XChange Panel: Bright Future For VARs

Solution provider, vendor and distribution executives on the panel, which was hosted by CMP Media President Robert Faletra, all said the future is bright for solution providers that develop tight trusted advisor roles with their clients.

Frank Mogavero, who next year will celebrate his 45th year in business as the chairman of Data Systems Worldwide, a Woodland Hills, Calif. solution provider, said his data center based managed services business and security solutions are the foundation for his company's future. "There is no question in my mind that you must do more than be a reseller," said Mogavero, who started his business selling adding machines. "The future lies with those that can develop the business so they can become the trusted advisor."

Mogavero said managed services has allowed his company to become "part of the customer. You are able to control a lot of what is done, assess the next steps that need to be taken and help with policies and requirements for new hardware." He said the gross profit on the managed services is 65 percent of his total business. "It is good for the customer," he added. "It is good for ourselves and good for the market."

Dan Schwab, the vice president of marketing for D and H Distributing, a Harrisburg, Pa. distributor, said the next 10 years will bring "huge opportunity" for partners that can deliver security technologies that protect corporations. "There is a great need for defensive technologies like protecting credit card information, backup redundancy and storage," he said. "A lot of time energy and resources is being spent to secure primary company assets to assure the free flow of information through the internet."

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Frank Vitagliano, IBM&'s vice president of worldwide distribution channels, Global Business Partners, said the managed services phenomenon is a "powerful business model" that over the next five to ten years will drive higher margins and tighter ties between solution providers and their customers. "Once a solution provider owns that customer through the managed service they deliver they have an incumbency view of future requirements whether it is to supply more hardware or applications," said Vitagliano.

"Many solution providers do a strong assessment of their customer's network infrastructure as part of offering a fixed managed service price," he said. "For someone to come in and beat that price it is a very risky proposition. It is not like going in and offering a better deal on hardware acquisition." Vitagliano said the managed services model reduces solution provider's reliance on hardware margins and is more resistant to margin erosion than the traditional product business.

Tom LaRocca, vice president of Americas Partner Development and Solution Partners Organization, said he sees partners moving higher up the value chain over the next decade. "That is going to accelerate," he said. "There is going to be more verticalization. I see partners developing specific verticalizations around inflection points like Sarbannes Oxley. There is a lot of value that partners can bring to customers to solve problems." LaRocca said he also sees more partners working with each other to provide complete solutions to their clients.

"Security is going to be a really good business in a big way going forward," predicted Steve Dallman, Intel's director of Americas distribution and channel marketing.. He said there is a big opportunity over the next 10 years to to help customers handle the massive amount of data in the home and business with digital convergence. "The PC or ability to digitize, handle and share and drive that content is going to be one of the key drivers," he said

Dallman said on the security front Intel is putting more technology into the microcode to help with thorny security issues. He said the company's LeGrande technology will put more security handling capability into the core of the CPU so software providers will have security hooks to provide more robust protection. "It's slated to come out a little bit ahead of the Microsoft Longhorn (technology)," he said.

Tony Ragio, the CEO of SIS, a $1 billion India based solution provider that is building ties with US solution providers, said SIS is interested in teaming its 50,000 US engineers to work with partners locally who are delivering managed services and security solutions. "We don't specifically offer a managed service, but we do a lot in developing applications and engineering them to be as secure and robust as possible," he said. "We rely greatly on regional providers to give us that local touch."

Ragio said the channel needs to innovate more around areas like analytics, business process management, and RFID. "Those are great opportunities for us to go and differentiate ourselves," he said. There is also a great opportunity to go to market with smaller niche vendors that that have outstanding technology. "It is important for us to find those guys and help bring their products to the market," he said. "These companies can contribute a lot to what our customers need."