How Small Is Success?

Small VARs make big waves in SMB waters

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Sometimes it pays being a small fish in a small pond. The pond in question is the SMB market. The fact is, large vendors historically just can't seem to make waves in this space.

According to VARBusiness' SMB end-user study, small-to-midsize business customers have, on average, more than $9 million allotted for technology expenditures this year, which makes it a fairly lucrative market space. With all the muscle powering some of the big integrators, smaller players are beating up the competition. Here's why.

1. SMB VARs Have SMB Experience

SMBs are more likely to do business with VARs familiar with the SMB market.

"We've been in business since 1987, and we have a very loyal customer base. We have instant creditability with the solutions that we recommend that perhaps a newer VAR might not have," says Donald Alyea, executive director of sales and marketing at MegaHaus, a 65-person solution provider in Dickinson, Texas. "Because we have loyalty, there are dollars being spent with companies such as ours that people have grown to know and trust over the years. That's a key element to our ongoing success."

Gregg Pickens, president of Digital DOT Systems, a small Mac-oriented, five-person VAR in Omaha, Neb., leveraged his prior experience to get his start-up off the ground. He and his partner, Bob Austin, bought the Mac division of their former employer, Computer Systems, which gave them the ability to better serve their Mac-oriented customer base that was built during a 20-year time period.

"If I had to start from scratch, it would have been a lot tougher; we wouldn't have the client base," Pickens says. "It would have been harder to get started. With this company, we pretty much made money the first day we opened the door, because we tried to continue what we were doing [at our old company."

But it's a Catch 22: If you don't have experience, how are you supposed to get any? For those VARs, the answer may be in partnering.

2. SMB VARs Know How To Partner Effectively

It's the SMB integrators' ability to "tweak" their businesses for clients that makes them desirable to small clients.

"We bring big expertise from a smaller company with a more personalized feel," says Gus Chiarello, business development manager at Atlantic Business Products, New York. "Often, [vendors are so big that they can't be specialized. It benefits them to partner with smaller SMB VARs that can offer that quality."

C.J. Wang, CEO of PurpleGranite, a 15-person shop in Syosset, N.Y., agrees.

"It's not profitable for larger companies to move into the SMB space. They work in the enterprise environment where if they can't send in 200 people to do a job, they don't want to do it," he says. "In our case, we send in one or two people. They all want to get into the SMB space. So they are partnering with people like us to do so."

Many big-name vendors, in fact, are eagerly searching out small players to guide them through the intracacies of SMBs.

"They need us more than we need them," Wang says. "The big fish can't come into the pond,the pond is too small for them. If you look at the IBMs, HPs, Compaqs,let's say there are 10 of them on top. Well, there are thousands of us. And their marketing strategy is different. They aren't going to customize anything, which is why, for example, IBM has thousands of business partners. That is the only way it can get into the SMB space."

Many of these VARs note that when they select a partner, they also evaluate the other company's channel strategy. For instance, Wang says he prefers Intel.

"Intel doesn't even sell direct. They sell to the Dells and the IBMs, top OEMs and thousands of us," he says. "They support us to go into the space. They have the right strategy, and they win hands down every time in terms of how they support the channel."

In addition, partners typically complement one another, a strategy that allows each to focus on its individual strengths. That, in turn, leads us to our third point.

3. SMB VARs Recognize Their Core Competencies

Knowing when to turn to partners for assistance is essential for SMB VARs to hone in on what they do best. They can then take those strengths and use them to court partners as well as clients. Many SMBs are themselves niche players and all too happy to work with VARs that are experts in those market segments.

"We don't have too many competitors that do exactly what we do," Pickens says. "We have competitors that,maybe,do parts of what we do, but not the whole thing."

Keep in mind, as well, that when SMBs turn to you, they're doing so because of your specific expertise.

"It's our ability to bring to the table small, local manufacturers [that makes us successful," says Roland Anderson, operations manager at Cypress, Calif.-based DapTech Consulting, which was formed in March with eight employees. "[We offer a personalized contact, which is a big aspect when you are a small VAR."

Anderson sometimes brings a small team of vendors with him when he is pitching a client on a solution,teams that often include the actual founders of companies, he says. That's in contrast to larger companies, which usually send representatives.

In the End

What allows you to be successful in your partnerships, your niche and your business is how you embrace other businesses around you.

"I think that your competition is what you perceive it to be," Digital DOT's

Pickens says. "If you see black clouds on the horizon with these large competitors, and you get in that mindset,then that's what your result will be. But, if you think, 'How can I compete against these companies and create a niche for myself,and create a unique place in the marketplace for my products and services?' then that's what allows you to be successful and compete successfully against those companies."

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