No More Howdy Doody

What Zarley and Kovar have found is that more and more solution providers are expanding their reach beyond this country's borders. The labor advantages that come with this decision are providing them with huge competitive advantages. Ultimately, the geographic expansion is being fueled by the unstoppable global IT economics that's driving more programming and engineering overseas, where skill levels are high and labor costs are low. It's just getting harder and harder to be competitive for certain solution sets unless you have that global reach. Another sign of the bone-crushing business economics of globalization is the increasing consolidation among top-tier solution providers and the influx of private equity capital. Those VARs with a fondness for nostalgia and the "old days" are going to see the new global IT world pass them by.

Businesses of all sizes are increasingly outsourcing noncore activities overseas as a way to lower costs and gain a leg up on their rivals. VARs have to pick a well-defined strategy and align the economics of their business around it. This is something best-selling author Geoffrey Moore talked about at the recent CRN Industry Hall of Fame event. Moore, whose new book is called "Dealing With Darwin"How Great Companies Innovate At Every Phase Of Their Evolution," told solution providers that they have to get out of the nostalgia rut and forget about the days of high margins for selling a PC or a server. Get over it, Moore says. He says VARs have to either pick a complex systems model where they get paid high margins for innovating or a volume model where lower margins prevail. One thing is clear: You can't fight global economics.

The Darwinian forces at work in the solution provider business are almost beyond belief. It's time to make some hard decisions about your business. If you want nostalgia, go pick up a Howdy Doody doll. VARs everywhere have to decide whether they want to eat or be eaten.

Are you nostalgic? Let me know at (781) 839-1221 or via e-mail at [email protected].