2010 State Of The Market: 10 Things You Need To Know

Solution providers are ready to put 2009 behind them and invest in growing their businesses again, with more security, managed services and cloud/SaaS solutions leading the way, according to new findings from CRN's 2010 State of the Market survey of North American solution providers. Here's an in-depth look at some of the findings.

Revenue from new customers represented 28 percent of the average solution provider's revenue in 2009, which is an increase from 25 percent in 2008, according to the study.

The change may have been caused by some existing customers delaying or decreasing their IT purchases this year, forcing VARs to spend more time targeting new customers.

Also, more sales from new customers could have come from solution providers reevaluating their customers or priorities, said Wesley Gipe, president of AgilIT, a Troy, Ohio-based solution provider.

"We were finding out we were not making as much money on some accounts as we used to because our business model changed," Gipe said. "We've evolved to serve really one market, health care. We evaluated other businesses to see if it was profitable enough to serve those customers."

Managed services will continue to become a bigger part of solution providers' offerings in 2010. The percentage of managed services in an average VAR's total revenue will jump to 11.4 percent next year, from 9.5 percent this year. And that's on top of an increase from 8.6 percent in 2008.

Sam Ruggeri, president of Advanced Vision Technology Group, Hauppauge, N.Y., said more VARs are interested in building a stable, recurring revenue stream in this economy.

"A lot of people are catching up with recurring revenue," he said. "The client is also more agreeable to a recurring revenue charge, more so than we expected to be honest with you. That's a good thing."

More solution providers are selling storage and security solutions (42.8 percent and 42.6 percent of all VARs, respectively) than any other solution this year. Business application software and custom systems were not far behind. Note that Cloud Computing/SaaS solutions were sold by less than 20 percent of VARs in 2009. But ...

Cloud/SaaS is the second-highest technology area that VARs plan to start selling in the next 12 months. Security, with an already big presence with VARs, is going to get even more competitive in 2010, as nearly 21 percent of VARs plan to add that capability.

Cloud/SaaS solutions will garner more long term opportunity for solution providers, as more customers evolve their IT infrastructures, said Glen Jodoin, vice president of operations for GreenPages Technology Solutions, a Kittery, Maine-based solution provider.

"The cloud/SaaS area is something that we're investing in and there's a lot going on. We see more investments, more integration, more interest from customers. That's the biggest opportunity for us, Jodoin said.

More than 18 percent of the survey respondents said that offering more services on a recurring revenue model is their top go-to-market strategy for 2010. Improving customers' business processes was a close second, both choices indicative of a solution provider base evolving to a service-oriented model.

VARs are expecting a big year in business applications in 2010. Almost two-thirds of the survey respondents expect revenue in that category to increase next year, while less than half saw an increase in the same category in 2009. On average, solution providers expect business apps to increase 6.7 percent, up from 3.1 percent this year.

Within the category, office productivity applications were selected as the big driver, with nearly 50 percent of VARs choosing that as their top focus within that category. Business intelligence tools and CRM applications were second and third, respectively.

In the security category, more than 60 percent of VARs expect to increase their focus on network security, a runaway favorite in the category. Overall, 67 percent of VARs expect to increase their security sales in 2010, and by an average of 7.7 percent. The percentage of VARs expecting their security sales to decrease in 2010 is just 3 percent, down from 12 percent for 2009.

In line with the other cloud/SaaS findings, more than 80 percent of VARs surveyed expect their sales in that space to increase next year. And that's building on top of an already-strong showing this year in which 65 percent of VARs saw growth in that area, and by an average of 6.8 percent.

Cloud/SaaS-based security solutions were chosen by VARs as their top sales focus, followed by hosted storage and e-mail solutions.

Voice-over-IP is shaping up to be a strong opportunity for VARs next year as nearly 60 percent of respondents expect to increase their sales focus in that area. Wireless/mobility technologies and networking infrastructure also posted strong showings.

Not shown, 65 percent of VARs expect their sales to increase in voice and data networking in 2010, up from 54 percent this year. Also, the average increase is expected to be 7.6 percent next year, up from 4.8 percent this year.

Storage was another area where many more VARs expect their sales to increase next year. All told, 71 percent expect revenue to increase, up from 53 percent that saw it increase this year. The number of VARs who expect storage sales to decrease also fell from 10 percent to 3 percent.

Backup and recovery software solutions were chosen as the top focus by VARs within the storage category, with nearly 60 percent expecting to increase their focus in that area.