SMB 500: Lessons Learned by Education VARs

When it comes to serving the education market, solution providers that specialize in the space say schools’ technology needs – mobility, security, updated systems and the like – mirror the broader IT market. Navigating the education vertical, however, requires special attention to timing and an understanding of budget constraints, the most successful VARs report.

The Ingram Micro 500, a listing of the top SMB VARs created in cooperation with The 2112 Group, parent organization of Channelnomics, includes 29 businesses focused primarily on education. While highly productive in terms of revenues and spending with the distributor, they tend to focus on smaller engagements, the IM SMB 500 shows. Nearly 75 percent of these companies are serving small organizations, serving no larger than 249 seats.

Only about a quarter focus on larger segments that approach 1,000 seats. And the VARs themselves fit into lower strata of SMBs, with the largest company, Consolidated Networks Corp. (IM SMB #295) staffing only 48 employees.

Evenly spread across much of the United States, these SMB solution providers offer the gamut of technologies, but the largest percentage of educational-centric VARs make most of their purchases from Ingram Micro in the areas of networking (21 percent), components (23 percent), peripherals 19 percent), software (22 percent), and systems (27 percent). Few companies noted services revenue, at just 3 percent, or storage (4 percent) as a significant part of their businesses.

“Right now, there’s a lot of push into BYOD and [Apple Inc.] iPads,” said Wade Devore, President of education specialist NetVision Consulting Inc. (IM SMB #310) in Arlington, Texas. “Mobility is a focus, security is always part of the equation [and] most of their devices are pretty locked down.” It’s not hard to see how software and peripherals help rope in what would otherwise be an unruly lot of devices.

Netvision sees nearly half its revenue evenly split between peripherals and software. Networking makes up about 13 percent, according to Devore.

Devore insists that selling to educational institutions differs other business. “They’re all looking to spend. The challenge is to understand their needs, like anybody else.” The obstacle, however, was in the actual implementation of this technology, he said.

“When schools are open, they don’t want to do anything,” said Devore, explaining the timing needed to approach educational upgrades. “If you’re going to develop a business based on schools, you [need to do it] during the summer and the holidays.

“So how do you staff? How do I grow my company supporting them [only during] the dead times? We actually limit how many schools we take on based on who can fill the gaps in the project.”

That timing situation may change in the near future, however. “[Schools are] looking to take their curriculum online so the student doesn’t have to be at the facility. They’re looking to extend their market outside their walls,” said Devore. That suggests educational-centric partners may see an eventual uptick in services-derived revenue, particularly if schools move technology off-premises and into the cloud. That could also alleviate some of the timing woes.

Teresa Rider, spokesperson for Lima, Ohio-based YES Learning and Computer Center Inc. (IM SMB #404) said that funding, more than timing, creates the primary obstacle to education sales. “If the schools don’t have money, they can’t purchase anything,” said Rider. “There’s not a whole lot we can actually do.”

To meet that challenge, Rider noted that YES provides equipment leasing and actively helps education clients work around budgets in order to find an appropriate vendor and solution. Asked where the future of the educational market was headed, Rider said that “everything is changing these days, so it’s hard to think that far ahead.”

For YES, servicing schools is less about mobility or peripherals and more about the basics — desktop and laptop computers. YES derives 46 percent of its revenue from system sales; software is right behind at 24 percent.

Lee Ann Cimperman, senior sales executive at Cranberry, Pa.-based Concensus Technologies LLC (IM SMB500 #23) said that when selling software to schools, Concensus will go with a subscription model. “It’s generally more affordable, plus it allows flexibility if enrollment changes.”

For higher education clients, Cimperman noted that full licenses are preferred, but a careful calculation is made based on an average of full-time students mixed with faculty and staff.

In some cases, K-12 schools are “restricted to buying off state contracts, or through certain pre-defined buying models. We may be able to offer a product from a vendor, but if it’s not on the approved list, we can’t sell it to them.” Cimperman noted that in some situations, if a particular brand is needed, sales can be made if the advertised price is lowered significantly.

In areas where cash flow is particularly slow, Concensus will break out projects into phases to enable an initial installation the first year with additions in the following years, Cimperman said, noting that phase-based rollouts are also helpful when implementing new campus-wide applications, teaching modules or human resource related software.

One common denominator that emerges among education-focused solution providers such as YES, Concensus and Netvision is the rapid pace of change within their vertical market. The educational vertical is clearly becoming much more dynamic, particularly as cloud-based services change the way technology is delivered to schools and impacts the way education clients consume IT — both on and off campus.

Concensus’ Cimperman said that migration services to Google Apps were in increasing demand, with some customers looking to pair Exchange with Google Apps. And where schools are moving to the cloud, there is a marked demand in putting storage into the cloud as well. “Schools are getting out of the hosting and file storage business,” said Cimperman, noting that “digital lockers” on a per-student basis were becoming more popular, and would likely become more so in the coming years.

But the real focus was not just on that technology, but rather, the technology which facilitates its use: identity management.

“More and more [services] are going out to the cloud, and as schools start using these cloud-based technologies, they want to have single sign-on capabilities,” Cimperman said, adding that capabilities are often derived through Active Directory or eDirectory services that can facilitate a single user experience across the entire school campus at any connected computer. In addition, identity management is quickly spilling over into BYOD and MDM, which Cimperman noted is picking up steam.

Overall, Concensus’s laser focus on software and services seems to be paying off — it has grown 654 percent over the last three years with revenue derived from essentially two spaces only, services and software, which make up 12 and 86 percent of revenues respectively. A lingering 1 percent comes from peripherals.

Even with such success, Concensus is prepared for the unexpected. “Education is different, and it’s changing constantly,” said Cimperman.

So while technology delivery methods may need to be a bit more specialized, Ingram Micro’s SMB 500 shows that the core of the education market for SMB VARs remains firmly tethered to the heart of the IT landscape.