Channel Partners Emerge With Allies

Partnering with other VARs can give you a competitive edge

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As the economy seeks to stabilize in 2002, channel executives have faith that better times are nearing. The ill effects of unprecedented declines in IT spending have left many solution providers with lower-than-expected,if not dismal,year-end earnings. To raise their volumes, they are attempting to sell more aggressively to prospering customers.

Faced with decreased resources, one way savvy channel partners can compete for choice customers is by forming strategic, cost-effective partnerships with capable providers. It's common knowledge that the key to gaining the competitive advantage is through a well-trained and highly skilled workforce.

"There's often 'coopetition' among the solution providers we partner with,they are competitors, but we cooperate with them anyway," says Terry O'Brien, senior director of new business development for Elite Information Systems, a Los Angeles-based enterprise solution provider.

Partnerships play an important role in improving cash flow, reducing overhead and fostering competitiveness. By joining strategically with another provider, you can gain access to and leverage competencies, enabling you to fulfill your project requirements more effectively and at a lower cost. And our 2002 State of the Market (SOM) research shows that approximately 18 percent of a solution provider's 2001 revenue, on average, was attributed to partnering with other providers.

According to Don Ganguly, co-CEO of Nexgenix, an Irvine, Calif.-based supplier of e-relationship professional services, his company frequently forms alliances to expand its skillsets. "Years ago, you performed one type of project for many clients; in today's tough times, you are often trying to do many more kinds of projects with fewer clients," he says.

In our SOM survey of more than 1,000 VARs, more than three in five respondents (64 percent) either subcontracted to or partnered with other providers last year. In addition, 44 percent say they partnered more this past year than in 2000. After all, few companies have everything they need. The No. 1 reason for forging alliances with other channel partners is to overcome resource limitations, cited by 67 percent of SOM respondents. To gain technical expertise (52 percent) and to work on larger-scale projects (51 percent) are also key reasons for partnering.

Pooling your company's solutions with another's can potentially offer your clients higher quality, seamless services. According to SOM research, some of the most popular services provided by partners in 2001 were application development (46 percent), e-business solutions (33 percent), integration of hardware and software (33 percent), LAN/WAN design (33 percent) and Web hosting/site development (33 percent).

When should you partner? "If it makes for a good strategic fit," O'Brien says. Moving forward, as the channel plays an increasingly essential role in IT distribution and deployment, building partnerships could yield big payoffs. Whatever your technological needs, there's someone in the channel who can meet them. And that someone is a potential partner.

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