Channel programs News

VARs Closely Watching Economy Amid Wall Street Volatility

Scott Campbell

The Dow Jones and Nasdaq averages were both up slightly on Wednesday, but their fall since July 21-22 is the worst decline since 2008, according to reports.

The Dow closed at 11,896.44 on Wednesday, up nearly 30 points from the previous close, breaking an 8-day losing streak. But that's down almost 7 percent from July 21, when it peaked at 12,724.41.

Meanwhile, Nasdaq closed at 2693.07 on Wednesday, up nearly 24 points, but also down nearly 6 percent from its 2858.83 mark on July 22.

"I don't see the economy relapsing, since it did not seem like it was ever in recovery," said Allen Falcon, CEO at Cumulus Global, a Westborough, Mass.-based cloud VAR.

Falcon noted that his company is still growing and that cloud solutions can be somewhat recession-proof because they can save a company money, but he is keeping an eye on economic trends nonetheless.

"We see companies looking to avoid cap-ex at the same time keeping op-ex under control," he said. "We also talk to our customers to get a better feel for the 'local' impact by industry, business size, and geography. Economic ups and downs can vary greatly by region and industry."

Michael Drake, CEO of Master IT, a Bartlett, Tenn.-based MSP, also is watching the economy closely especially after surviving the 2008 downturn. As an MSP, he expects a 30-percent revenue increase this year, with much of that recurring revenue. Because many customers are on contracts, he does expect the economy to have a lagging effect on his business.

"Our fixed costs are well in line with our margins, so we have the flexibility to react quickly," Drake said. "Even though there is churn, recurring revenue with our client profile does not go away easily. Spending on infrastructure updates and projects becomes most vulnerable, but it only represents 30 percent of our total revenue."

Arlin Sorensen, CEO of Heartland Technologies, a Harlan, Iowa-based solution provider, said he was nervous about the economy long before the stock dive of the last two weeks.

"In the Midwest, [the economy] has not really been all that strong. Nothing has been solved. We are not over the issues from the recession and I firmly believe we will head back to some dangerous times in the coming 12 to 18 months," Sorensen said.

Still, he added that his pipeline is bigger than ever and the economy has yet to impact IT spending.

"It is a bad situation thrust on us by folks making decisions that have no clue how it impacts SMB customers," Sorensen said. "We are conserving cash, cutting costs, and managing tightly. It is time to hunker down and be strategic."

Sorensen is also the CEO of Heartland Tech Groups, a peer-to-peer organization for VARs and he cautioned channel executives to watch the market and communicate with their peers and customers all over the country.

"As solution providers we have to become better business people as this roller coaster is not leaving any time soon," Sorensen said. "If we don’t run our businesses well, we will have a tough time hanging on. It is a skill that all of us need to be learning. That is one of our key focuses in HTG – to help members learn to be strategic business leaders."

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