The distributor predicts that the next year will be a strong one for small and midsize business VARs as blockbuster new products that have made inroads in the enterprise begin widespread adoption at SMBs.
With a handful of blockbuster new products recently making their premiere, plus several other market drivers on their way down from the enterprise into the small and midsize business space, 2007 looks to be a strong year for SMBs.
That's the forecast from D&H Distributing, a Harrisburg, Pa.-based distributor catering to the SMB VAR market.
Privately held D&H does not release quarterly numbers but offered a snapshot into its 2006 financials. Revenues for 2006 climbed to about $1.7 billion. For the third and fourth quarters, D&H saw an 18.8 percent increase in revenues year over year, which represents a faster growth rate than for the rest of the industry but is not surprising given the company's focus on the fast-growing SMB space.
Areas of particular strength at D&H in 2006 included servers, up 54 percent; portable computing, up 44 percent; backup storage, up 39 percent; application software, up 37 percent; and networking, up 34 percent.
"The past few years have been strong years for SMB VARs," said Dan Schwab, vice president of marketing at D&H. "2007 looks to be an even better year than 2006."
D&H has identified six market drivers and growth categories for 2007. They are multicore microprocessors, terabyte storage, mobile solutions, small business servers, color laser printing and 802.11n wireless technology. Noticeably absent from the list is Microsoft's long-awaited new operating system, Vista.
"If you ask a lot of people about Microsoft Vista you will get different answers," Schwab said. "Some say adoption will be in second half of 2007. We look at it from a long-term perspective with January as the start of the upgrade cycle."
D&H is providing education and tools to partners to assist them in educating customers "on the benefits of Vista migration."
As for the other technologies on D&H's list, some of them have already been making inroads in the enterprise space and this year will see more adoption in the SMB market.
"The stars have aligned for SMB in 2007 on features and price points at the same time these end users are looking to incorporate these technologies into their businesses," Schwab said.
For example, Schwab noted that some SMBs are now migrating to multicore processors. Some are also switching out desktops for mobile solutions.
"A year ago was the inflection point when notebooks started to outsell desktops," Schwab said. "That is just now hitting SMB."
D&H seems to be ahead of the pack in the switch to laptops from desktop PCs. A recent report from New York-based Merrill Lynch projected that in 2007, the amount of revenue generated by laptops will surpass that of desktops. Shipments of desktops are expected to continue outpacing notebooks, but some market observers that could change as soon as 2008.
D&H believes color laser printing is another technology that will gain favor with SMBs in 2007, as companies find that the cost per page rivals that of ink-jet printing, Schwab said.
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SMB customers are also now more seriously looking at VPN security, storage, remote storage and wireless technologies. So instead of selling point solutions, Schwab said, VARs will have more of an opportunity to migrate the entire infrastructure.
"We believe there is a lot of technology coming from key vendors such as Microsoft and Cisco and Intel that makes D&H feel very bullish about 2007 and the opportunities ahead for our VAR partners," Schwab said.
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