2009 VAR 500 Up And Comers

Each of the more than 90 newcomers to the VAR 500 this year has its own story of how it arrived. Here's an inside look at three of the newcomers, each with a unique business model and ways to differentiate themselves from the competition.

Bluewolf, a New York-based VAR with offices in San Francisco and London, lands on the list for the first time at No. 494 after growing the business to $29 million in 2008 from $24 million the previous year. Bluewolf's success is due in part to a controlled growth plan that featured no venture capital or outside investment, said Eric Berridge, co-founder and principal of the company.

Bluewolf, founded in 2000, offers management consulting focused on custom business process applications. Its sweet spot, according to Berridge, is building services and solutions that bridge disparate processes within an organization.

"Everything from how organizations generate leads through how they take care of their customers," he said. "We work with organizations to refine those processes and implement Web 2.0 technologies in order to execute those processes."

Bluewolf focuses on enterprise financial services, media/telecommunications and technology/manufacturing vertical markets. In one project, Bluewolf helped Time Warner Cable identify the potential business clients that would buy voice, data and cable services from the communications giant. The VAR created a custom application, called Starting Point, for Time Warner that incorporated Salesforce.com and Google Maps to help determine whether Time Warner should pursue a lead, based on the customer's location vs. Time Warner's resources.

Successful firms know it's about the deals and the people behind the scenes. Bluewolf has some unique employment policies that have helped it achieve success and attract great talent, Berridge said.

"We don't track vacation. We could care less. If someone wants six months off, all we care are that the results are there and they are held accountable for their jobs and client relationships. Beyond that, we don't care if we work 10 days a week or two days a week," Berridge said. "We try to generate a culture that's a self-aware team organization."

Bluewolf had its best revenue ever in the first quarter, but Berridge is still cautious about 2009 because of macroeconomic issues. "We're aware of the fact that every one of our customers is being extra careful where they spend their funds. Their spending habits are doubly scrutinized," he said.

In addition, the VAR pitches short projects that could last just 10 weeks, which helps the company be more agile and also get in the door to work on a longer term relationship with bigger projects.

"Clients engage us to get a working product within a 30- to 60-day period of time. We ease into customers with small quick-hit engagements. We've been working with Dow Jones for four years. The largest project was $200,000. It's not big dollars per project, but in the Web 2.0 world and SaaS world, we find that clients constantly need to enhance and improve their processes in that area."

Good Customers Make Good Neighbors

Anexinet (No. 416) took a more direct route to the VAR500. Last April, it merged with another VAR,Virtus Partners, which resulted in a company twice its original size. The combined companies had complementary skill sets and zero overlap in customers, which has helped propel cross-selling opportunities, said Diego Calderin, president of the East Norriton, Pa.-based VAR.

"It was a way for Anexinet to quickly get into virtualization and it was an easy entree into each other's customer base," Calderin said. "[Virtus] had close relationships with HP and VMware. On the services side, we added Oracle and Metastorm."

Anexinet has developed what it calls a "near-site development center" model that has proven to be successful. When the solution provider wins a project, it opens a satellite office "across the street" from customers, Calderin said. "And we do that on our nickel. It's given us a leg up on our competition," he said. Anexinet includes the near-site office in its proposals, which customers appreciate, he said.

In many cases, the challenging economy often has provided Anexinet with plenty of office space to choose from, Calderin said.

"We can grab a sublease very quickly. We move out like a M*A*S*H unit and we can use it as a springboard to look for other customers nearby," he said.

The solution provider also has its own "innovation center," a lab where engineers can figure out what works together and closely examine the components of cloud computing and social networking in a replicated business environment, Calderin said.

"It's like R&D for midmarket companies that can't afford to do that. We can do a quick demo of apps working," he said.

Combining Onshore With Offshore

For Achievo Corp. (No. 199) the key to success has been a combination of offshore software development in China working with local project managers and other employees based in the U.S. and Europe.

"Instead of having to deal with H1B visas and having people fly in, we hire locally for the front-end piece of the work, the project manager, the architect, and so forth. It helps with and with the management of the project," said Douglas Louie, director of global marketing at the San Ramon, Calif.-based company.

China has lower labor rates than India (not to mention the U.S.), so Achievo is able to bid very competitively for projects and keep in constant communication with customers locally, Louie said.

Custom software development accounts for about 85 percent of Achievo's revenue, with about 20 percent coming from IT services, Louie said.

"We have some customers that may have three to five folks working on something. There's a 4-to-1 cost advantage of working in China," Louie said. "We can have four times as many engineers, which leads to higher productivity and immediate cost savings. In this economic environment, customers can do more with less."

Some Achievo customers made knee-jerk cost-cutting moves last fall when the economy fell down. Now that the dust has cleared, they're finding they have less staff -- and pent-up demand.

"They either cut their budget or reduced staff. With us, they find they can get four times [the staff]. Smaller companies and private startups are also looking to stretch cash and their issue is time to market," he said. "We can get an application up and running for a company in four weeks after they signed. It's incredibly flexible for them."