SP500: Transformation Is Key To Business Survival

It's no secret that the key to survival in a fast-paced solution provider business is to transform your business as technology changes. But, the pace of transformation is quickening, forcing VARs to be even more nimble, said a panel of executives at the Solution Provider 500 conference in Charlotte, Wednesday.

Jim Dixon, president and CEO of CompuCom, said his company has been through several major transformations since opening in 1986. And they're not through.

"We have to do it again. You have to make [the change] or you won't be here," Dixon said after rattling off a list of well-known resellers that are now long gone.

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"They went out of business. I personally think it's because they didn't change. We don't call it change. We call it survival," Dixon said.

CompuCom started as a retailer and made the switch to servicing large accounts after margins started falling. In the 1990s, the Dallas-based company transformed again to specialize in networks and services for pay after giving away services for years, Dixon said. "Our first marketing program internally was to take the 'R' out of 'free,'" he said.

In 2004, the company transformed again to managed services and is now changing for the cloud and utilizing third-party data centers, said Dixon.

"We found there's ample supply of data centers out there. We've kept increasing profits and our 80 percent recurring revenue [for services] didn't go away," he said.

Meanwhile, Joe Vaught, CEO of PCPC Direct, a Houston-based solution provider, has also seen his share of transformations in the company's 34 years.

Its most recent evolution has been in the data center space, after PCPC Direct started getting calls from customers who were building data centers for the first time and wanted advice, Vaught said.

"It was a shock to me. The more I thought about it, the more I said that's where we should be. So today, we are now working with [a Canadian customer] on six new data centers and working with government agencies with five data centers in the U.S.," Vaught said. "They didn't call us not to fulfill hardware, but they wanted to talk about power, which is critical."

So PCPC Direct got in the business of designing and building data centers, Vaught said. "We hand them the keys and give it to them as an [operating expense] and if necessary we have people to manage it," he said.

NEXT: Transformation Must Be A Core Competency

When Dan Weiss, CEO and co-founder of Varrow, started the Greensboro, N.C.-based VAR in 2008, he knew he would have to be even more agile than he was in the 1990s when he ran a "classic VAR with a line card and a catalog."

For one, the business needs of CIOs have changed, he said. "There was no longer one way to get 100 customers. There's 100 ways to get one customer. We knew we couldn't go into a customer's office and say tell me your budget and let us fulfill your solutions. That doesn't work anymore," Weiss said. "You have to add value. You can't rely on the old way of doing things. We knew we wanted to get involved in data center, and we knew we had an opportunity to be one of the best in our market and make money on it."

Still, transformation isn't a concept where you come to a point in the road and say, "Oh, we have to transform," said Weiss. Transformation has to be a core competency for a solution provider to survive, he added.

"You have to be able to transform your business. Not every seven years. I believe it's going to be an every three years, or two years. If you don't have it as a core competency, you're going to have a difficult time," Weiss said.