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VARs doing business with the U.S. Department of Defense, Coca-Cola Co. or the state of Virginia already know that if they don’t connect directly to the buyers’ procurement systems, they will lose business.

More and more federal and state agencies—and smaller numbers of corporations—are requiring IT suppliers to sell them products such as laptops, desktops, wireless cards and printers over the Web. Bidding, price quotes and the sale itself must take place online.

For VARStreet Inc., which provides an e-business platform to VARs for commerce and for product sourcing, these e-commerce mandates spell opportunity. The company’s servers can provide price quotes for future purchases and immediate purchases, as well as business rules that limit a given user’s spending ability or the range of products a buyer can choose.

Over the next four quarters, VARStreet expects to quintuple its list of 200-some VAR customers as its customers demand more online service, co-founder and CEO Rad R. Sundar said.

“Right now, we’re getting a lot of requests for VARs selling to the states of Virginia and California,” Sundar said. Government agencies are the most common and consistent online-only buyers, but more corporations are following suit.

“If you don’t have an online presence, you can’t do business with them. The end-user customers are driving the change.”

Most VARs still resist doing business online, Sundar said. “VARs are like other small businesses; they are loath to change.”

Read more here about the cost savings of online procurement.

In the past five years, VARStreet, based in Santa Clara, Calif., has set up 300 custom electronic storefronts for 200 VARs. Built on VARStreet’s Xponential Commerce hosted application, the e-commerce sites connect to product suppliers at the back end.

Sundar said VARStreet’s mission is to provide links between the various constituents in the IT supply chain, from the end-user buyers to the product suppliers. “We call it Xponential Commerce because it connects many to many,” he said.

Connecting the various points along the supply chain is significant because enormous amounts of information about products and prices flow down the chain, but the information is organized differently by different people. Product descriptions don’t follow a standard format, and pricing information is complex. Prices change daily, and distributors set different prices for buyers based on volume.

Individual VARs trying to make sense of this ever-changing flow of information could find it a daunting proposition. VARStreet aggregates all of the information and presents it to the VARs in a uniform way, Sundar said.

VARs can check price comparisons between suppliers, get updated product availability and check for special promotions, he said. They use the information to update their own sites and to prepare interactive price quotes for customers.

VARStreet connects with the major distributors, including Santa Ana, Calif.-based Ingram Micro Inc.; Clearwater, Fla.-based Tech Data Corp.; and Harrisburg, Pa.-based D&H Distributing Co.

Ingram Micro partnered with VARStreet because VARStreet makes it easy and affordable for VARs to add needed electronic capabilities without having to invest in development and maintenance, said Justin Crotty, vice president of channel marketing at Ingram Micro.

“Customers expect solution providers to give them the option of ordering products and services online, and in some sectors, such as government and education, e-commerce capabilities may even be more of a prerequisite to winning specific deals,” he said.

Doing procurement electronically saves VARs a significant amount of time.

Click here to read about how Ford backed out of an online procurement project.

“Having the pricing from the three major distributors makes it much quicker than calling all three,” said Paul Whalley, vice president of Whalley Computer Associates Inc., a large VAR based in Southwick, Mass.

Another time saver, Whalley noted, is the use of interactive price quotes. Once the customers get a quote, they can make changes on quantity and prices and send the information right back. No phone haggling is required.

Ron Cook, president of the Connecting Point Technology Center in Las Vegas, said access to the information allows him to give customers consistent prices, something that was hard to do before he hooked into the VARStreet platform five years ago.

Connecting Point was an early adopter of the VARStreet technology. “It’s something you have to do. There were customers that wanted to buy online,” Cook said.

VARs pay VARStreet monthly fees of $100 to $200 per user, a cost Sundar justifies by saying that the system makes the channel more efficient and reduces the cost of selling.

VARs doing business with VARStreet are a varied bunch. About a quarter of the VARs are small, one- and two-person shops, a quarter are large VARs with $20 million or more in sales, and the rest are somewhere in the middle, Sundar said. They sell to different vertical markets, and in some cases, VARs have set up several storefronts targeting different customer sets.