The Role of Big VARs

There was a nice Christmas email that was sent out by Tectura’s CEO Terry Petrzelka this week. What there has not been is the filing of an S-1 for the large reseller's initial public offering. At one point, it seemed likely to occur in 2007. There was an SEC filing by the Redwood City, Calif.-based Microsoft reseller in December. But it was for the REGDEX form, which is filed when a privately held company sells stock to investors, such as venture capitalists. (No dollar amounts are filed with such forms.)

That came just a week after ePartners, which was the first organization to put together a large reselling unit, saw Howard Diamond, its CEO of three years, leave and the promotion of Michael McCarthy, who joined the company last year, from president to CEO. ePartners, at an estimated $75 million for 2006, and probably smaller now, is nowhere near the estimated $260 million to $270 million in annual revenue for Tectura. But it is still larger than most Dynamics resellers.

There’s always been a question of how viable large reselling organizations can be and how they should be structured. There are others, including Columbus IT Partner, a reseller based in Denmark that has operations in the United States, and Qurius, a Belgium-based VAR that doesn’t. Columbus IT had revenue of about $120 million for the three quarters ended September 30.  Qurius, which had  725 employees at the end of 2006 and revenue of about $205 million (at this year’s exchange rate) should be a lot larger since it merged with Watermark at the end of 2006.

These four companies have been very important to Microsoft and have each had turns as Microsoft’s Partner of the Year, with Qurius receiving the honor this year. 

In many ways, they aren’t VARs, especially Tectura, which has some highly specialized operations, and Columbus IT, whose ToIncrease development arm came out of the original Watermark. I’ve used the term vertically integrated distributor to describe these entities, which have VAR, developer and distributor attributes.

These aren’t the only large resellers. But they have been among the most aggressive acquirers (although ePartners' buying days passed a few years ago). They signal a change in the market—largely serving the Dynamics NAV and AX markets, which are Microsoft’s worldwide entries in the accounting software market place.

What they have not been is uniformly successful. It’s very difficult to determine their role since these companies are works in progress when compared to the average reseller who has been doing the same thing for years.  What is not yet apparent is whether these companies represent the future, or an experiment in putting together entities whose size isn’t sustainable.