VARs Struggle To Keep Up With Wall Street's Wild Ride

It's a straightforward question, but the answer, according to John McNeely, is anything but simple: How has the wild ride of Wall Street this week impacted your business?

The CEO and president of Sword & Shield Enterprise Security, a Knoxville, Tenn.-based solution provider, said it's a hard question to answer because his business is being hit on a number of fronts these days.

The good news is that U.S. stocks rebounded Tuesday, a day after the Dow Jones fell 777 points when Congress couldn't agree on a financial markets bailout. The Dow rose 485 points or 4.7 percent Tuesday. Meanwhile, the tech-heavy Nasdaq Composite Index was up 99 points or 5 percent.

But McNeely points out that the wild economic swings of recent weeks can fester in many different ways. For one, there's the gasoline crisis snaking its way through several Southern cities, most recently and perhaps most notably Atlanta. Knoxville, about three hours north of Atlanta, recently had some of the highest prices in the country, based solely on rumors of an impending shortage.

"We are a consulting company so we have to go onsite for engagements, which affects our travel expenses and increases our rates [to customers]," McNeely said. Typically, gas prices in this college town are below the national average, he added.

Then there's the financial markets situation. Sword & Shield deals mainly with regional banks that haven't been impacted by the struggles of the big financial institutions, but McNeely is smart enough to know his company's financial security can change tomorrow.

"We have a lot of things in place already that aren't impacted by current crisis, but where we have concerns and where we're keeping an eye on is we have five lines of credit with five different distributors for product reselling. It remains to be seen how that is impacted," he said.

Then there's the housing market. McNeely typically recruits nationally and pays for people to relocate to Knoxville because the local talent pool can't meet his IT requirements. He can still find people he wants to hire, but now nobody can afford to sell their house to move to Tennessee, even at a cheaper cost of living, he said. "If they can't get out [of their current situation], they're not willing to move."

Like McNeely, Mark Wyllie, COO of Compuquip Technologies, a Doral, Fla.-based solution provider also chuckles at the question of what the market's ups and downs this week will hold for his company.

"Coincidentally, we just got approved for a large line of credit with a local bank. We were kidding this morening that maybe when we go to use it, they'll say "Geez, we were just kidding,'" Wyllie said laughing.

Compuquip closes its fiscal year today and Wyllie noted that among the top 20 accounts he had on this date last year, sales with 17 accounts are down a collective 26 percent. "And 10 of those customers are financial institutions," he said.

His top 20 accounts today, mostly different names from a year ago, are up 32 percent through the first 11 months of Compuquip's fiscal year, Wyllie said. "We've also had a bunch of other companies approaching us about acquiring them or doing some partnerships because business is not that good for them," Wyllie said.

All the solution providers can do is try to plan appropriately and hope the roller coaster ride is over.

"We're in trouble whenever we see banks of significant size being bought or taken over, that's a sign we're in something serious," McNeely said. "People are comparing this to the Depression, but there's a big difference between now and then. There's still a lot of cash that companies have. Some of this depends on where government goes with a bailout. If that happens, we will rebound. But I'm not sure anybody really knows what will happen."

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