Arrow's Bryant: Our Head's In The Cloud

created a separate business unit

We last talked to you about a year ago. Tell us what's gone on with Arrow since that time.

We talked about ROI last year and for 2010, ROI will continue to be front and center. The good news is that IT spending is beginning to break loose in the market. But it's only going to be had by VARs that can create tangible ROI with CIOs and CFOs. That's something we're helping resellers do.

The large enterprise companies are leading the turnaround of spending because their balance sheets are strong with cash. But they are looking for tangible cost savings, then productivity on top of it. You're dealing with fewer employees for these companies and IT is the number one way to get automated and get more productivity. That will trickle down to SMB. We're still not getting as much spending in the SMB space, but as credit loosens that will happen.

When do you see the SMB market breaking through in terms of spending?

I think in the second half of this year. The SMB spends when they are most comfortable and certain. When they see business turning around. Resellers want to add more vendors to their portfolio. Vendor suppliers are looking to broaden their customer bases. They can't continue to sell the same products to the same customers. Cloud computing is a new way reach to more customers. That will happen first in SMB.

What is Arrow ECS planning in terms of cloud offerings?

We see an opportunity to help our customers build out their own internal cloud infrastructure and to distribute external cloud services to end users. Today, we're working with MXLogic, which was bought by McAfee, in that regard. That's an e-mail security archival storage solution that we offer in a managed service environment. The cloud gets lots of definitions. There's whole new opportunity around Google, Amazon and others to service the broader consumer market and perhaps SMB can ride that wave as well. We see our role as an aggregator to help the VAR sell through to the end user.

Speaking of Google and Amazon, are you having conversations with them about a channel play? Can you tell them that you and your partners can help them reach business customers they might not get by themselves?

Not yet. At some point we will talk with them. So far they provide their services really in a direct offering much like Dell has gone to market. They are out offering the service but we haven't seen a channel play there yet. We're also working with Verio for security, hosting and network-management products. [Our] services group is embryonic, but it's moving quicker than most people think. The number one challenge [in the cloud] is still security. This is where Arrow is in a particularly interesting position. The last few years, we've built a large security offering. And we're the largest VMware distributor worldwide today. Go back up the wire and we have the storage players too. EMC, they bought RSA, they bought Data Domain. We are able to bring these things as an end-to-end solution. The security piece is becoming more meaningful if you can tie it back to an enterprise data center problem. Security at the desktop is one thing, but security for the cloud is in environments that exist today. This is a really good position for Arrow to be in.

How do you help VARs move from project-based revenue to more of an annuity stream?

You start with education, training and offer this new opportunity to crate revenue and profits for resellers. One thing we have that's foundational is we completed an ERP rollout in North America last August. That's enabling us to have more dynamic portals [available] out to resellers. In this annuity stream model, it's about who has the ability to see adds, moves and changes. We have the capability to do annuity billing streams for the end user, so we look like an end-to-end solution. The reseller gets to enjoy our capabilities in this way. It keeps the reseller very much entrenched and very much in the value chain.

Are your VARs doing more leases now vs. a year ago?

It's been a growing percentage with our VAR base. End users are saying they'd rather expense it than put out the capital. More and more industry-standard servers are putting on two-to three-year leases because the lifecycle of those is fairly quick. A lot of companies are choosing to do that.

With the swing in the economy, how many of the VARs that you had a year or two ago are still around? Also, how many new VARs do you have and what do they look like?

There's always flow in and flow out. The net, when I last checked, was we moved up slightly in the number of VARs we're servicing total. As always, a percentage of them represent a certain amount of revenue. One of the things helped us grow the VAR base is our Mpower initiative. We have 200 new resellers in our midmarket program that were new to Arrow. Those are companies enjoying tens of millions of revenue. We're in the midmarket, driving virtualization, network security, storage management. Servers are always front and center of course. We've helped them in [vertical markets including] manufacturing, distribution, health care, some in finance. We've added retail to the verticals. The other thing is we've become a GSA schedule holder to more suppliers. That's helped us expand in the government area.

Where do you see big vertical opportunities in 2010?

Health care will continue to be an opportunity. The normal areas of high-performance computing will be pretty good, like finance. Manufacturing is an area we'd like to see more activity in, but should be OK. The whole consumer retail space is picking up and driving so much of the economy.