VARBusiness 500 Tech Trends

Ask any VARBusiness 500 executive and they'll tell you that you don't succeed by selling technology. You do it by selling solutions. Clients don't care about the next hot technology; they care about their businesses, and if you can help them solve a business problem, they won't care if you did it with the technology everyone's talking about today or with one that everyone was talking about five years ago.

On the other hand, technology is the building block on which VARs build solutions. Technology is usually hot for a reason, and the number of different types of technology a solution provider has at its command will often determine the range and scope of the solutions they can offer to their clients.

The bottom line: While your clients don't care about the next big thing, you have to. The technology that this uber group--the VARBusiness 500--is looking at hints at what's coming down the pike in the next 12 months.

As far as major trends, our 2007 VARBusiness 500 research confirmed what most of the channel is already thinking.

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Storage was far and away the most important technology, ranking first by almost every metric, and often by a large margin. About 75 percent of the VARBusiness 500 work with storage hardware, 42 percent lead with storage when making a sale, and 45 percent rank it in the top three technologies increasing in importance to their overall businesses.

"Storage-based projects are high-value, from the customer and reseller perspectives," says Dan Schinsky, vice president of Enterprise Solutions at Rolling Meadows, Ill.-based Relational Technology Solutions (VARBusiness 500 No. 115). "It's the heart of that body. If you don't have data, you have nothing."

Security technology--both hardware and software--is another unsurprising presence near the top of the tech list. Given efforts to shift the focus of security away from the network perimeter, combined with falling margins on hardware, it's clear why software ranked higher than security appliances.

In 2006, security software ranked third out of 19 categories in terms of its growing importance among the VARBusiness 500, with almost 31 percent placing it in the top three. Appliances ranked No. 6, with just over 14 percent.

In this year's VARBusiness 500 survey, 68 percent said they work with security software, 75 percent of whom have added a security software vendor in the past year and 67 percent of whom expect to in the next; about 62 percent work with appliances, 70 percent of whom have recently added a vendor and 55 percent of whom plan to do that in the next 12 months.

"Security is just a constant," says Augustine Riolo, COO and CFO at Virginia Beach, Va.-based Knowledge Information Solutions (No. 457). "It's pretty trend-resistant, because it's always got to be there. Whenever people add new applications or complexity, there's more to secure."

NEXT: The next batch of hot technologies.

Other technologies that ranked high in our survey include core networking (routing and switching), IP telephony, enterprise applications, network applications and entry-level servers.

VoIP is widely viewed as a hot technology and has been the focal point of several significant vendor initiatives.

According to 2006 VARBusiness 500 research, 49 percent of respondents resold VoIP solutions, which placed the technology No. 15 out of 19 categories. In terms of its growing importance, VoIP ranked second. This year, the technology ranked the same in terms of its growing importance--No. 2--and the percentage of those selling it inched up three percentage points, to 52 percent.

IP telephony sales seem to be growing fast among those VARs already working with the technology, but for others, there are a few barriers to entry--competition, expertise and marketing issues. It's interesting to note that about 30 percent of those surveyed said they turn to subcontractors to provide the VoIP component of solutions, more than for almost any other technology.

"We have lots and lots of partners in the United States, but only a few hundred are the ones that are out there really driving unified communications," says Denny Trevett, director of advanced technologies for U.S. and Canada channels at Cisco Systems. "It's a short list, relatively speaking, but these are really our most successful partners."

Routers, switches and other core networking hardware ranked surprisingly high in this year's survey.

Although it's not often viewed as "sexy," core networking hardware was cited by 72 percent of VARs. About 60 percent of them have added a network hardware vendor in the past year, and about 43 percent plan to add one in the next 12 months. About 23 percent of respondents said they plan to expand their networking hardware business in the next year.

Some VARs say the main driver behind core networking sales is rapid growth of the load that businesses place on their networks. Enterprise apps, IP telephony, voice- and video-based collaboration packages, and WAN architectures demand ever-increasing bandwidth, forcing businesses to look for new hardware that expands the pipeline and offers more sophisticated traffic-shaping and optimization.

"It's at the forefront of everyone's mind--that when they roll out new applications, they need to make sure the network can sustain that load," Trevett says. "If you're rolling out any kind of new application, you probably have to touch the network."

A second factor may be mere timing. Routing and switching hardware typically has a refresh rate of about six to seven years, which would make 2006 and 2007 big years for companies that refreshed their hardware in the years preceding 2000.

Not-So-Small Servers?

Entry-level servers made a surprisingly strong showing this year.

Although the demand for inexpensive servers has grown in the SMB space in recent years, their low profit margins wouldn't suggest they would be a focal point for the VARBusiness 500. But 74 percent of those surveyed said they resell entry-level servers--including more than 82 percent of the top 100 VARs--ranking them No. 2, just behind storage hardware. Seventeen percent said they would lead with low-cost servers when making a sale, ranking them No. 7 out of 21 technologies.

And entry-level servers aren't just going to SMBs. "There are more inexpensive 1U servers in enterprise data centers than you might think," says Bill Cate, Sun Microsystems' senior director of Global Channel Strategy. "They also end up in remote offices or in departments."

Adds Relational's Schinsky: "Instead of buying a $2 million box and slicing it up, you can buy lots of $8,000 boxes and spread your risk. I think the decentralization pendulum is starting to swing back that way because some vendors [need it to]. They're not competing at the high end."