Five Technologies That Will Help VARs Survive

Despite the current economic malaise, VARs can make a buck by focusing on five technologies: SaaS, manages services, open source, storage and virtualization.

Like all VARs, you're looking for the silver lining among dark economic clouds. The good news is that five technologies can boost their profitability while cutting customers' costs and consolidating their infrastructure. Among the technologies fitting the bill are managed services, Software-as-a-Service (SaaS), open source, storage and virtualization.

1. Managed Services

"The realities of today's economy have accentuated businesses' needs and demands for predictable IT spending and for less capital expenditure upfront," said Keith Bradley, president of Ingram Micro (NYSE: IM) North America.

Bradley said he believes that corporate focus on predictable IT spending will increase the adoption and deployment of managed services and SaaS solutions.

2. Software as a Service

What managed services and SaaS offer to VARs more than anything is a way to generate recurring, predictable revenue — a major advantage in this economy.

The growth of hosted services, specifically hosted applications or SaaS is driving managed services revenue growth in the United States, according to a report from researcher In-Stat. The researcher forecast that hosted application revenues will grow from $8 billion in 2008 to $16 billion by 2012.

3. Open Source

Another hot technology for VARs is open source as it provides better margins and broader opportunities than proprietary technologies to make money from customization and integration services.

Open-source software products are often easier to sell than proprietary products because they cost less and lack the unpopular per-seat license fees of proprietary enterprise software.

Spending on software related to Linux server operating environments (SOEs) is growing quickly with a 2006-2011 CAGR of 35.7 percent, according to researcher IDC. Overall spending on Linux SOEs, including software, hardware, and services, is increasing at a 2006-2011 CAGR of 24.1 percent, reported the research firm last year.

4. Storage

Spending on storage products are also up — bucking a trend in hardware as a whole.

Worldwide external disk storage systems revenues posted 8.8 percent year-over-year growth totaling $4.9 billion in the third quarter of 2008, according to IDC.

Various surveys of IT users suggest that storage is one the few hardware categories in which buyers are reluctant to cut spending independent of the economic situation.

5. Virtualization

The final technology worth checking out is virtualization. IDC estimates that 1.7 million physical servers will ship in 2010 specifically to run virtual machines — a threefold increase from 2005. The worldwide market for x86 virtualization solutions has been growing rapidly since 2003 when it stood at $205 million, according to IDC, which projects the market will be worth around $1.8 billion by 2010.

Storage virtualization is establishing itself as a strong revenue opportunity for VARs and as a smart investment for companies eager to maximize their money and data center resources in a depressed economy.

"Storage virtualization is the next wave of virtualization, and it's just starting to take off," said Pete Peterson, senior vice president and general manager of the advanced infrastructure solutions division at distributor Tech Data (NASDAQ: TECD).

"This year could see a lot of interest in storage virtualization as companies seek compelling ways to improve their storage management capabilities while saving money on hardware," he said, noting that growth in most hardware markets is projected to be flat for the next 12 months.


TAGS: open source,Linux,virtualization,managed services,Storage

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