VARs: 10 Steps To Business Growth In 2008

With the new year fast approaching, it's critical that VARs keep savvy on the upcoming technologies and business trends reshaping the landscape. Here are what VARs say will be 10 key steps to grow in 2008.

1. Embrace software-as-a-service

As customer relationship management, Web conferencing, security services and a host of other implementation opportunities for software as a service (SaaS) grow in the near future, understanding the new possibilities SaaS is opening up is important. While adoption has been slow, SaaS is predicted to be a $1.4 billion business by 2011. For VARs that provide personal productivity applications with on-premises software, SaaS will increasingly cut into business in the coming years.

Tom Ruffolo, president of eSecurityToGo, Irvine, Calif., said SaaS helps reduce time-to-market because it is simple to integrate and reduces infrastructure requirements. Ruffolo said that while some companies are unfamiliar with the benefits of SaaS or worry about a perceived lack of control, explaining the benefits on a company-by-company basis can be an effective strategy. So is knowing which clients need the service most.

"Smaller-to-medium-sized companies are more likely to go for [SaaS]" Ruffolo said. "Many of them don't have on-staff IT people, so the simpler you can make it to implement the better. Ruffolo lists ease of maintenance, lower risk of downtime and affordability as the top selling points of SaaS. "This is just sort of a better fit for some companies -- and it will seek its level," he said. "And that level is certainly going to be higher than it is now."

2. Get creative in technical hiring

The quality of your technical hires is critical. For 2008, all projections say that technical staff will be in high demand and short supply. Rachel Coburn Johnsen, recruiting team leader at Boise-based Intermountain Technology Group, said in IT the talent pool is driving the market rate, and offers are aplenty. "Each candidate is reviewing 70 opportunities and will receive seven offers within seven days," Johnsen said. "The biggest key is being very prompt, getting people in for interviews and being prepared to make a decision fast -- don't get into a bidding war."

Johnsen recommends focusing on unique employment perks and benefits -- everything from increased vacation time to profit-sharing benefits or even little perks like membership to a local gym. When it comes to finding qualified applicants, be prepared to search outside the box. "The most success we're having right now is through social networking -- mostly LinkedIn," she said. Johnsen said she's "absolutely" happy with the results so far, but that building that social network can take quite a bit of time.

3. Go Web 2.0 for marketing

YouTube, blogs, viral marketing: You've heard all the terms, you've seen corporations successfully implement them, and you can be sure Web 2.0 marketing techniques are going to play into your branding strategy. While some VARs have begun experimenting with blogs and interest in social networking grows daily, security concerns and an unfamiliarity with Web 2.0-centric marketing plans hampers real action.

Pam Wiese, director of customer relationship management with LOGOS Communications, Westlake, Ohio, said the company will use a cost-effective marketing plan employing applications such as blogs and YouTube to get closer to clients. "Web 2.0 has impacted the ability for VARs to listen to their clients," Wiese said. "It has also decreased marketing budgets, since many of the technologies are free or low cost compared to traditional advertising and marketing." Wiese also acknowledged that Web 2.0 marketing requires a different mentality than past advertising channels. "It is more collaborative and interactive as compared to one-way marketing of the past," she said. "It is more about engaging and entertaining, while also adding valuable content."

4. Build managed services

Managed services was a hot topic in 2007-- and it will be getting hotter in the coming year. Backup, storage, network and systems management are all potentially lucrative areas for managed service providers (MSPs), but some VARs say it's now or never for those who want a piece of the action. Rory Sanchez, president of West Palm Beach, Fla.-based SL Powers, describes his company as "managed service-focused" since 1998, when he began providing flat-rate service contracts. "Then we started adding additional tools to it, which became remote monitoring and administration, et cetera," Sanchez said.

"If you want to get into this business you've got to drop everything and do it," Sanchez said. "I think a lot of people try to preserve their margins in the product business and I'm telling them -- give the hardware away." Sanchez said companies moving into the MSP space need to do "whatever they can" to bring managed service customers through the door. "It's about process, not the tool," he said. "I could switch tools on a weekly basis and my customers wouldn't care -- build that process and have faith in that process."

5. Maintain vendor support

Active vendor support is a critical part of a solution provider's success, but early partner support can dwindle if it isn't nurtured. That's why Arlin Sorensen, founder and CEO of Harlan, Iowa-based Heartland Technologies, said he spends half his time deepening the relationship between his company and his vendors. "Maintaining vendor support is critical from our perspective," Sorensen said. "We treat our partners like a customer. We keep them informed of what we're doing, update them on our success stories."

Sorensen said he believes VARs need to be proactive when cultivating long-term relationships with vendors. "We make a huge investment with our vendor relationships," he said. "The training we participate in to get our teams up to speed is critical for us to support the technologies. We do a lot of joint planning with our vendors." One aspect of that strategy is a yearly business-planning meeting with Heartland's four major vendors and distributors gathered together to plan out 2008. It's a business strategy that's evolved over time. "We used to do [the meetings] one at a time, and we were ending up with multiple plans," Sorensen said. "Now we lock all the vendors in the room together and pound out a plan."

