VARs Safe from Economic Slump, for Now

While Forrester Research's updated IT Spending Outlook for 2008 showed dampened economic expectations, analysts say VARs won't be affected unless corporate earnings take a dive.

According to Forrester analyst Michael Speyer, IT spending tends to track two to three points higher than the U.S. gross domestic product. Even though Forrester revised its expectations for 2008 spending the week of Dec. 10—reporting that IT spending would grow between 4 percent and 6 percent rather than the 8 percent previously reported in October—Speyer said VARs will feel little impact.

"Unless we go into a recession, which means two or more consecutive quarters of declining growth, it's unlikely that VARs' revenues are going to fall off a cliff," he said.

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"The economic slowdown and the credit crisis don't have much to do yet with corporate earnings," said Steve Tepedino, co-founder and president of Channel Savvy, a Scottsdale, Ariz., consulting group. "When [the economy] starts to have a negative impact on corporate earnings, then bringing solutions to market is going to be much more difficult for VARs."

That's because many of their customers will have to slash IT budgets and reduce their spending on the products and services VARs offer, Tepedino said.

He said that in the event there was a recession, midmarket customers and SMBs would be hit hardest, but VARs could shore up business by offering customers in these market segments help with financing solutions for both services and products.

"If VARs don't want to be crippled by a spending slowdown, they need to consider the impact early and bring to mind how they can mitigate any negative factors," Tepedino said.

Speyer said that even with the lowered economic expectations, 2008 will offer opportunities for VARs targeting what he called "microverticals," or niche markets, and that the unified communications space would also continue to grow.

Read more about Forrester's 2008 IT Spending report.

For example, in health care, vendors and VARs should focus on niche markets within that larger vertical market, Speyer said. In this space, VARs can specialize by targeting specific types of health care providers, organizations or even specific types of physicians and caregivers.

"There have always been VARs that make [health care] their area of expertise, but what does health care really mean? Pharmaceuticals? Hospital emergency rooms? Even a dentist's office," he said.

The unified communications space also is wide open for VARs, Speyer said. Because the technology touches so many aspects of infrastructure and services, VARs with a variety of backgrounds can easily find their own niche.

"Within UC are so many parts of the technology stack: hardware, network infrastructure, IP telephony, [and] software," he said, which gives both traditional hardware resellers and networking- and communications-focused VARs and managed services providers opportunities to thrive within the space."