Smart VARs Listen, Then Lead

"What keeps me up at night is making sure we pick the next correct IT wave, whether it be CRM or wireless or portals or disaster recovery," says Gotshall, founder of the Troy, Mich.-based company. "I've always got my ear on the railroad track, listening for that next locomotive."

Considering the fact that TSI just celebrated its 10th year in business and is profitable, it's safe to say Gotshall's company has been pretty good at choosing new waves to ride. His No. 1 strategy: letting client's business problems direct his business.

From CAD To the Web

TSI was founded in 1992 after Gotshall left his job as a senior sales rep for CAD/CAM software vendor Computervision. The idea to go out on his own came from existing clients, mostly automotive suppliers and manufacturers, who told him they were looking to work with a single company that could integrate the various CAD technologies into one solution.

"That really was the reason we started," Gotshall says. "We saw that opportunity, we hung our shingle, and out we went."

For the first few years of business, TSI made its money as a Computervision VAR and provider of CAD/CAM solutions targeted to the automotive industry. Business grew steadily, from $500,000 in sales per year to more than $12 million a year, based solely on the demand for CAD/CAM solutions. But Gotshall realized in the mid-1990s that he wanted to expand the business to other markets and technologies.

Like any good solution provider, he put client needs at the forefront of expansion, listening to their specific problems and then finding the right tools to solve them. Again and again, Gotshall heard his clients talk about wanting to better leverage internal information so they could expand to new markets. TSI identified database solutions as the technology that could help them succeed. He eyed several vendors and ultimately chose Oracle to build a new business on.

"We did it when we started the business, and still do it now, 10 years later," Gotshall says. "We ask our customers, 'What are your bottlenecks, [where are you having difficulty, and what types of innovative things are you trying to do within your organization?'"

Since then, TSI has played a key role in guiding clients toward new technologies that serve a specific need, including Web development and portals, and has expanded to new markets like banking and insurance, wholesale distribution and higher education. Today, the company has revenue exceeding $20 million annually, sells more than 50 different technology sets and has strong partnerships with vendors like Hewlett-Packard, Hitachi, Oracle, Sun and Veritas.

Quelling a Fear

Real Time Enterprises, a network consultancy that specializes in Linux, also listened to its existing customers and found a huge opportunity in that so many of them were having problems finding good training and information concerning the open operating system.

"We were mystified, because once you get rolling with it, Linux is easy," says Dennis Johnson, director of sales and marketing at the Eden Prairie, Minn.-based company. The problem, he says, was the majority of existing training programs gave participants an overload of information without customizing content for their specific needs. So the company developed customized Linux training programs, based on what clients said they wanted to learn. "With desktops, people came in and said what they wanted or what they were afraid of, and we worked it out for them," Johnson says.

Today, those programs are big sellers for the company. What's more, Real Time's close relationship with customers,from the National Football League to small, regional nonprofits,helped the company identify client fears and shape a go-to-market strategy that works, especially for bringing Linux to the desktop. "For a lot of people, it's a new thing, so they have that fear of change," Johnson says.

Real Time also built a lab to show clients how they can use CodeWeaver's CrossOver offerings to emulate the Windows applications they are already comfortable using. And, listening to client fears about completely dropping Windows, the company is trying to make the transition a little less dramatic. "Everybody [in the Linux space is pushing the idea to totally drop Windows, but it's something that the general public says is a huge decision," Johnson says. "Since we are so close to our customers, we realized that they can't afford to rock their employees' boats that much. They are going to look for that happy medium of loving the environment, but looking at new applications."

Reinvent Yourself

Dave Sperry, CEO of San Francisco-based MicroMenders, says the most successful VARs are the ones who reinvent themselves every three years or so as a way to keep up with new technology offerings. Like TSI, MicroMenders uses customer relationships as the main influencer when choosing which new technologies to invest in. "A single place to start is to ask your clients what scares them right now," he says. "And out of that come things like security and intrusion-detection, and secure wireless technology."

As a result of those client fears, MicroMenders has begun developing stronger intrusion-detection solutions for its network-operations center so it can take the more complex virus, intrusion and security issues out of clients' hands.

But the problem with being too responsive to client demands, some solution providers say, is you run the risk of spreading yourself too thin. That's why it's important to find a workable balance between new technologies and what you are already good at. "Customers will ask you to do different things all the time," Gotshall says. "If you get away from your core competency or change too radically, you'll be all over the place."

For instance, when TSI made the decision to expand into database solutions, the company waited until it had enough client demand to support the new venture. "So when we heard about a client with a problem around sharing dissimilar databases, and we knew a thin-client solution would enhance their ability to analyze data, we wanted to hear that not once or twice, but again and again,maybe 10 or 15 times," Gotshall says. "We did some what-if scenarios and [decided we could solve that problem. Once [clients said they'd buy it, then we went out and looked at the marketplace at the solutions available."

MicroMenders has a bit of a different strategy. When looking at a new technology to explore, the company wants to know if it has already been deployed successfully for someone else. "We want to know that somebody else has played guinea pig already, and that it has generated client interest," Sperry says. "If they say, 'Hey, Client X did this,' then it's more interesting for me to get involved."

It's that focus on proven technologies that has enabled MicroMenders to stay in business while other companies in its space have faltered, Sperry says. "I think some businesses undoubtedly have the perspective of being first to market and getting the lion's share of the ROI," he says. "And that's fine if you guess right. If you guess wrong,I'll be reading about you in the paper."

For instance, Sperry thinks voice-over-IP is one technology that has, so far, fallen short of its expectations. "It's one of those technologies that I don't think is being adopted as quickly as VARs thought it would," he says. "The cost to get up-to-speed on the training, investment and equipment is substantial. Jumping at the new technology is quite risky right now, I think."