Sorensen added that it is important to remember vendors are short-staffed in the field and it takes active communication to keep your company on the radar screen. "We would not be close to where we are if it wasn't for the relationships we've cultivated with our vendors," he said. "Investment precedes return. That's never more true than with a vendor relationship."

NEXT: 5 More Steps

6. Understand your customers' business

One mistake VARs can make is not communicating to their clients that they understand their business as well as technology. Another mistake some VARs make is not taking the time to fully understanding their customers' businesses. Actively cultivating that knowledge, on the other hand, invigorates long-standing partnerships built on trust, solution providers said.

Camera Corner CEO Rick Chernick says that's exactly what's kept his Green Bay, Wisc.-based company in business for so long. "If you don't know the customer, how are you going to sell to them what's right for their business?" he asked. "You certainly want to bring the technology to them to help them run more efficiently and if you don't know that customer you're not really going to know how to direct them the right way."

Customers may be hesitant to share everything about their company at once, Chernick admitted. Trust takes time, so the earlier you start asking the probing questions, the better, he said. "Once we get in there, we can figure out what tech solutions we can bring to them," he said. "Our goal is not to just sell them something but to help them reach a particular end."

7. Provide specialized, customer-sized solutions

Solution providers know it's not just about selling your customer the least expensive product on the market -- or the most expensive, for that matter. Where a VAR provides true value to the client is where the clients specific challenges are solved using a fluid, customer-sized combination of technology and innovation. To know the customer's business and be able to apply specialized solutions is an increasing demand for VARs -- a challenge Darren Patoni, president of Tempe, Ariz-based Information Technology Workshop, said his company is meeting.

"You really have to know what you're talking about," Patoni said. "It can't be a cheap solution you have to continually replace -- as IT solution providers we have to justify our own existence." The technology VARs provide is implemented to give the customer a competitive advantage -- shopping the same solution around to the competition negates the value of that solution. "It really does require customization," Patoni added. "Some of my competitors are coming to me because they don't have the skills to offer that level of specialization -- instead of investing in training they're coming to us because their customers are demanding it."

Keeping an open line of communication with the customer is also important, as is understanding that the client is likely looking to do more with less. "You want to make their limited pool of resources count," he said. "You want that customer to say, 'This company really cares about me'—that's how we do it."

8. Upsell, upsell, upsell

Everyone's heard the old adage about being savvy enough to sell ice to Eskimos -- but there's truth in that clich, and in an environment where margins are melting away, your company's ability to upsell and cross-sell to the existing client base as well as new customers will keep your sales force sharp and your revenues insulated. It is important to note that upselling without a value-add can damage the relationship with a customer. Translation: if you're pitching that extra ice, make sure it improves the igloo.

"We're upselling our value-added proposition," said Mike Novotny, president of Phoenix-based InterTech. "You've got to be able to tie [an upsell] back to the client's best interest." Sales incentives are a good way to foster a healthy spirit of upselling, as well as keeping sales staff up-to-date on client needs. Using your company's strength in services is also a great way to position an upsell, said Novotny, adding that a valuable upsell can pay big dividends. "I find our customers are more willing to trust our judgment on a longer term basis," he said. "They begin to place their confidence in our decision-making ability."

9. Expand new technology offerings

In a business that thrives on constant technological innovation, it's more important than ever that VARs are aware of new products and services that can better facilitate their customer's end goals. It is also important, however, to keep the focus on innovations your company is able and willing to implement. "Its extremely important to have the people in place to extend your brand into new technologies," said Neil Medwed, president of Richardson, Texas-based Preferred Technology Solutions. "Determine if you want to invest in the engineers and the salespeople."

When it comes to VARs specializing in advanced technologies, you have to be the very best at what you do, Medwed said. It can be difficult to take on more than one per year and still be proficient, he said. "One year it was voice, then wireless, then Citrix, this year we're trying to get stronger in VMWare," Medwed explaied. "You can't do it all at once." Aggressively marketing those proficiencies is also key. "If you've got a lot of high-paid talent, you have to put it to use," he said.

10. Virtualize

Virtualization is one of the hottest trends in the VAR universe right now, and solution providers can only expect the heat to rise -- accompanied by budding temptation to enter the virtualization market. One of the big advantages to virtualization is that it applies to all sizes of companies, says John Gunn, president of ISG Technology, in Salina, Kan. "It's one of the few things I can take to customers big and small and give them an ROI that's easy to show," he said. "It's driven our storage business and services biz through the roof."

Having a technical staff trained to handle customer demand for virtualization is crucial, said Gunn. "I get as many of my technical people trained in virtual storage as I can," he said. "When you get in front of customers, you better be able to talk the talk and deliver." While virtualization is a fast-growing area of the market, Gunn said he feels there's no need to rush in unprepared. Still, demand is rising, he said. "Customers are just soaking up every bit of information they can about it," he said. "We've experienced explosive growth and we don't even feel like we've scratched the surface."