Issue #187, December, 1998  

Catch the Changing VAR

By Stephen Lawton 

etrospectives are popular this time of year. People like to get together, talk about the good times they have had over the past year, reminisce about opportunities won and lost, and sing Auld Lang Syne.
    I like to reminisce too. For example, do you remember back in the “old days” when buying a white-box system from a local systems integrator got you at least as good of a system, if not better, than some of the branded PCs, and for a whole lot less? 
     Today, the branded PCs have fallen well below $1,000 for a basic system, while resellers are putting together very impressive workstations at that price point. The issue for VARs is that the pricing and functionality delta between the branded and non-branded systems is disappearing. 
     Moreover, Compaq Computer Corp., Hewlett-Packard Co., Apple Computer Inc., Gateway 2000 Inc. and other manufacturers now sell  directly over the Web, putting even greater pressure on the traditional reseller. 
     As a result, the reseller market is changing. Many of today’s successful VARs underscore the “value-added” portion of their collective identity, and, increasingly, emphasize service, support and vertical integration. 
     In some cases, this could mean the difference between returning to the days of high profit margins and sticking with low-margin products such as PCclones. 
     In other cases, it means that VARs are becoming experts in networking infrastructure, adding software expertise with certified engineers for Windows NT and NetWare and hardware expertise with network designers familiar with such issues as wiring topologies and Layer 2/Layer 3 switching and routing. 
     Still other resellers are adding Web capabilities, either partnering with or acquiring expertise in Web development, while still others are taking a more support-oriented view by adding network management capabilities. 
     Whatever their choices, these VARs realize that there still are margins to be made in helping small- to mid-sized companies with their computing needs. The growth of small companies continues at a significant rate. 
     Earlier this year, President Clinton sent to Congress the latest edition of The State of Small Business: A Report of the President. The report, which covered the calendar year of 1995, stated in part: “The number of businesses filing tax returns grew to a record 22.6 million. Proprietorship earnings increased 8.0 percent; corporate earnings, 10.8 percent. The number of business bankruptcies and failures declined, and industries dominated by small firms increased employment at a rate 1.6 times the national rate of increase of 1.6 percent.” 
     Although those figures represent growth from three years ago, small businesses continue to be one of the fastest growing markets. In coming months, we will look more closely at the service and support sector. I encourage you to turn to Page 29, where Deidra-Ann Parrish helps you go “Looking for Mr. GoodVAR.” In future issues, we’ll look at vendor certification for engineers, a look at some VARs who made the change from selling boxes to vertical integration, and Y2K issues. 

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