No one had to tell this year's Technology Pacesetters that 2009 was tough.
While revenue is not a criterion for inclusion in our annual list of top-notch value-added resellers, we do collect data on it - and a comparison with last year's list showed that close to a fifth of our VARs saw modest declines in revenue, while many others reported declines in particular service lines, or flat growth in general. (Spots on the list are awarded for innovation, vendor awards, leadership and contributions to the field, and general reputation, regardless of revenue.)
For those whose revenues didn't decline, the sight of many of their competitors leaving the field - as with the high-profile collapse in July of top Sage reseller MIS Group due to lack of credit and market conditions - was strong evidence of a tough marketplace.
Of course, one of the things that make a Pacesetter is the ability to get going when the going gets tough. "We've picked up numerous clients from other VARs that are now exiting the marketplace (translation: folding their tent and retiring)," said Kevin Stroud, president and chief executive of AccountMate reseller NexLAN. "We've kept ourselves very visible in our channel and advertised that we pay good commissions for the transfer of clients for businesses leaving the market."
Crisis may breed opportunity, but it can also call for a renewed focus on the basics, like client service, firm processes and marketing. "We are visiting more clients, more often, to keep relationships warm," said Jeff Roth, chief executive of Sage reseller SWK Technologies, who added that his firm is growing through small acquisitions.
At Microsoft Dynamics reseller TM Group, meanwhile, president Judy Thomas reported a raft of initiatives: "We are concentrating on streamlining our implementation processes for our clients; offering zero percent financing for new client sales; and providing existing clients with a software review; offering prepayment discounts on blocks of hours; and just trying to do whatever we can to take care of the clients until things recover."
Fellow Microsoft VAR Dynamics Source was well-prepared to ramp up its efforts in another area: "During 2008 we built up our cash reserves, and during the downturn we have used these reserves to increase advertising and marketing," said CEO Jason Hull. "Our active leads list is now larger than it has ever been." He also noted that the firm has been able to pick up staff who were laid off from larger VARs.
At SystemLink, president David Beck attributed the Sage reseller's ongoing success to taking its own medicine: "We position ourselves to our clients as highly competent and skilled management accountants, and we have applied our skills internally in managing our own business. We follow best practices in good times and in bad."
GOOD TIMES, BUT WHEN?
While the Pacesetters weren't inclined to downplay the severity of the economic crisis, they do expect a recovery - though when it will come is a major question.
Brian Naftzger, marketing manager at Sage and Microsoft VAR NexTec Group, said, "Our outlook for the next year is guardedly optimistic. Many people we are talking to are not saying 'No;' they are saying 'Not yet.'"
Dynamics reseller Barry Knaster, of The Knaster Group, sees growth, but not as soon as some might like: "I don't anticipate much growth for us or the greater VAR market until early 2011. After that, I think pent-up demand should provide a catalyst for a few years of sustained growth."
TM Group's Thomas said that she thinks 2010 will be a positive year, due to the same pent-up demand: "People have been sitting on decisions for too long, and the dam will have to burst soon."
Not everyone will be able to capitalize on that demand, though, said David Cieslak, a principal at Sage and QuickBooks reseller Arxis Technology: "The VARs who will thrive have a healthy sales and marketing engine, broad product and industry expertise, and a strong network of referral partners. On the other hand, those that for many years depended solely on product and service revenue from existing customers will struggle mightily, and are probably better off selling the practice to a stronger company."
Microsoft reseller I.B.I.S., for one, plans to be on the right side of that equation. "We have taken a bit of a hit financially [from the economic downturn], but it has made us focus on being a better company and delivering value to our clients," said CEO Andy Vabulas. "We expect to grow 20 percent in the next year. We are bullish on the future."
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