No End In Sight To Channel Consolidation

The acquisition marks the fourth deal over the last year for Net@Work, which has 90 plus consultants and a robust applications business including a thriving Sage practice. Terms of the deal were not disclosed.

Another sign of the times: Certified Security Solutions, a Kirkland, Wash. security consulting services firm, just announced a deal to acquire DHK Associates, a Portland, Oregon security solution provider with compliance expertise.

As for the Net@Work deal, Werkflow founder and President Christina Strack joins Net@Work as director of sales for the company's infrastructure business. She will manage Net@Work's network-side vendor relationships such as Citrix and Cisco along with recent partnerships with Mimosa Systems and Equallogic.

Werkflow provided small businesses across New York with technology assessment and disaster recovery services and implementation and support of key products including Microsoft offerings and ACT contact management.

Alex Solomon, Net@Work's co-president, said the deal provides Net@Work not only with new network infrastucuture and security services, but the foundation for a managed services offensive. He said Strack's expertise with moving to a managed services model will be a huge competitive advandatage as Net@Work ramps up that business. "We sell services through blocks of hours right now," he said. "Werkflow was well on its way to a managed services model. As Director of Sales, Christina understands that philosophy. That will make it a lot easier for us to go after that business."

Solomon said the deal is yet another sign of the channel consolidation as customers demand an end to end solution from a single solution provider rather than working with four or five different partners. "You are going to continue to see non stop consolidation in the channel," Solomon said. "The little guys are not making it. They can't make the margins they used to. I think the smaller companies realize they can no longer survive. It is over. From a client's perspective why do you have to deal with four or five different vendors? The market has changed. Providing an end to end solution is now a requirement. Clients can't have four or five companies telling them what to do, effectively stifling their growth. Our company handles the entire solution. Our client team is focused on understanding the customer's entire business and building a technology road map. That way the customer knows how much it is going to cost to run IT (information technology) over the next three years."

Solomon said that more customers are looking to move to a managed services model where they know what their IT costs will be over the next several years. "Customers want to budget on a yearly basis to support technology," he said.

Solomon said smaller solution providers have to decide whether they are going to make a big investment to hire new talent or sell out to a larger player. "It is a slippery slope for them: either you make a drastic move and start buying companies with additional products and services or you just go away. If you don't want to go away you better sell to someone who can take your products and customers and compliment them."

Net@Work plans to continue to make additional acquisitions, said Solomon. He said he is currently talking to several potential acquisition targets. "We are constantly looking for acquisitions," he said. "We are not going to stop. It's about how much it costs to get a customer and then up selling and cross selling them other products and services."

Solomon said emerging vendors like Equallogic and Mimosa that provide higher margins than established vendors are becoming more important to solution providers. "The emerging technology margins are spectacular," he said. "That's why we constantly must look at what's coming and what's hot."

Solomon said Net@Work is not interested in selling out to a private equity company. "We are just not interested," he asserted. "We don't have a strategy to sell out. Our strategy is to become branded as the best technology solution company in New York, New Jersey, Conecticut. And soon in Boston and Philadelphia."