Mark Cuban has two words for IT VARs: Go home.
Cuban, the billionaire owner of the Dallas Mavericks, co-founder of HDNet and one-time Dancing With The Stars contestant, got his start as a VAR and made his first millions selling that company—MicroSolutions--to CompuServe in 1990. Cuban’s track record in business is impressive, so his take on what constitutes a hot market bears notice.
Home IT is a hot spot both in terms of traditional PC network integration and home entertainment, two worlds that are converging rapidly.
“What I call the ‘last three rooms’ is a more important aspect of delivering video to the home than the ‘last mile,’” Cuban told SearchITChannel.com via email. The last mile is the wiring or cabling that connects the local building to the Internet and phone system.
Wireless routers are the heart and soul of the home network and yet get the least support and are the most susceptible to interference and other problems, Cuban said. “Bottom line is that few homes have an optimal installation of their wireless routers and connected devices. The result is that more often than not, delivery of streaming video is going to have problems. As the number of devices trying to simultaneously access that video grows, the problems grow faster.”
Meaghan Kelly, Hewlett-Packard Co.’s vice president of SMB channels, said her company is aware of the huge potential market of these home VARs. It would dearly like to tap their potential in its renewed SMB push.
HP channel chief Stephen DiFranco even has a name for this army of technicians: “the Larrys,” Kelly said. “There are many of them out there. They carry their kit in their trunks and go to small businesses, home offices, homes, get what you need, come back and set it up. It’s a massive market, the long tail,” Kelly said. “People pay $70 an hour for peace of mind.”
Kelly may be underestimating what the market will bear. The home VARs interviewed here charge—and get—anywhere from $85 to $150 per hour, excluding product sales.
This prescient cadre of home VARs includes small companies such as UberGeek Girl of Los Angeles, New Age Communication of San Mateo, Calif., and Gould-Sherwood Consulting of Lexington, Mass. They have built practices supporting and maintaining home networks and all the devices that hang off them. Most resell hardware and software if they have to, but it’s not the focal point of their business.
“Dealing with all the sales tax stuff is a hassle,” said Jessica DeVita, founder and CEO of UberGeek Girl.
Beth Gould, CEO of Gould-Sherwood, agrees with Cuban that wireless is king. “Most of my requests are to get the house wireless—for everything. They want the phones, the iPads, on WiFi. They want the wireless to work with everything and then complain about performance. I always say if they want better performance, just plug in the cable, but no one wants cables in their houses,” she noted.
Warren Wong, owner of seven-year-old New Age Communication, also put wireless at the top of the list and said that integrating home theater components with traditional IT devices like PCs, is the main thrust of his business. (Wong, by the way, is DiFranco’s “Larry,” having worked with the HP exec for many years.)
Specialization for home VARs
Gould worked in IT for years at Harvard University’s Graduate School of Design and now supports several Harvard professors in their homes. She has several business clients in the architecture or design field for whom she sets up and maintains small servers and advises on cloud services. But the rest are home users who find her via word of mouth. None of the home VARs interviewed spend a dime on marketing or advertising. They get ample work from referrals although they all maintain blogs.
Much of their work is consultative. What hardware to buy? Should I run a server or use cloud services? These are the questions they get.
“I hear a lot about cloud computing, and I have no problem setting up email from another provider. Other VARs want to run your mail for you and charge a monthly fee. I don’t mind being the intermediary and admin for a cloud service—for email, for FTP, for VPN, for file sharing. I do the research and pick the provider,” she said.
DeVita said most of her clients are high-end households in Los Angeles, many with fancy-schmancy home theaters. “They want the integration of different devices. They want their devices synced with hosted Exchange and with other things. A lot of clients have mixed Mac and PC environments that they need integrated.”
She often installs the network that will run the home theater and associated gear. “Home entertainment requires a significant contribution from the IT perspective. You have to create the network so devices can be managed and maintained from the outside.”
She often uses LogMein to remotely manage and monitor home customers. There are only a few who do not want her to do so, citing privacy concerns, she said.
To resell or not to resell, that is the home VAR question
None of the home VARs interviewed put a great premium on reselling hardware or software. They see their value in support and service. Gould will research and spec out what PC a customer should get based on her knowledge of the customer’s needs and get a quote from Dell or other vendor. Then the customer can place the order or she will, with 10% markup.
Part of Gould’s service is realistically assessing customer needs versus selling a ton of new stuff. One customer bought a new $1,000 PC based on a recommendation by Best Buy’s Geek Squad. But the new PC ran Windows 7 which no longer supports Outlook Web Access, and the customer, an elderly woman, didn’t want to relearn a new program. Gould looked at her old PC, added more RAM and instructed the woman to return her new PC for a refund. Which she did.
Clearly services like those might be one reason not a lot of tech companies do a good job courting or serving home VARs. After all, a home VAR’s service means that many tech purchases can be deferred—that’s not a big draw among IT vendors trying to sell stuff.
DeVita said getting a big vendor—like Apple--to pay attention to her is a non-starter. She has, however, formed other important alliances.
She cultivated a contact at both a local Verizon and AT&T store that she can tap in an emergency. “If one of my client’s Blackberry dies, they need a new one that day. I have someone to call and say, ‘I’ll be over in a half hour for that new phone,’” she said.
She also has a tight relationship with a local retailer and a small local distributor from whom she sources her gear.
For many VARs, home is a scary place
There is clearly demand for home IT services and yet many traditional VARs shun them. “They probably want to maximize the dollars, and I understand that, but there is very good money to be made in this and I can sleep at night,” said one long-time home VAR.
“Many VARs look at the home as a landmine. They’re scared of it,” noted DeVita.
For many established VARs it’s just a matter of dollars and cents. Paul Shoberg, director of sales for Works Computing Inc. in Bloomington, Minn., said for a company like his that focuses on enterprise customers, home IT is not a focus. But, home integration services could work really well for the right type of company with the right cost perspective, he said. “It’s a great market and a growing one. …Eventually the cloud will drive these services because customers will be looking to plug right into the Internet for applications or whatever else they need,” Shoberg said.
Still, many home VARs mix in small business clients with their home customers. Some 80% of DeVita’s clients are home customers. Gould is more heavily weighted toward business customers, with just 30% or so home based. Many customers start out with home services, then drag their home VAR into the office as well.
One thing will probably never change. Most IT VARs provide some manner of home support whether they like it or not.
”For my friends, I usually work for drinks. I’m the only person they know who can really program their remotes and get their high-def stuff to work and cable up their home theater,” said Jane Cage, COO of Heartland Technology Solutions. “I’ve joked many times that my next job will be to do tech support for rich people.”
Assistant editor Pat Ouellette contributed to this report.