VARs: Wall Street Free Fall Won't Derail Robust Sales Growth

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Solution providers do not expect the precipitous 513-point drop in the Dow Jones market index Thursday to stop their robust sales growth this year.

In fact, some solution providers believe the economic downturn heralded by the stock market dive could accelerate operating expense-based cloud computing services sales. They say, unlike the recession in 2008, technology is now seen as a business driver to save money and create operational efficiencies.

"Obviously everyone is always worried about the macroeconomic situation, but in general for us there's a big emphasis on cloud and managed services,” said David Powell, vice president of managed services at TekLinks, a Birmingham, Ala.-based VAR. “Even though the market is up and down, we've had fairly consistent growth around cloud services."

"Customers are using [cloud and managed services] as a tool to operationalize expenses and not rely on capital investments,” said Powell. “There was no cloud in 2008. Now, customers are saying they don't want to manage [IT], they want to consume it. In 2008, that wasn't an option for them. That option has emerged."


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The Dow Jones industrial average Thursday plunged 512.76 points, or 4.31 percent, to close at 11,383.68, while the Nasdaq took a 136.68 point dive, or 5.08 percent, to close at 2,556.39.

Jamie Shepard, executive vice president of ICI, a Marlborough, Mass., solution provider, expects technology purchases to take a "short term hit,” but even with Thursday’s stock market dive he expects ICI to have a record sales growth this year.

The IT industry is going through a renaissance of sorts for companies focused on delivering cloud computing services, Shepard said. Corporate belt tightening is pushing more customers to adopt operating expense-based cloud computing service solutions rather than big capital expense based IT projects, he said.

"The world economy has been terrible since 2008," said Shepard, whose company just posted record second-quarter sales growth. "It has been horrible. That has everybody looking at op-e based IT versus cap-ex based IT. And the easiest way to get to op-ex IT is to adopt some kind of cloud computing services."

Greg Knieriemen, vice president of marketing at Chi Corp., Cleveland, Ohio, expects the worst-case scenario in the current economic malaise will be longer sales cycles and more scrutinizing of budgets.

The big difference between IT spending expectations now and a couple of years ago is that customers have already been through many of the hard decisions, Knieriemen said.

"When the economy fell a couple years ago, it caused a reality check among customers," he said. "IT companies have done well since then. So things should remain constant, but sales will drag out longer."

But the recent economic worries are in stark contrast to the banner years that many VARs have experienced thus far in 2011.

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