Software Developers Debate Strategy For Future Channel Relationships
These are legitimate questions to ask, and if you think for a minute that they are not being debated inside software publishing headquarters, you are being nave.
Let's remember one thing: Every vendor would like to have a software-as-a-service model that provides recurring revenue without the cost of servicing the customer.
No vendor engages with the channel out of the goodness of its heart, nor should it. It only engages because it is the most efficient go-to-market method available. To that point, there are only a handful of senior-level executives in high-tech that truly understand the efficiencies of the solution provider market. You also should not underestimate the difficulty vendor channel executives at all levels face in arguing the case internally of engaging more with solution providers. They are challenged at every turn inside of their own organizations by individuals who know little to nothing about how to build indirect sales models that can scale a business efficiently. The thought of handing over sales to individuals not on the payroll is foreign to far too many.
So as the ability to deliver software as a service via the Internet builds, discussions will arise in software developer houses as to why they should give up margin to the channel.
Does anyone believe Google isn't going to try to deliver a productivity suite that will include mail, word processing, presentation and spreadsheet programs that it will offer direct to users? And if it does and gains traction, how will Microsoft respond?
Steve Ballmer at the recent Microsoft partner conference said the developer was forming an advisory group of solution providers to determine the company's future model and how Microsoft and the channel will work together. Right now there are more questions than answers. Ballmer, to his credit, recognizes this and is the first one to publicly state they are going to try to come up with a plan.
I have my own opinion, of course, on what needs to happen. But I also know what will happen.
What will happen is more software developers will try to end- run the channel and go direct than will try to figure out how to work with it. Some that do the end run will get traction for a period of time and then will hit a wall. Those that try to truly look at how the model should work with the channel will question why they don't just go direct and be done with it.
Over the long haul, the reality is that the channel will continue to manage the customer experience with technology. Very little technology is consumed in a vacuum.
The advent of a managed services world on the face of it looks to some vendors to be a way to drive more sales direct and disintermediate solution providers and capture the entire available margin. The fact is that customers are increasingly looking to buy solutions from a single point of contact that can not only deliver, but also advise and consult. That is why nearly every manufacturer wants to be a solution provider.
My gut tells me we are heading toward one of those unusual periods of unrest and contention between the channel and its software suppliers. It's one of those things that cycles through this business about every seven years or so.
The smart vendors will try to establish how to work with the channel from the beginning. The hard part will be identifying the smart ones and aligning with them early. We in the CMP Channel Group will be there to help you decide.
Make something happen. I can be reached at (781) 839-1202 or via e-mail at [email protected].