List-Makers And Trendsetters

Next month, we'll publish the VARBusiness 500, our annual ranking of the largest solution providers in North America, and perhaps the most anticipated list compiled in the IT industry today. On June 11 and 12, we'll host an event in New York City to honor the accomplishments of the top solution providers and gather the executives who lead these extraordinary organizations for a day of brainstorming, breakthrough conversations and information-sharing.

No doubt, the VARBusiness 500, like the Fortune 500, is an elite group that many want to join, but it also serves as a standard by which many VARs measure themselves. And it represents an ecosystem too. Many, including me, have viewed the list-makers as a group of companies that operate independently. They do share many of the same traits--a determination to drive more revenue from high-margin services, a fixation on growth and a move away from commoditized markets. But our groundbreaking research has revealed something else--that these VARs form ecosystems and are interdependent.

VARBusiness 500 companies like to partner with other solution providers for a variety of sales-related reasons, and many smaller VARs like to partner with list-makers to stretch into new geographies or meet the needs of a customer that's just out of their technological reach.

Here's what we found. VARBusiness 500 firms in the South Atlantic United States generate up to 28 percent of their revenue from partnering activities, while those in New England generate nearly 12 percent. In less populated states--Montana and Idaho, for example--the number's closer to 10 percent. Basically, the VARs on the list are either acting as subcontractors for other VARs or leveraging another firm to break into a new market. That's bad news for vendors focusing too closely on one segment of the VARBusiness 500 to drive their business.

But there's good news for 111 VARs--the newcomers to our list. This year, we put vendor services arms in a separate category. And even if we had kept the likes of IBM Global Services on the roster, we would've had well over 50 new firms on the VARBusiness 500, whose revenue cutoff this year was nearly $25 million. The newcomers were spread out all over the list, with a smattering in the top 100 and the biggest chunk ranking somewhere between 400 and 500.

Frankly, that's just the tip of the iceberg when it comes to the VARBusiness 500. Check out our next issue, and our Web site, for lots of data, news and channel insight.

Does Sam Have It Right?
We landed an interview with IBM chairman and CEO Sam Palmisano at the company's PartnerWorld conference last month. I have to admit that I was disappointed with Palmisano's view on the midmarket and the time it's taking IBM to get serious about this space. Palmisano and many other IBM execs have been talking for years about the midmarket opportunity. They even created a product line called Express to capitalize on it. So far, though, the vendor has been less than nimble in that space, and what's worse is that only half of IBM's midmarket sales go through partners. It's no wonder Big Blue hasn't captured more mindshare there.

And here's something else Palmisano said that makes me wonder if IBM really has the right midmarket strategy.

"They [midmarket customers] want what the large guys want," he said. "If we can give them that, and use partners as the conduit, we'll get there."

Unfortunately, I disagree. Midmarket customers want something unique, and they want solutions from their VARs that can support their growth. They don't envy the systems that the big guys have built. If Palmisano's really serious about the midmarket, he needs to tell the channel a more inspiring story.

Send me your thoughts on the midmarket; I'll send the best of the bunch to Palmisano.