Darwinism comes to the Channel

Evolution, and survival of the fittest have long been documented as the manner by which species prosper, and this is no truer than in the IT channel.

If we consider where Microsoft were in the early 80’s – a mere fly-swat to the likes of IBM, their reliance on resellers to promote the software they wrote was vital.  Fast forward 25 years, and Microsoft are in the ascendancy with that relationship due to their stellar growth and so are able to dictate revenues and terms and conditions to the LARs and VARs of this world.  As recently as 2011, Microsoft were able to state to resellers that their commission would be vastly reduced on Enterprise Agreement contracts if they did not shoe-horn in base-level Software Asset Management services to their clients to highlight good practice with Microsoft software.

What is the shape of things to come in the next five years?  Software as a Service currently being offered by the likes of Adobe and Microsoft could see to it that the requirement to operate via the channel is all but an unnecessary link in the chain, and so dealing with a LAR and/or VAR becomes surplus to requirements.

However, before we condemn LARs and VARs to the annals of history, it might be worth focussing on what the V in VAR stands for: namely, value.  Oscar Wilde once wrote:

A cynic is a man who knows the price of everything and the value of nothing

If resellers are to emerge leaner and fitter in this ever-changing world of IT, then they have to examine what value they offer to their clients – what more can they bring to the table?

Good old-fashioned SWOT analysis should offer a breakdown of Strengths, Weaknesses, Opportunities and Threats – being a blog, I won’t labour all the points that might could come to light in such an exercise, however some bullet-points might include:

Strengths:
  • Understanding the Software Procurement Process (Services & Consultancy potential)
  • Understanding Software Licensing (Services & Consultancy potential)
  •  Software Asset Management as a Service
Weaknesses:
  • Perhaps no proprietary Software Asset Management software
  • Exclusivity deals with Software Asset Management suite vendors (potentially limiting the scope of Software Asset Management consultancy engagements)
  • An absence of an internal Software Asset Management training programme
  • Shrinking margins from software vendors
Opportunities:
  • Offering cloud services (SaaS, PaaS, IaaS if feeling adventurous)
  • Spotting where Software Asset Management feeds other areas of IT (Info Sec, Help Desk, BCM/DR, Governance)
  • Software Asset Management Training
  • Software Asset Management Services (both consultancy and Software Asset Management as a Service)
  • Buying a Software Asset Management vendor
  • Buying a competitor/rival
  • Snowden/NSA revelations (EU based opportunity – this could be a viewed as a threat for US based providers)
  • Non-cloud software still needs selling
  • Other start-up software vendors who wish to promote their products in the more traditional manner
Threats:
  • Being viewed as “poacher turned gamekeeper” (i.e. we will look after your Software Asset Management service whilst also selling you software at the Software Asset Managemente time)
  • The big five software vendors going direct to the market
  • Competitors in the Channel
  • Reduced margins on volume sales/agreements
  • Software Asset Management Suite vendors offering consultancy

Already this year we have seen SHI acquire eTelligent (link) and Viglen merge with services company XMA (Link) and I suspect we will see more of such activity as the year progresses – also (and this is a fear of mine) I suspect we will see some LARs and VARs go into administration, but I think they will be the vendors who refuse to adapt to new avenues of generating capital.

 

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2 thoughts on “Darwinism comes to the Channel”

  1. Gai Trewinnard-McNeill

    Very interesting article as always Rory.
    Timely too…one of our LARs has recently tried to re-float an idea they tried a few years back…Licensing as a Service.
    Essentially they are responding to increasing costs around providing Licensing Services (including those involved in bidding for sales I might add!) by proposing that we sign a Service Level Agreement that locks them into a expected level of services that they will provide when dealing with us for licensing. One of the difficulties all our LARs face with the large enterprise agreements is that they bid them down to the bone in order to win the business and then find themselves unable to sustain the level of service that is expected and required to manage them. Partly this is because, as you’ve pointed out, they believe they will re-coup some of their costs from the ad-hoc purchases that will come their way as a result of winning the enterprise agreement business but this is just not happening as often because more and more of what we purchase now is covered under one agreement or another. Its an interesting phenomenon and I am keen to see where it goes from here. They will certainly not be the first of our LARs to think in this direction.

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