Varnex 2017 Lynn Haber, Channel Partners

Varnex 2017

The Doyle Report: Ten Years On, Varnex Provides a Window into the Health of the MSP and VAR Market

Varnex members are looking to add new vendors, enter into adjacent markets and develop vertical market expertise. That's a good sign for everyone.

Broad-line distributor Synnex recently wrapped its spring Varnex event for mid-tier and large solution providers. Gauging from feedback there, the VAR and MSP community is busting with new activity—more so than at anytime in recent memory, says Varnex host, Synnex Senior Vice President of Marketing, North America, Bob Stegner.

Varnex, of course, is the peer-to-peer community of Synnex resellers that get together twice a year to discuss business and build long lasting partnerships. The year’s event, which was held in Austin, Texas, attracted 537 attendees. That compares to the 100 professionals who attended the first event, then called Optima, in Las Vegas in the fall of 2007.

(While I wasn’t able to attend this year, my colleague Lynn Haber from Channel Partners did and put together this slide show, which provides a flavor of the activities there.)

Of late, Synnex has been making headlines. It was just named the Commercial Distributor of the Year by Red Hat, Inc., and has enjoyed improved financial results. Revenue for the fiscal first quarter ended February 28, 2017 was up 12.6 percent to $3.52 billion while net income jumped 32.7 percent to $61.8 million. Not surprisingly, shares of Synnex stock (NYSE: SNX) are up from a year ago as well. They now trade for around $110 per share, well above the company’s 52-week low of $77.54.

While Synnex still faces the same existential threats that all distributors face—the loss of hardware revenue as MSPs and cloud brokers switch to services, a struggle to attract ISVs who question the value of distribution, etc.—the Greenville, S.C. company has responded by broadening its focus and capabilities.

Late last month, it announced a deal to add Google's G Suite productivity and collaboration suite to the set of Synnex CLOUDSolv offerings. It also expanded its line of networking equipment with a deal to resell the Brocade Ruckus ICX campus switches.

At Spring Varnex 2017, Stegner kicked off with an inspirational presentation from the founder of Tito’s Vodka, Tito Beveridge. Why a vodka businessman? It turns out that his backstory mirrors that of a lot of VARs and MSPs.

Like many solution providers, Beveridge funded his company with credit cards initially. To identify best practices, he experimented with different products and business models. He also tried to win awards when possible, which he saw as a way to differentiate his business from his competition. And he relied on word of mouth to enhance Tito’s reputation.

Naturally, Stegner figured that this story would resonate with channel companies.

Synnex SVP Marketing, North America, Bob Stegner

“It couldn’t have been a better lead in,” says Stegner. “He wasn’t talking about IT but the story of how a small business prevails after a 20-year struggle. It gave hope and inspiration to everyone else.”

Shifting his focus to his members, Stegner says he heard from no one that business is down year-over-year. That’s unusual even in good economic times. Partners, instead, told him they were looking to add new vendors, enter into adjacent markets and develop vertical market expertise. They are expanding, in other words, as evidenced by the response to the “speed dating” session that Varnex arranged for vendors and partners. It turned out to be one of the most highly rated gatherings of the entire event.

One thing still challenging some partners is cloud computing. “A lot of the mid-sized VARs still look at the cloud as a threat,” says Stegner. “But even peers [in community meetings] are telling fellow members that they need to be engaged with it even if they are wary of it. That’s because someone else is going to approach their customers and offer them help with the cloud. Even if a VAR chooses not to do something in the cloud now, they need to be prepared if and when a customer asks.”

Finally, Stegner says he sees a growing acceptance within the Varnex base that “you cannot be everything to everyone.” Varnex partners are thinking very carefully about the market niches that make sense for them based on their capabilities and demographics.

About Those Credit Cards

One last word on funding: If you’re a fan of the television show “Shark Tank,” you know a significant number of entrepreneurs fund their businesses with credit cards. They are handy after all, and don’t require the groveling that goes along with borrowing from family members. Besides, if Tito’s can fund a business on credit cards, why not you?

Well, that’s something a good many partners may wonder. But be careful, fellow MSPs caution. More than a few otherwise promising businesses have been doomed by an over-reliance on credit cards. MSPs that have used them as springboards to get started can share all kinds of tales about the dangers of getting in too deep.

A better approach? Some say local lending institutions such as banks offer better terms. Or distributors. An entire subset of the market swears by local credit unions. Consider what Reddit reader Wes Garrison suggests that fellow MSPs do: reach out to a local credit union and “set up a meeting [and] ask about ‘business lines of credit.’”

At the very least, MSPs advise, consolidate your credit card balances onto one card with lower interest rates and initiation fees.

Let me know how you would advise a newbie to fund their business and what has worked for you.

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