2008: A Bright Outlook

If the economy is about to take a dive, solution providers don't seem all that worried. Nearly three-fourths of channel companies polled in Ziff Davis Enterprise's Channel Outlook 2008 study said they anticipate higher profits in the next 12 months, and many expect to achieve that with new customers, a sharpened focus on solution sales and services, and increased business with existing customers.

Despite economic indicators pointing to a downturn—including the ongoing mortgage crisis—it seems many solution providers are feeling immune to macroeconomic factors as they work to diversify their portfolios with a strong emphasis on sales and services offerings while de-emphasizing stand-alone product deals. The technologies of sharpened focus include things such as security, application integration and mobility Despite a weakening economy, solution providers expect higher profits in the new year.

The survey results point to the channel's overall efforts to emphasize value and specialization, said Bob Dutkowsky, CEO of distributor Tech Data. As solution providers find some level of economic security by seeking out higher-margin, higher-value specializations, they naturally feel better about business prospects, Dutkowsky said.

"Any time companies anticipate improved profitability, that is a good thing because that says they're focused on adding value rather than driving down prices," he said.

Such is the case with Greg Starr, owner of I.T. Works, in New Boston, Texas, who, despite some trepidation over possible spillover effects from the mortgage crisis, said he feels good about the coming year.

"We're moving more and more into managed-services recurring-fee contracts," Starr said. "The more we do that, the more profitable we are becoming. We're taking the business to the next level with the client." Tiffani Bova, an analyst at Gartner, called the focus on profitability, rather than top-line growth, a good sign. "If VARs are starting to look at real profitability, then it means we will have a healthier channel," Bova said. "It's good to see that they are tracking real profitability, adding in costs for time of sale, logistics, support and other services, and not just working from cost of buying to cost of selling."

Diane Krakora, president and CEO of analyst company Amazon Consulting, said the channel is an optimistic place in general. "It's not just the VARs who are optimistic," Krakora said. "The vendors are, too. We are hearing nothing but great expectations as vendors increasingly look to investing in their partners and partner strategy."