drive ROI for the millions of dollars they spent on IT in the 1990s. To do that, the company is focusing on two areas. The first is e-business infrastructure,the middleware, enterprise application integration, security and Web services necessary to build applications on. That's why the company is close to IBM and its WebSphere offering. The second is the application layer, using Web-enabled data to strengthen customer relationships, empower workers and cut supply-chain costs.

"We're energized even in the midst of this fallout because there's an opportunity here to do this right," McDonald says. "The hype's been blown away,there aren't going to be any more Time magazine covers,but this is where the real work gets done."

From Out of the Rubble...

Some of the best success stories are those born in the midst of chaos. Such is the case with Derive Technologies (VB267), a network integrator formed more than two years ago that managed to distinguish itself as the fastest-growing solution provider on this year's VAR500. The company was formed in early 2000 with the merger of Wall Street reseller Computer Connection and the organization formerly known as Computer Mechanic, which had been acquired by MicroAge in the late 1990s as part of its ill-fated foray into IT services.

With the demise of MicroAge, executives at Computer Mechanic had two options: Let employees go their separate ways or keep the group together and find a new way to go to market. Recognizing the strength of longstanding relationships, they chose the latter.

"That was a big challenge, because as MicroAge was unraveling, there were many sharks in the water who were going after our sales and services organizations," says John Wood, vice president of marketing. "But we kept as many people as we could together."

In need of additional support to get back on its feet, the company reached out to Kirit Desai, then CEO of Computer Connection. Because the two companies had worked together throughout the course of a decade, they knew each other's strengths and capabilities. The company pitched the idea of a merger, and by early 2000, Derive Technologies was born, with Desai at the helm as CEO.

Derive faced a long list of challenges. Aside from trying to merge two distinct cultures, it also had to deal with employee and client retention and financing. Meanwhile, Derive spent much of 2000 identifying the spaces it wanted to target, recognizing the need to build expertise in a few key areas.

"It's one thing to be just a network integrator," Wood says. "But now you need to hone down, focus in and become a specialist."

Storage became its core expertise, with the company building close relationships with Compaq and Citrix. Other areas of focus were security and server-based computing. A big part of the effort included expanding its technology capabilities, going from what had been less than a handful of engineers on staff to roughly 60 by the end of last year. As a result of its work, the company was named one of Compaq's top enterprise storage partners, in addition to becoming both a Citrix Platinum and Cisco Premier Certified Partner. The company also built stronger relationships with clients and technology vendors that could steer it in the right direction. The strategy worked, with Derive seeing a huge revenue jump in 2001, from less than $20 million in 2000 to $87 million.

While Sept. 11 didn't hurt business immediately, the real pain came at the beginning of this year, when clients started putting projects on hold. As a result, 2002 growth is unlikely to be that explosive. "We all read that there's going to be 35,000 layoffs here, 10,000 layoffs there, and the numbers just keep escalating. I've seen a lot of VARs throw their hands up," Wood says. "Those are the guys that are closing their doors."

Still, he thinks there are plenty of opportunities. While he's not overly optimistic about the rest of the year, he's not a fatalist either. "No, I don't see growth in 2002. We are seeing tremendous consolidation. The strong will survive, and the weak will be shaken out."

From Resumes To IT Solutions

When John H. Chuang started his company more than a decade ago as a typesetting outfit based in a Harvard dorm room, you can bet he never imagined it would be among the fastest-growing companies on the VAR 500. But thanks to good timing and a smart acquisition strategy, that's just what happened to Aquent (VB239), the company he founded in 1987 with fellow undergrads Steven Kapner and Mia Wenjen.

The firm, created as a way to make extra cash, started out as a typesetting company for resumes and other documents, and quickly grew into MacTemps, a staffing firm for Macintosh workers. The focus continued to shift during the years to technology, and the company changed its name to Aquent in 1998. But it wasn't until late 2001 when the company made its big move into IT services, with the acquisition of professional services firm Renaissance Worldwide, that it really started to grow. "That's what accounted for the doubling of our size," says Chuang, whose company grew from $40 million to close to $100 million in just a year.

Today, Aquent's business revolves around three areas: IT and professional staffing, IT and business-process outsourcing and technology consulting. While staffing is the largest money-maker, Chuang sees growth in outsourcing. Aquent has staked out a niche around corporate communications departments for large companies. "Right now, it's still a small part of the business, but I wouldn't be surprised if two years from now half our total business comes from outsourcing," he says.

While the IT consulting portion of the business remains small,roughly $5 million annually,Chuang says it's a stable source of income because it has a number of long-term, dependable clients. The company focuses all of its IT consulting on marketing departments, so technologies such as lead-management and customer-interaction solutions are its biggest sellers. "Anything that has to do with sales is getting a lot of attention from clients right now," he says.