2009 VAR 500: What It Takes To Win

All told, this year's VAR 500 is worth a grand total of $597,588,818,754.That enormous number includes IT consultants, solution providers, traditional resellers and vendor services arms.

The figure is roughly $220 billion more than last year's number, largely because of the inclusion of the vendor services arms. Students of the VAR 500 will recall that the vendors were placed on a separate list of 25 in 2007 and, in 2008, the Vendor Top 40 listing. This year, the vendors were reintegrated onto the list, recognizing their value as solution providers. IBM Global Services, ranked No. 1, does not, after all, simply sell IBM brands, but offers an entire spectrum of products to customers. IBM, as with the other vendor services arms on our list, provides clients with the equipment and services they require to design solutions with holistic consideration of servers, storage, application performance and manageability.

IBM Global Services reclaimed the top spot it last held on the overall combined list in 2006; this year it appears at No. 1 with revenue of $57.3 billion. Though it's increasingly difficult to post increases at such high sales rates, the technology services company saw a 3.6 percent rate of growth. Remarkably, $28.2 billion Cognizant, ranked second, saw tremendous growth of 31.8 percent.

During an earnings conference call in February, Cognizant's CEO Francisco D'Souza said that in a soft economy, customers want partners that provide service innovation. "Cognizant has continually demonstrated its ability to bring new services to its customer base," he said. "This is of particular importance at this time ... when customers are reacting to the pressures of a weak economy and are looking for ways to limit costs and to improve productivity."

The combined list of VARs grew despite an economic recession: The total revenue figure climbed 58 percent in 2009.And last year's list was up 24.3 percent from 2007. That, despite what some in the media are calling the worst economic climate since the 1970s -- and some reach back and point to current times rivaling the Great Depression. In fact, the total revenue figure of $597.59 billion is larger than the gross domestic product of Poland ($525.73 billion) or of the Czech Republic, Ukraine and Hungary combined ($553 billion). You could build 1,000 Citi Fields (if you're a Mets fan) or 398 new Yankee Stadiums (if you follow the Bronx Bombers) for that amount of money.

Obviously, the largest systems integrators and consultants contribute a great deal to the $597 billion figure. The so-called "billion-dollar club" has 89 members, contributing $484.8 billion to the list's bottom line, or 77 percent of its total. This year, 92 solution providers joined the list, down slightly from 113 last year, and they accounted for $25.1 billion in revenue. An additional 21 newcomers joined the 25 To Watch List, bringing in an additional $546 million in revenue.

The results of mergers and acquisitions made room for the newcomers, and 2009, as with previous years, had a number of high-profile companies come together. One year ago, Hewlett-Packard announced it would buy EDS, which ranked No. 1 on the VAR500 last year, for $13.9 billion. The deal catapulted the combined company's revenue 34.5 percent, to $22.4 billion, bringing it to the No. 5 slot on this year's list.

With the vendors added to the list, the top 100 ranked companies, not surprisingly, had far heftier revenue in 2008 than in 2007. But the trend extended through nearly every tier. How do solution providers do so well in the face of a lackluster economy?

VARs and their vendors must work together to present solutions at the "C" level, which leads to a robust pipeline and closing opportunities, said John Convery, executive vice president of vendor relations and marketing at 3MD/Denali, VAR 500 rank 263.

"In a down economy, customers look to Denali Advanced Integration for value, and solutions that drive the cost out for IT spend," he said. "They look to Denali for the expertise as an outsource option instead of hiring internally. Customers leverage our hundreds of certified engineers to take on a project or two, which leads to an overall IT consulting resource for them."

However, solution providers are not entirely immune to the peaks and valleys of the economy. VARs ranked 400 and higher had lower average revenue than last year, and the solution provider that ranked at 500 this year had lower revenue than the No. 500 company in 2008. In addition, companies between 300 and 400 had a much smaller average percentage of revenue growth than larger VARs. The economic slowdown has seemingly impacted the VARs in the lower third of the list more than those with greater sales.

Methodology

The VAR 500 is the definitive listing of the largest IT solution providers, system integrators, IT consultants and services companies with headquarters in North America, as measured by worldwide gross revenue.

The survey was fielded in February 2009. Rankings were determined by 2008 fiscal year gross revenue generated by the sale of IT goods (hardware and software), software licensing, customer software sales, professional services and managed services. The editorial team reviewed the financial performance of hundreds of companies. Public and private companies were asked to participate. Applications are vetted and cross-checked against multiple independent resources including "Hoovers" and "Selectory."