Solution Provider Business Model More Powerful Than Ever

That was the message from Monty Cornell, group director of research for CMP's Channel Group, in a presentation on the changing nature of the channel before XChange 2004 attendees in Chicago.

"The value of the channel from the client's perspective is not about the vendor," Cornell said. "It's about solving business problems. Solution providers are on the same plane for most small and medium businesses as the accountant and the lawyer. They are at the heart of the business."

Cornell said the solution provider of 2004 plays an integral part in translating the business need into a technology plan 93 percent of the time. That compares with solution providers doing needs assessment only 16 percent of the time 10 years ago.

"The solution provider has become much more sophisticated with a better understanding of who the customer is and what they need to solve their business problems," he said.

Cornell chronicled the evolution of the VAR model 10 years ago moving from "vendor-centric" to "client-centric." Manufacturers used to select reseller partners, but today it is the partners who are choosing the vendors based on what products best solve their clients' business problems, he said.

"There has been a paradigm shift," he said. "The solution provider has gone from being a vendor to a trusted adviser. The fundamental goal for the solution provider is to build a long-term business around long-term clients."

The average solution provider-client relationship now averages seven years, Cornell said.

One sign of the times is the fact that the solution provider of today derives 53 percent of his or her sales from services, up from 33 percent in 1995, he said.

Solution providers of today are also sourcing products from a wider array of players, Cornell said. For example, he said, VARs sourced 49 percent of products from distribution in 2004 compared with 66 percent a decade ago. Alternative sources, such as CDW, PC Connection and other players, meanwhile, accounted for 25 percent in 2004, up from only 10 percent a decade ago.

But while solution providers have evolved into trusted advisers, vendors appear to be stuck in the past, talking about "the same old stuff like demand generation, partner loyalty, the role of distribution, and the value of end-user brand awareness," Cornell said.

"Vendors go in and out of being solution provider-friendly," he said. "They get greedy and think they can do it better than the channel. Ultimately, what happens is they end up coming back to the channel."

"While the products and the industry have changed dramatically, the solution provider continues to persevere," Cornell said. "It continues to be the most important sustainable business model in the industry. And it's sustainable because it is efficient, agile, and because solution providers' lives are tied to their business. Their house is on the line."

Brian Okun, director of marketing for Chips Computer Consulting LLC, a Lake Success, N.Y.-based solution provider, said the channel has been successful because of its perennial ability to "integrate multiple products into an overall single solution."

"No single vendor can do it alone," Okun said. "We have gotten a lot better at being a partner to our clients," said Okun of the changing nature of the channel. "That means understanding the business value of the technology solutions we deliver, being able to articulate that to business owners, and being able to provide a justifiable ROI to business owners."