For VARs, Wall Street Mess Creates Upheaval and Opportunities

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The financial crisis that struck Wall Street giants Lehman Brothers and Merrill Lynch as well as insurance behemoth AIG has many solution providers shaking their heads in dismay.

"In all the years I've been in business, I've never seen anything like it, in terms of the economic sector reeling," said Dan DiSano, president of IT soulution provider Axispoint.

"It has an impact on the overall economy," he said. "We're a global company, but local New York business in particular will suffer. For example, if you focus on retail and your location is by Lehman's building, you'll suffer. Thousands of people won't be going to that location any longer. In addition, there are firms that focus on the financial sector; if you focused 50 percent on Lehman and Merrill, you're in deep trouble. Hiring firms are in trouble too, with the fall of those corporations in addition to others like Bank of America and J.P. Morgan Chase looking to cut."

The collapse of the investment banks coupled with the recent failures of Fannie Mae and Freddy Mac will have a detrimental impact on the entire economic ecosystem, said Vivek Mehra, Vice President, Global Financial Services and Insurance at IT consultant Keane Inc. But there are also opportunities for solution providers.

"The economy will clearly slow down as a result of lack of credit in the markets," Mehra said. "IT spending will be a mixed bag -- there will be greater spend in areas such as risk management, compliance, reporting and auditiing, as well as spend on IT outsourcing -- as a means of reducing IT operational cost. Discretionary spend will decrease."

With the focus on trimming back and buying on need vs. want, VARs that can provide services aimed at improving return on investment, or cutting costs outright for clients, will position themselves well for the future.

"Projects that are focused on reducing costs will get higher priority especially if they can show a clear ROI," Phil Neray, vice president at database security company Guardium said. "In part, those will have to do with reducing compliance cost. For example, many companies initially instituted simple, manual approaches to SOX, so they are now looking at automating those controls. "

The key will be to stress how a VARs' product offering and services can help companies do more with less. As credit gets tighter, spending scrutiny will become more intense.

"Our company will probably see minimal negative impact however, simply because our business model is one of saving our customer's money," noted Mark Metz, CEO of solutions provider Corus Group, of Norcross, Ga. "IT projects and spending are going to be under further scrutiny. With capital being tight, CFO's are going to look closer at each investment and hopefully this won't lead to a slowdown in innovation as projects will be judged primarily on cost savings."

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