A new wave of emerging Linux application providers are doubling and even tripling their channel investments this year as they move to take Linux from a cult status relegated to business niches to a mainstream end-to-end solution stack.
Among those rolling out new channel programs in recent weeks are vendors in the most explosive solution segments, including PBX/VoIP luminary Digium, database mainstay MySQL and CRM fast-mover SugarCRM. And other open-source vendors, including SwitchVox, Astaro, Zimbra and JasperSoft, are dramatically increasing their channel spend and the number of partners in their stable.
An informal CRN survey of open-source vendors found that channel investments are going up an order of magnitude this year. The uptick is aimed at taking open-source solutions beyond a small group of Linux specialists to a broad and deep partner network that can cover small business to the enterprise.
The partner push represents the biggest influx of new channel dollars in many, many years. Even more impressive: The new channel programs are backed up by 30 percent to 50 percent solution margins vs. typical 5 percent to 20 percent margins on old-line solutions from application vendors that have gorged themselves for years on hefty software license and maintenance fees.
The Linux application offensive covers every segment of the solution stack—with open-source vendors in areas such as VoIP and CRM facing off against one another to compete for solution provider share. This may spell trouble ahead for Windows and Unix app vendors that have stood by while their partners' profit margins have plunged into the single-digit range in recent years. What many of these margin-starved partners have been waiting for are viable Linux channel programs. Now they are here.
A Watershed Year
Prophet Network Integration (PNI), a Phoenix-based solution provider that has partnered with mainstays Cisco Systems, Hewlett-Packard and Microsoft, is one of the partners expecting big things from the new Linux channel programs this year. PNI has been selling Digium's Asterisk open-source PBX without the benefit of a channel program for about a year and half and has built a $500,000 business around the product. But with the scalable service, support and sales boost provided by the new channel program, PNI expects to double its Digium solution business to $1 million this year. And it expects to double it again to hit $2 million in 2008.
The open-source channel revolution is changing the financial character of PNI. Two years from now, the company expects one-third of its business to be open-source solutions. "That's not even being extremely ambitious," said Art Tarsha, technical director at PNI. "Open source is completely unstoppable."
Solution providers say this year is a watershed one for Linux application vendors now moving beyond viral downloads aimed at the technical elite to a full-fledged sales channel chartered with driving mainstream adoption in businesses of all sizes. That involves new products, too. Huntsville, Ala.-based Digium, for example, is bringing to market a hardware appliance aimed at small and midsize businesses to move the product from what Digium Asterisk open-source PBX inventor Mark Spencer calls the early adopter phase to the early majority. That means a full-fledged reseller effort with its first-ever channel program, 10 channel reps and a dedicated technical support hot line for VARs.
"It's really important for open-source vendors to introduce these programs," Tarsha said. "Instead of staying in the shadows with leading adopters, they are moving these great products into small and [midsize] businesses by providing competitive pricing and support. Now I have a baseline that I can work off to build implementations on. And with a formal program, my profits are obviously going to increase significantly."
Next: More Channel Launches