Tight Reseller Margins Prompt Many Storage Resellers to Go Independent


John Pearring, president of STORServer, has found an interesting window of opportunity during this economic downturn: more and more resellers are calling, looking to work as independent agents for the backup recovery company.

"I'd say we talk to 25 to 50 people a month, starting in November of last year," Pearring says. "Before, we would talk to two or three a month. And most of these people who come to us are not laid off. These are resellers who just are not happy with their margins."

This is a boon from companies like STORServer, which outsources everything from its public relations to its accounting to is salesforce. This month, the Colorado Springs, Colo.-based company announced it would bolster its reseller program and create a brand new agents program--one that works with individual resellers at every stage of the sale. Currently, STORServer is looking to increase the number of its agents, from five to 100, as well as increase the number of its resellers, from 25 to 100.

"I'm poised to handle that kind of growth," Pearring says. "Our reseller program has high margins. We will do onsite visits and we will help close the deal. Also, we will support our resellers with a backup application, online demo."

The economic downturn in the technology sector is putting a squeeze on resellers' margins. Vendors are reducing prices on products--putting the pressure on the reseller community to make high-volume, high-transaction sales in order to make solid commissions. STORServer, which designs a backup appliance solution that includes all hardware and software needed for a backup solution, sees this as a good time to bolster its reseller program and create a program catering to individual agents operating one-man shops out of their homes.

As part of these programs, STORServer will offer resellers and agents perks, like support for sales through a teleconference call. Large-scale resellers get a demonstration unit, customer visits and onsite training. For individual agents, STORServer will offer a company e-mail address and a client hookup to a backup server to conduct product demonstrations, as well as credit line financing to purchase the hardware and software appliance components that eventually will be sold to customers.

"The [credit financing does not sound sexy, but it actually is a big thing to some of these small guys," Pearring says. "There are many areas of the country not being serviced by [the larger resellers, like small towns that resellers don't go into. There is a huge opportunity for agents to fill in those gaps."

These "agents" typically are one-man companies--like Adam T. Maguire, who works out of his home in Camas, Wash. Maguire says that he, personally, has not felt a squeeze on his margins because he carries low overhead. He recently won a sale with a government organization, beating out Network Appliance, and selling 4 Tbytes of disk storage and a 9-Tbyte library. He says it is not atypical of him to make at least a 25 percent profit on a sale.

"Right now, it's the best it has ever been for me," Maguire says. "My overhead is nothing. Give me a cable, modem and laptop and I'm ready to go. Big companies have big overhead. There is a squeeze out there, [but I think small resellers can function more efficiently in this market because they have low overhead."