2005 VARs of the Year

Charity may begin at home, but it can sure pay off at work. That's what Lighthouse Computer Services has discovered. The $100 million Lincoln, R.I.-based company has benefited nearly as much as the charities it supports in New England enjoyed increased business. There it sponsors a number of local community events in conjunction with the New England Patriots football team and other sports organizations.

The resulting publicity helped the company grow its business faster than many other companies in its region. This and other reasons have made Lighthouse a standout among channel companies. For its efforts, VARBusiness has named it a VAR of the Year. In this first year of our VAR competition, we recognized--and in this feature profile--six different companies in the following categories: Homegrown Technical Innovation; Sales Excellence/Demand Generation; Advanced Technology Deployment: Security; Advanced Technology Deployment: Mobility; Customer Return On Investment; and Business Ingenuity.

Although many vendor companies evaluate and honor VARs belonging to their programs, this is the first independent, multivendor assessment of VARs in key, interdisciplinary categories. Editors began by soliciting nominations and suggestions from the vendor and VAR communities this summer. After evaluating entries, winners were selected by top editors at the publication (see methodology).

In Sales Excellence/Demand Generation, Lighthouse took top honors. Its application and execution made it a standout, while others, including some award-winning VARBusiness 500 companies, also made an impression. Logicalis CEO Mike Cox received the VARBusiness 500 CEO of the Year award in June and his company again was a finalist in this competition with its commitment to create a brand identity through its sponsorship in the Rahal Letterman Racing (RLR) motor-racing team. In fact, the company is the "Official Information Technology Partner" to the team, which has benefited greatly from the addition of Indy Racing League rookie sensation Danica Patrick. Her showing at the Indianapolis 500 last May attracted unprecedented attention to the team, which boasts TV personality David Letterman and former Indy 500 winner Bobby Rahal as owners.

The opportunities presented by Logicalis' involvement with RLR have been nothing short of incredible, according to the company--so much so that it recently signed another three-year sponsorship agreement. Among other things, the company has used the events to entertain and host customers, demonstrate its technical prowess in a difficult environment and attract new business. In fact, Logicalis serves RLR with ongoing managed services, demonstrating to prospective customers yet another way Logicalis can meet their business needs.

In almost all of the categories, VARs demonstrated their versatility and aptitude. Consider the diversity in the Homegrown Technical Innovation category, which recognized the engineering work in advanced solution design, software development and/or hardware integration. Applicants were encouraged to strut their technical stuff and articulate how their companies' intellectual property creates new solutions.

Finalists showcased their work in a wide array of pursuits--everything from custom displays for the Nasdaq trading floor, medical-claims processing applications for the Web, custom rack-mountable storage servers for the Navy and a manufacturing solution for Microsoft Business Software customers, to name a few.

In this category, VARs innovated solutions for customers and for themselves. These include technical or business solutions that make running their own companies easier. In the end, VARBusiness chose Advanced Technical Solutions (ATS) of Scott Depot, W.V., as the VAR of the Year. The company was among the smallest to have made it to the final round of judging. With sales of less than $4 million this year, it is at least an order of magnitude smaller than several other competing firms.

Nonetheless, ATS, a premier Cisco Systems partner, distinguished itself from a technical and customer-satisfaction perspective by building an innovative bank-on-wheels solution for Peoples Federal Credit Union. Consider what the credit union had to say about ATS: "Throughout the whole design process, we were always working right on the edge of time-delay issues, but remained confident that it could be done," says Jeff Snider, vice president of IT and marketing. "Time and again, I'd come up with something else we'd want or need from this mobile branch, and ATS never said no. It just goes to show that sometimes the ability to achieve is not knowing you can't achieve it."

A Trend In the Making

When VARs weigh in en masse about what they're doing, key trends emerge. The competition entries reveal much about where the solution-provider community is headed. Take managed services, for example.

Clearly, managed services are showing real promise for many VARs. One, Alvaka Networks of Huntington Beach, Calif., is literally writing the book on managed services. Its founder and CEO, Oli Thordarson, has spent several years building his managed-services business. He was a founding member of the Global MSP Network, and has worked with several vendors to help them build MSP programs to meet the needs of solution providers. More recently, he has begun a book about developing a successful and profitable managed-services business.

A finalist in the Business Ingenuity category, Alvaka is, in its own words, "taking managed services to the next level by unbundling managed services so clients can purchase only the services they need." The new offerings have suddenly opened the company to a much broader client base with discrete IT service needs.

Thordarson is sharing what he learned about building a managed-services business in his book because he believes it will increase acceptance and understanding for the go-to-market strategy. It's a page he's borrowed from the playbook of former Novell CEO Ray Noorda, who often shared his strategic wisdom on networking in an attempt to--as he often put it--"lift all boats" in his company's chosen market.

The timing couldn't be better. According to VARBusiness' own 2006 State of Market (SOM) survey, 41 percent of VARs say their firms now offer some form of managed services. Moreover, an additional 22 percent say they are considering offering it in the next 12 months. Given that many CEOs of IT solution-provider companies say the transition from a transaction-oriented selling company to a more consultative managed-services provider organization can take as long as five years to complete, Thordarson's book couldn't come at a better time for a sizable percent of the VAR community.

Ironically, Thordarson's company came up ever so short in the Business Ingenuity competition against another company with a burgeoning managed-services business, Future Tech Enterprise of Holbrook, N.Y.

In the past year, Future Tech has introduced new practices and offerings to complement its existing competencies and resources. For one, it built what it believes is the East Coast's first structurally secure disaster-recovery data center that offers more than a dozen managed-service offerings. The services are comprehensive, expansive and easy to acquire and invest in. The company has even developed a contracting vehicle, ContractOne, that consolidates a customer's IT contracts for goods and services under one umbrella. It has proved to be one of Future Tech's most popular offerings to date, has brought in new customers, and helped the company get closer to existing ones.

Standouts In Their Field

What makes one VAR better than another is subjective. Some metrics do separate weak companies from stronger ones, of course, but they don't tell a complete story. Sales and earnings, for example, can tell you which companies are extracting money from a given market, but they won't reveal which ones provide the best customer service.

This simple truth challenges those managing partner and channel programs and vendors big and small. Those with mature channel programs--and hundreds, if not thousands, of business partners--often study what separates better partners from weaker ones. They do so to better classify partners to ensure that support is meted out squarely, leads disseminated fairly and rewards given accordingly. Cisco, for one, looks closely at how well its partners perform from both customer-service and financial standpoints. During the time that Cisco has measured the former and monitored the latter, it has discovered that its best go-to partners are the ones that consistently post profits and receive high marks from customers. "Well-run shops rise to the top from a variety of angles," says Chuck Robbins, Cisco's vice president of U.S. channel sales.

Predictably, almost all VARs succeeding in this year's VARs of the Year competition report healthy profits and growth rates above 10 percent, with some exceeding 30 percent.

Advanced Technical Solutions, for example, will likely see its sales grow 40 percent this year and is on track to do equally as well in 2006, according to its finance chief. One reason: The company is taking great efforts to measure the efficacy of what it does for customers and document what works.

The VARs of the Year winners are, in sum, developing true best practices and repeating them at every turn. It's winning them accounts, getting them closer with existing customers, and, in several cases, earning them well-deserved recognition in their fields.