Not So Tight Times For VARs

As the economy continues to falter, technology companies are trimming the fat by reducing spending and laying off employees. But it's unlikely that channel initiatives will be pared down. To the contrary, technology companies are sinking more money into the channel. Take a look at some of the recent announcements from these big players:

• IBM (Armonk, NY) is investing more than $50 million in its PartnerWorld for Software program. Notable benefits for the channel include 250 IBM field representatives helping partners close business and more funds for reimbursed partner training.
• Hewlett-Packard (Palo Alto, CA) is spending more on channel development during the remainder of 2001 than it did at the beginning of the year. One focus is investing in partners selling enterprise accounts.
• BEA Systems (San Jose, CA) introduced its Star Solutions Program that offers the channel more education and technical support, as well as inclusion in the BEA Solutions Catalog. This program is targeted for partners providing integration, wireless, and portal solutions.
• FrontRange (Colorado Springs, CO) is recruiting new channel partners for its GoldMine customer relationship management (CRM) and HEAT customer service and support applications. At the same time, Microsoft (Redmond, WA) has ventured into this market with plans to deliver a CRM server by the end of 2001.

It's not surprising that channel programs have escaped the budgeting axe. After all, technology companies are pressured to generate more sales and channel partners can help with this task. However, this increased spending on channel programs during tight times is not the norm. What's driving this trend?

It may be the growing demand for integration by end users. And, providing integration services is what VARs and integrators do best. Industry analyst IDC (Framingham, MA) predicts worldwide revenue for integration services to grow from $38 billion in 2000 to $116.5 billion in 2005.

This growth is being fueled by end users' need for seamless business processes among their customers, partners, suppliers, and employees, according to IDC Senior Analyst Stephanie Torto. "Companies need their IT systems and applications to work as one cohesive unit. As a result, the service opportunity around implementing, integrating, customizing, and optimizing business solutions has never been larger," she adds.

The segments that offer the most opportunity for integration services include:

• Supply chain services - revenue is forecasted to grow from $12.7 billion in 2002 to $41.4 billion in 2005.
• CRM - revenue is predicted to increase $16 billion by 2005.
• Knowledge management - revenue is expected to have a CAGR (compound annual growth rate) of 40% from 2001 to 2005.

While these specific technologies top the list for integration, IDC sees all technologies starting to converge and technology boundaries starting to blur. As a result, the demand will move toward integration services for the entire IT enterprise - not just by technology. When you pair this increase in end user demand with vendors prepared to back channel partners, I can't imagine a more ideal time to be a VAR.