Cutting The Numbers

VARBusiness' Annual Report Card Awards shine a spotlight on the technology companies and professionals that offer the best solution-provider programs in the business.

Now in its 18th year, the study evaluates 75 vendor programs in 18 technology product and service categories. Detailed results and analysis of our partner satisfaction are showcased in the pages that follow. In conjunction with our annual assessment, however, we also collect a wealth of demographic data about the solution-provider community. Together with our assessment of partner satisfaction, the information provides a unique snapshot on the state of the partner and vendor ecosystem. First up: some interesting findings on the state of the partner community.

Demographic Trends

No question, partners are feeling more upbeat about the state of the economy and their prospects, in particular, than they have in quite some time. Consider the following: Sixty-three percent of solution providers expect business to increase with their ARC vendor partners in 2004. A year ago, the figure was 59 percent, meaning that the business improvement that solution providers have enjoyed this year is expected to continue through next year as well.

VARs most likely to look ahead to improved business include those partnering with EMC, which participated in our network storage and storage management software categories this year. Ninety-one percent of EMC network storage VARs say they expect their EMC business to improve next year. Likewise, 82 percent of EMC storage management VARs say they, too, expect sales of EMC products to improve in the coming year.

Solution providers also say they expect sales of other network storage vendors' products to improve in 2004. For example, 82 percent of IBM network storage VARs say they anticipate that their IBM sales will increase during the coming year.

Conversely, things do not look so good in the advanced desktops and workstations category, where just 48 percent of VARs say business is likely to improve.

When it comes to customer focus, more solution providers depend on small businesses that employ one to 99 employees for more of their revenue than any other customer segment, meaning the midmarket customer base (100 to 999 employees) or the large enterprise market segment (1,000 or more employees). Nonetheless, solution providers say they sell to accounts of all sizes. Specifically, solution providers derive 44 percent of their sales from small businesses, 29 percent from midsize enterprises and 27 percent from large customers. A year ago, the numbers were 49 percent, 26 percent and 25 percent, respectively. What's interesting is that solution providers seem to be focusing more on midsize companies than before, and large corporate customers, too. In conversations with vendors' preferred partners (those we polled in the ARC survey), we've learned that many are migrating to midsize to enterprise customers due to their more complex IT needs and more stable IT budgets.

One other notable demographic finding: Despite the fact that companies have honed their expertise and developed areas of specialization, the average solution provider generates revenue from a variety of offerings. For example, our study found that solution providers generate close to one-third (29 percent) of their business from the sale of services and consulting, and roughly one-third from the sale of systems (29 percent). The rest is software (17 percent), networking hardware (16 percent) and storage (9 percent).

Notably, partners continue to rely on distributors for most of their purchases. On average, for example, 70 percent of solution providers' purchases are being sourced through distributors, according to the survey.

Satisfaction Outlook

Of all the companies included in this year's survey, none did better than Samsung, which swept its category (display technology) and wound up with the overall highest scores in the entire study.

But others did well, too. IBM won the most awards, followed by Microsoft and HP. Intel and AMD also stood out, scoring high in our desktop and server processors category. Their scores were among the highest in the entire survey. Alas, as you can read on page 86, Intel narrowly edged out AMD as our ARC champ there.

Some victories, without a doubt, may come as a surprise. Triumphs for Sun (advanced desktops and workstations) and IBM/Tivoli (storage management software), for example, come just one year after these vendors placed fourth in their respective ARC categories. In contrast, both Dell (entry-level servers) and HP (network storage) dropped this year. Both slipped from the No. 1 to No. 4 spot in these ARC areas, largely attributable to plunging scores in the support subcategory.

Interestingly, solution providers are looking to those that can help increase their sales and margins. Thus, our measure of which vendor provides the best return on investment (ROI) turns up some interesting results. According to the ARC, vendors that offer the highest ROI are Samsung, Intel, IBM (iSeries servers), Macromedia and Maxtor (enterprise disk drives).

One additional finding worth noting: Overall partner satisfaction has waned somewhat over the years. We measure partner satisfaction on a weighted scale of 100. The score for 2003: 68. In comparison, the score last year was 69. In 1995, it was as high as 75. Clearly, solution providers are either getting testier with age or more exacting in what they like and dislike about vendor partner programs. Maybe it's both.

Analysis of ARC data completed by Answers Research reveals that there is a disconnect between how important solution providers rate various aspects of a partner program, such as reliability, and their level of satisfaction with that attribute. Bottom line: There's always room for improvement.

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