Vertical Virtues

Financial services and health care remain two of the most popular verticals for this year's VARBusiness 500 companies. The government and education markets are gaining momentum as well, as providers help schools and local government offices find grants and other sources of income in order to creatively use technology to meet their very specific needs.

"Customers are coming to us much earlier in the sales cycle than ever before," says Dino Farfante, president of Tempe, Ariz.-based Insight Worldwide, which focuses on the medical, financial and retail markets. "Instead of being one of many RFPs, they want us to help solve their business needs through our engineers. That allows us to entangle ourselves with our customers much deeper from a technology and IT standpoint."

Financial Services
Particularly in financial services, where the largest percent of solution providers are setting their sights (55 percent, according to VARBusiness 500 research), VARs are finding opportunities. Insight Worldwide VB26, for example, helped a large insurance company replace its sales team's notebook computers on a nationwide basis.

The company, which Insight would not name, was concerned with the potential of downtime, as well as the challenge of trying to seamlessly upgrade such a geographically diverse group. To address these concerns, Insight created a computer lab at one of the company's annual business meetings. As each of the 500 salespeople arrived, they were asked to turn in their notebook computers. Insight technicians transferred their data from the old systems to the new, did the network setup and asset-tagged the new system.

"We need to be targeted at fulfilling specific business needs rather than selling product," Insight's Farfante says. "Rather than going in at the end of the sales cycle and bidding on a product sale, we have been very successful in identifying a business need and working toward fulfilling it."

Health Care
For their part, health-care customers are looking for partners who are familiar with their myriad evolving requirements.

"A number of our health-care customers are looking at wireless solutions. HIPAA has created a challenge in maintaining the security of information of both the hospital and the patient," says Russell Doll, president of Bell Industries' Tech.Logix Group VB223, El Segundo, Calif.

In fact, HIPAA continues to feed opportunities to companies that are willing to help educate customers on how to make themselves compliant.

"We started two years ago educating our customers about HIPAA," says Kurt Schmelz, vice president of sales at Electronic Systems (ESI) VB199, Virginia Beach, Va. "We are still trying to reach smaller practices that are not as well-informed and don't have the IT staffs or resources available to keep up to date with new regulations and the impact of those."

One challenge in tackling the health-care market, served by 51 percent of surveyed solution providers, is that many large organizations have divided cost centers. ViableLinks VB453, Tigard, Ore., for example, was hired by a diversified medical group with divisions that act as independent units.

"We have to deal with each group individually," says Eric Kornberg, marketing manager at ViableLinks. "They would love to join forces to get a better deal, but that's just not how it is set up."

Local Government
No mincing words, local-government customers invest in technology only if there is a clear-cut cost-savings opportunity.

"One of the main drivers in the marketplace is obviously that state governments have to reduce costs," says Henry Cheli, president and COO at Annese and Associates VB391, Herkimer, N.Y. He points to security and VPN networking as one technology area that offers opportunities in the local-government segment. "With security, you can provide a robust offering and reduce costs tremendously," he says.

Altura Communications Solutions VB343, Anaheim, Calif., has found its niche in providing telecom solutions and reports that local governments is a strong segment for it. It is one of 48 percent of survey respondents that works in the space. "Often, we can help them eliminate costs if they have multiple sites because they can bypass toll charges by going over a WAN with IP telephony," says Mark Izumi, director of sales and marketing at Altura.

Indeed, budget constraints remain the biggest challenge to technology sales. "They don't have the money to spend that they used to have, and they have to be more creative about spending the money they do have," Cheli says.

K-12 And Higher Education
The K-12 and higher-education markets claim the attention of 22 percent of VARBusiness 500 respondents, respectively. Despite tight budgets, schools increasingly are using computers for every student, and that is ratcheting up both the total number of computers and the importance of the technology to the schools.

"We are seeing school districts, counties and, in some cases, even whole states support initiatives that put laptop computers in the hands of each student," Bell Industries' Doll says.

This evolution has translated into the education market taking on some of the characteristics of midsize enterprise-level customers, Doll adds. Most schools, however, typically don't have the manpower to address their expanding technology needs, so they turn to solution providers for IT muscle. ESI, for example, helped one school system roll out 4,500 desktops and 200 servers in a 30-day period across 82 user sites.

"Our experience has been that the reliance of schools on business partnershas increased," ESI's Schmelz says. "They are relying on us to bring new developments to them as they occur and to help them execute on them."