Business In The Fast Lane

There are fast-growth VARs. And then there are fast-growth VARBusiness 500 VARs--best-in-class technology innovators in the robust midmarket driving huge productivity gains in red-hot markets, such as unified communications.

Take BlueWater Communications Group. The Hauppauge, N.Y.-based VAR, which was No. 467 on the 2008 VARBusiness 500, ranked as the fastest-growing company on the list with an astronomical 1,942 percent growth rate. But that didn't mean cutting corners on customer engagements. BlueWater scored an impressive 4.91 out of 5.0 in an independent customer satisfaction survey done by networking behemoth Cisco Systems Inc., San Jose, Calif. That puts BlueWater in the top 10 percent of Cisco partners worldwide in customer satisfaction. In addition, BlueWater just won Cisco's prestigious Technology Excellence Award for North America. All that from a 2-year-old company with only 70 employees. BlueWater, which was bootstrapped by the founders and was profitable after only five months, is regularly beating bigger competitors in the sales trenches because of its technical prowess and solutions muscle.

It's no small matter that BlueWater was built from the ground up to tackle what company founders saw as a big hole in the channel: providing robust unified communications solutions to midmarket accounts. With that in mind, BlueWater CEO Bob Cagnazzi, the former CEO of systems integration giant Dimension Data's North America unit, put together a world-class team, including Lou McElwain, an 11-year Cisco veteran, who at one time led the networking behemoth's aggressive drive into the midmarket in the East Coast U.S. market.

"I think success in any industry is a result of having the right team," Cagnazzi said. "We took care to make sure we built the right team from the very beginning, a team with lots of experience in this industry. And not just with startups, but with larger organizations. We started at the beginning with a framework to scale the business quickly." The top management team at BlueWater has more than 100 combined years experience in the industry building large, profitable businesses, Cagnazzi said.

One of the secrets to BlueWater's success has been taking advantage of the unified communications infrastructure buildup in the midmarket that left many clients with little more than a "dial tone," he said. BlueWater's genius was in taking that dial tone to another level, driving significant productivity gains and lower total cost of ownership for clients. "We have worked jointly with clients to drive productivity rather than looking at what's the next thing we can sell them," Cagnazzi added. "I don't know if that is unique or special, but that is the way we have approached the market."

Cagnazzi compares the current unified communications opportunity to the Internet boom in the mid-'90s. "People are figuring out business models and how to take advantage of the investments they have made," he said. "A lot of midmarket companies were not really taking advantage of the opportunities that the technology opened up. We felt we had an opportunity to take all we learned from implementing the technology in Fortune 500 accounts and bring it to a segment below that. It's all about bringing that expertise into the midmarket to really deliver on the promise of the technology. Every one of us was inspired by the technology and felt it was a great time to start a business focused on that technology."

Among BlueWater's unified communications success stories: a wireless RFID hospitality solution for a casino aimed at keeping players at the slot machines longer. The BlueWater solution automated everything from food and drink ordering at the slot machines to asset tracking and physical security. Another big BlueWater victory: a financial services sector deal to roll out 6,000 IP phones. "We were able to put in front of them a highly experienced design and implementation engineering around unified communications," Cagnazzi said. "No other partner had shown that level of detail and process to ensure consistency and quality."

McElwain said one of the keys to BlueWater's success has been that its sales reps are more customer advisers/consultants rather than run-of-the-mill salespeople. Half of the sales team were engineers or project managers before taking the assignment at BlueWater, he said. What's more, they were carefully handpicked from dozens of potential candidates. Ultimately, BlueWater is bringing better cost savings and project management to the table, along with flawless execution in the field, McElwain said.

That ability to flawlessly execute is one of the characteristics that unites all of the VARBusiness 500 Fast Growth solution providers. Waltham, Mass.-based NWN Corp., which was No. 207 on the VARBusiness 500 and grew 33 percent, has also won plaudits from customers for delivering huge productivity gains and cost savings in the unified communications market. Among the solution provider's successful customer engagements is a solution for 30,000 students and faculty in some 200 campus buildings at East Carolina University in Greenville, N.C.

"Our success is built around being focused in the right markets and the right technologies with the right partners and the ability to go out and execute," said NWN CEO Mont Phelps. He credits the company's partnership with Cisco in the unified communications segment as a key differentiator. Cisco represents about half of NWN's total sales, he said.

To its credit, said Phelps, Cisco has done a good job making sure its midmarket-focused VARs are rewarded for driving advanced technology solutions. "You have got to have margins on product transactions and services that go along with them," he said. "Otherwise, you can't invest in the salespeople and marketing campaigns to build a healthy business. Cisco, in my view, has been one of the leaders in making sure their partner ecosystem is healthy. The growth rates on Cisco advanced technologies are pretty substantial."

Playing in the midmarket is critical, too, said Phelps, since those accounts have a greater appreciation for solutions value. Solution providers playing in commodity technologies are getting beat up on price, Phelps said.

In 2007, Phelps' growth was boosted by two acquisitions. That could change with the current private equity and mortgage crises. "Prices have gone down on companies," Phelps said. "It is like real estate multiples. The funding to do these deals has really dried up. Last August, the window closed. We are still looking at doing things to round out and grow our business. I think there is still activity, but it is not like last year." For 2008, Phelps sees continued strength not only in the solution provider's growing unified communications, security, wireless and storage practices, but also robust growth in managed services and next generation data centers.

Phelps said one of the keys to competing in the current marketplace is not to fall into the trap of the "hypochondriac's recession." That means "we don't talk ourselves into getting sick," he said. "Certainly some industries are in distress, but other industries are booming, like energy and regional banking. Once you start talking doom and gloom, people start delaying purchases and then it just snowballs."

Ultimately, the most important ingredient for success for VARBusiness 500 Fast Growth solution providers such as NWN is not the economy, but bringing valuable solutions to clients. Phelps, in fact, said he is optimistic about climbing higher up the VARBusiness 500 list. "We are in the process of continuing to build and grow a really great company," he said. "I see opportunities all over the place to expand. Despite being one of the fastest-growing VARs, we're still a shrimp. We hope to be a jumbo shrimp someday."