In a logic-defying twist, the economic downturn hasn't stifled growth everywhere. Instead, for a good number of VAR 500 companies, it's done exactly the opposite -- fueling aggressive, and by some accounts big-time growth -- illustrating that solution providers are a resilient lot that doesn't wait for the second knock before answering the door to opportunity.
"We look at the opportunity that comes with a market downturn to grab market share," said Bob Cagnazzi, CEO of BlueWater Communications, a Hauppauge, N.Y.-based solution provider.
And in the face of adversity, some solution providers are still hiring, bringing in the talent needed not only to accommodate current growth paths, but also to facilitate the future boom for when the market turns around.
"We're currently hiring because we're still growing," Cagnazzi said of the two-and-a-half-year-old BlueWater, which as of the first half of 2009 is experiencing growth of about 30 percent year-over-year.
Cagnazzi said BlueWater's head count is at 85 right now, and it has 10 open positions that it is actively looking to fill. And since the down economy has created no shortage of available talent, BlueWater is being selective. Cagnazzi said hiring is a rigorous undertaking and a time-consuming process that bubbles the best candidates to the top.
BlueWater, which hit No. 345 on the VAR 500, is hiring on all fronts, looking to bulk up its marketing team, eyeing sales reps and engineers to round out its regional presence.
And it's a trend that Cagnazzi sees continuing.
"We're two-and-a-half years old and we've been generating profit and cash since our first five months in business," he said. "We're financially extremely sound."
From 2007 to 2008, BlueWater grew revenue a whopping 81 percent, from roughly $39 million to almost $71 million in just one year. Cagnazzi attributes that rapid growth to BlueWater's ability to capitalize on trends, but a little luck didn't hurt either.
"You never discount luck for anything," he said. "We were lucky to be in some areas that saw growth. In some cases, we were in the right place at the right time."
Cagnazzi said BlueWater has had a solid run in the federal and education spaces, and its acquisition in 2008 of a consolidation and virtualization company has grown its presence in the data center, which Cagnazzi said has been a "phenomenal success."
But BlueWater isn't resting on its laurels. Instead, it's plotting an aggressive course for future growth, which requires bringing aboard more top talent as it continues its charge.
"In our mind, we're still a baby in the industry," he said. "There's a lot more we need to do, a lot more we can do and a lot more we plan to do to grow the business."
Doubling Up In The Next Two Years
Like BlueWater,Trace|3 is a young company with growth in its DNA. In its six years, Trace|3 has grown from zero to $100 million in revenue, a number it plans to double by 2011. From 2006 to 2008, Trace|3 grew from $23 million to $100 million in sales.
Just recently, Irvine, Calif.-based Trace|3 signed on three new sales reps and has more openings that will build its staff from 60 people to 85 in three years. By 2011, Trace|3 plans to bring aboard at least 11 more reps and 12 to 14 system engineers.
"Our strategy is to hire high-end talent," said Trace|3 CEO Hayes Drumwright. "We're only as good as the people we hire."
It's Drumwright's philosophy that solution providers that pay 30 percent to 40 percent better than the average market rate get 100 percent to 200 percent better performance out of the talent they sign.
"We shoot for very high-end guys," he said.
There's no hiring freeze in Trace|3's future, as the company comes off its most successful month ever in April 2009, a time when a lot of its competitors fought to dodge slumping sales and revenue.
"Operating in a slower market is not that difficult for us," Drumwright said.
Trace|3, which landed at No. 284 on the VAR 500, saw revenue skyrocket from 2007 to 2008, jumping 41 percent from $71 million to more than $100 million. Drumwright said that falls in line with the company's three-year plan and its strong focus on core vendor partners like Riverbed and Palo Alto, two vendors that make products that sell themselves in a down economy—Riverbed on the WAN optimization side, and Palo Alto for network security.
"We sell two or three products that are heavily ROI-focused," he said. "There's never a market where those kind of products don't play. Most of what we do saves money."
Drumwright said Trace|3's alignment with key disruptive vendors and the ability to drive customers toward groundbreaking, emerging technologies sets it apart from the pack and helps fuel its growth. Success has been so great, he said, that "the challenge of ongoing growth is finding the next Riverbed" to stay ahead of the curve.
As Drumwright said, staying on top of new technologies has become a necessity in the down market. "If a VAR can't do that, what value does that VAR add?"
For the next three years,Trace|3 plans to spur growth by signing on new clients and customers. In 2009, the company plans to focus heavily on net new customer accounts, bringing aboard 100 new customers that do $40,000 each in business. By 2010, Drumwright said, the goal is to have 20 of those original 100 customers doing $500,000 to $700,000 in business with Trace|3. And by 2011, five of those original 100 are expected to be doing $3 million each.
Staving Off The Slump
Like their younger counterparts, established players such as World Wide Technology Inc., a St. Louis-based solution provider and No. 52 on the VAR 500, are also experiencing growth and bringing on new talent to facilitate it further. From 2007 to 2008, World Wide grew revenue nearly 5 percent from $2.5 billion to $2.6 billion.
World Wide Technology CEO Jim Kavanaugh said his company has been able to stave off the economic slump, suffering no layoffs and bulking up staff throughout the year.
Kavanaugh estimates that by the end of the year World Wide Technology will bring aboard 100 to 120 people, 85 percent to 90 percent of whom will be in sales, business development, or billable professional services engineers focusing on key technology areas like the data center, unified communications, security and wireless.
In addition, Kavanaugh said, World Wide Technology has seen steady growth in the federal, state and local government segments. The company is also still hiring in the commercial segment, despite sales trailing off slightly.
"Some of the money is slow to trickle down, but we're seeing opportunities there," he said. "We're doing reasonably well, relatively speaking, to the market and the different things going on. We are actually hiring."