No service provider can be all things to all customers. And certainly any service provider that stretches its technical services across too many areas usually finds itself coming up short on all fronts.
Trying to be all things to all companies is a recipe for disaster for any channel company, and one designed to ultimately fail. While a deep breadth of value-added services is especially desirable, there is a point at which over-expansion can lead to problems.
That is why in my last column I pushed the point of VARs partnering with other VARs to not only help fill geographic gaps, but service and expertise holes as well. Specialization is the key to growing your business profitably, satisfying customers and being a desirable partner for other service providers. VARs that find a technological niche in which they can provide a specific service expertise have developed the building blocks to a successful business model.
Just take a look at the ghosts of channel past that tried to position themselves as total solutions providers, from soup to nuts, from all products to all services. I am dating myself here, but companies such as Businessland, JWP, ComputerLand, Inacom, CompuCom and MicroAge all thought they could do it all.
They spent millions of dollars on state-of-the-art mega warehouses and tried their luck at channel assembly, all in an effort to supply products more quickly than their distribution counterparts and to out-Dell Dell Computer. At the same time, these companies believed they could take care of highly complicated network installations, provide integration services for disparate applications and even get into the long deployment cycles of ERP and such.
JWP also had the grand vision of utilizing its electrical and construction businesses to offer customers a turnkey solution for all its wiring needs when moving into a new building. That went over like a brick, pardon the pun.
Many of these companies are either gone or have become shadows of their former selves. The ones that have survived, or made a comeback rather, have focused their service offerings and basically got out of the hardware supply business if there is no service angle attached.
Enter the more specialized VAR, integrator and service provider — companies whose expertise run more deep than wide. They are constantly evolving as technology advances. VARs are now specializing in e-mail security, regulatory compliance, VoIP, and even home theater and networking services.
“There are many VARs out there that have built a good business out of specializing on a specific area,” said Benny Lorenzo, a general partner with Aspira Capital Management in Fort Lee, NJ. “This is a very good business to be in.”
One such success story is Advanced Systems Group (ASG) out of Denver, Co. The company may be closing in on the $100 million revenue mark but understands that it must stay focused on its core expertise. The service provider has made a name for itself in data storage management and that has lead to a variety of other revenue opportunities, according to Mark Teter, chief technology officer of the company.
“By focusing on the data management piece, or data storage management, that has gotten us into a lot of vertical specializations such as backup, archiving and storage infrastructure,” Teter said. “We can’t be an expert on everything. You need to understand where your expertise stops and what your core competence is.”
This is the way to build a business in today’s channel.
Tell me your success story.
Elliot Markowitz is Editor-at-Large for Channel Insider. He is also Editorial Director of eSeminars for Ziff Davis. He can be reached at Elliot_Markowitz@ziffdavis.com.