D&H VARs Size Up SMB Market, Vista, Competition

D&H Distributing's solution providers know SMB end users inside and out. Editor/News Steve Burke and Distribution Editor Scott Campbell recently spoke with several D&H solution providers at the Harrisburg, Pa., distributor's annual New England Reseller show to get their take on all things SMB. The following are excerpts from the conversation:

With several economists predicting a gloomy IT spending forecast going into 2007, several solution providers said they are still growing their revenue—but they're also changing their businesses to spur new growth.

Alain Bezahler, president of Boston Computer and Peripherals, Sharon, Mass.: "We see a tough business environment. We hope to end even for the year. Corporate is definitely slow. That's a huge part of our business. They have to fight tooth and nail for every penny in their budgets. The education and federal business is always consistent. The amount of money the federal government spends is staggering. A lot of people spent a lot in the last year or two. Let's face it, interest rates are up. Everyone reads the paper. Just because you're a CFO at a Fortune 1000 company doesn't mean you're not affected by what you read at breakfast in the morning."

David Ferreira, vice president, Ferreira Group, New Bedford, Mass.: "We see a slight increase. On an as-needed basis, some big projects are coming through. Since we are [our customers'] IT department, we can do server upgrades and workstations as needed. We're getting into data backup off-site and spam filtering."

Tim DeKorne, owner of One Second Computers, Dover, N.H.: "Our focus is on what the [end user's] need is. If people get sick, we would focus on the health-care industry. If gas prices get out of control, we would focus on those companies. We follow the market. This year, when our techs are out on jobs, we have them marketing. They go to the neighbors of the companies we're visiting and say, 'Here's who I am. I just did something next door.' If they pull jobs down, we have the bonuses, spiffs, incentives, products to make sure they get what they want. We try to stay in tune with what's happening. The retail business has been booming for us. It's unbelievable. [Recently], we sold 12 machines at $1,500 to $3,000 each. We're working with leasing companies, too. If business is so-so overall, [end users] start leaning toward leasing companies. Why not build relationships with them? We just closed a $10,000 deal on 10 machines [with a leasing company]."

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When Microsoft finally takes the wraps off of Windows Vista, many end users may not flock to upgrade the way they did with previous operating-system releases, the solution providers said.

Ferreira: "Our customers wait for us to sell [technology] to them when they need it. If they need Vista to run [the newest release of] Quick Books, that's when they will look to upgrade."

Jeff Salmeri, owner of Computer Escape, Randolph, Mass.: "It's not just Vista, it's new technology in general. I really believe that customers have the attitude [that] if it's working efficiently, why change it?"

Ferreira: "Most people now are on a system with at least a 1GHz processor. That works fine for them. It's not slowing down every day, so why do they need a 3GHz processor right now?"

John LoConte, co-owner of KDSA Consulting, Andover, Mass.: "If [Windows] XP Home is working, the last thing they want to put in is something with a marginal increase in benefits. If XP is working fine, there's no reason to change. Vista is not at the top of the list of what our clients are looking for."

Despite a recent rash of consolidation in the VAR channel, the five solution providers said they aren't engaged in any merger talks. But they believe that the competitive landscape has changed.

Salmeri: "There are no more startups popping up around me. Two or three years ago, there were 12 guys in my area, now there's two or three. I don't see [selling Computer Escape] because my customers want to get everything from one company. That's the model I've always followed. I'm already trying to supply everything they need."

Bezahler: "I think good people are hard to find. The IT market has shrunk. People still expect huge salaries and lifetime positions. We're at the size now to position ourselves to go to the next level. A couple of key manufacturers we're talking to, [Network Appliance] and EMC, want a significant investment from us. I'm looking at whether we should invest in our organization or look to team up with someone who has that infrastructure. I want to be able to provide a $250,000 NetApp [solution] that some customers are asking for. The question is: 'Do we make it out of or own pocket or leverage it [through someone else]?' "