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VoIP is widely viewed as a hot technology and has been the focal point of several significant vendor initiatives.
According to 2006 VARBusiness 500 research, 49 percent of respondents resold VoIP solutions, which placed the technology No. 15 out of 19 categories. In terms of its growing importance, VoIP ranked second. This year, the technology ranked the same in terms of its growing importance--No. 2--and the percentage of those selling it inched up three percentage points, to 52 percent.
IP telephony sales seem to be growing fast among those VARs already working with the technology, but for others, there are a few barriers to entry--competition, expertise and marketing issues. It's interesting to note that about 30 percent of those surveyed said they turn to subcontractors to provide the VoIP component of solutions, more than for almost any other technology.
"We have lots and lots of partners in the United States, but only a few hundred are the ones that are out there really driving unified communications," says Denny Trevett, director of advanced technologies for U.S. and Canada channels at Cisco Systems. "It's a short list, relatively speaking, but these are really our most successful partners."
Routers, switches and other core networking hardware ranked surprisingly high in this year's survey.
Although it's not often viewed as "sexy," core networking hardware was cited by 72 percent of VARs. About 60 percent of them have added a network hardware vendor in the past year, and about 43 percent plan to add one in the next 12 months. About 23 percent of respondents said they plan to expand their networking hardware business in the next year.
Some VARs say the main driver behind core networking sales is rapid growth of the load that businesses place on their networks. Enterprise apps, IP telephony, voice- and video-based collaboration packages, and WAN architectures demand ever-increasing bandwidth, forcing businesses to look for new hardware that expands the pipeline and offers more sophisticated traffic-shaping and optimization.
"It's at the forefront of everyone's mind--that when they roll out new applications, they need to make sure the network can sustain that load," Trevett says. "If you're rolling out any kind of new application, you probably have to touch the network."
A second factor may be mere timing. Routing and switching hardware typically has a refresh rate of about six to seven years, which would make 2006 and 2007 big years for companies that refreshed their hardware in the years preceding 2000.
Not-So-Small Servers?
Entry-level servers made a surprisingly strong showing this year.
Although the demand for inexpensive servers has grown in the SMB space in recent years, their low profit margins wouldn't suggest they would be a focal point for the VARBusiness 500. But 74 percent of those surveyed said they resell entry-level servers--including more than 82 percent of the top 100 VARs--ranking them No. 2, just behind storage hardware. Seventeen percent said they would lead with low-cost servers when making a sale, ranking them No. 7 out of 21 technologies.
And entry-level servers aren't just going to SMBs. "There are more inexpensive 1U servers in enterprise data centers than you might think," says Bill Cate, Sun Microsystems' senior director of Global Channel Strategy. "They also end up in remote offices or in departments."
Adds Relational's Schinsky: "Instead of buying a $2 million box and slicing it up, you can buy lots of $8,000 boxes and spread your risk. I think the decentralization pendulum is starting to swing back that way because some vendors [need it to]. They're not competing at the high end."
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