Issue #137 | Mar. 7, 2008 | by Andy Kowl

Everyone knows the 80/20 Rule. It is right up there with Murphy’s Law and other immutable forces of nature. For you youngsters, so you do not have to ask, it means that 80% of your sales come from 20% of your customers. The reason everyone knows this is that, allowing for fuzzy math, it is always true.

We have been talking about Value Added Resellers a lot recently, and this is an 80/20 story about VARs. But it is hard to do percentages when, with the definition so broad, there is no consensus on how many there are.

In our design studio,* for example, replete with Macintosh desktops, laptops and servers, we rely on Mac Girl – a no-nonsense, professional businesswoman who works alone and is booked solid – who might be considered a VAR. On the other hand we have heard IBM referred to as a VAR by more than one RFID manufacturer. So where do you begin counting?

The numbers

Industry leaders we have polled agree that 40,000 is not an unreasonable number to put on this census. If anything, it is probably low. We know of a number of large manufacturers – not where RFID is predominant, mind you, I said large – that claim channel partner counts of 8-15,000. I am told SAP authorized partners, alone, exceed 20,000.

But here is the really big number for this story: 2%.

Less than two percent of VARs overall are currently selling RFID technology. We have interviewed the major distributors and largest IT companies’ channel partner managers, and the number holds across the board, usually closer to 1.5%.

As I wrote last year, while attending BlueStar’s VARTECH in Nashville, I spoke with about 40 VARs. Not one of them was selling RFID technology. One hundred percent of them told me they intended to begin selling RFID. With six instructional tracks, only the RFID track was standing room only.

Going from 2% to 90%, or 50%, is not the point. It is hitting 6-10% where the growth is coming these next couple of years. We are literally hearing from new, wannabe RFID VARs every day.

Competition rules

After all, now that RFID has matured, the industry has created RFID applications offering true value. There is no more “bleeding edge.” Dozens of innovative manufacturers have solutions that offer ROI for virtually every industry. Many of these VARs see this solution-oriented approach as an opportunity to grow their business.

Let us take the example of hospitality VARs, thousands of IT professionals serving restaurants, hotels, golf courses, casinos, cruise lines and the like. It is possible not one of them has a burning passion to sell RFID technology. But let’s review what their customers have:

• Restaurants with food temperatures and other safety considerations; access control and security issues; valuable and disposable assets.
• Baggage storage areas and systems, from guest rooms to the airport.
• Opportunities everywhere to enhance customer service and perceived value.
• Ticketing systems; event management needs; other access control needs
• Casino systems; contactless payment systems; rental and return systems
• Laundry and uniform rental assets reused and reissued; trash, hazardous waste
• Parking lots, vehicles, heavy and light equipment; security needs; gates and access systems

Do you think any of the VARs in this business might be looking for ways to gain an advantage over the competition? In every one of these categories, RFID solutions are available today to help one VAR to beat the pants off of another VAR.

Resellers are queuing up around the globe

Just this week, we were contacted by a company in Curacao, Netherland Antilles, which specializes in Access Control and sells to neighboring Aruba, too. He needed to find out how to service an existing, RFID system with RF interference issues one of his customers has. He needs to tag 500 cars and get an automatic access gate to open.

When we asked him if he was interested in meeting RFID manufacturers that could help him get going selling RFID regularly, he said ‘absolutely.’ Now I have not been to Curacao for a long time; but I remember both islands have plenty of hotels, casinos, golf courses, parking lots and other places needing their access controlled. This company could be a great reseller for the right supplier(s).

We also heard from an inventory control VAR in Arizona; a “risk assessment IT consulting company” in the U.K.; and a system integrator in the Philippines currently doing vehicle and asset tracking and inventory tracking work. These companies and others want to find sources and support for RFID systems to sell to their customers.

Velvet ropes guarding the door

These resellers are, for the most part, not being greeted with open arms. Their reception reminds me of the doormen at the original Studio 54 in NYC. They are being looked over with suspicion, as if they may not be ‘worthy.’

At the heart of it is the old 80/20 rule, but with a twist. Unfortunately, we see too many established RFID manufacturers looking at these “new” VARs as automatically falling into the 80% category, as if ‘anybody we are not already working with is probably not right for us.’

The main point to remember there is a reason they call it the 80/20 “Rule.” It is guaranteed – a physical law as tested as gravity and inertia – that 20% of these newcomers will be champions bringing in business on a regular basis. And since all of them have existing customer bases, it seems short-sighted to ignore these hungry product sellers with service teams in place.

Part II next week: Why VARs are getting a cool reception. If you have thoughts on this to share, please do at editor@RFIDswitchboard.com

* www.gofurther.com