Changing channels

As Kayvaan noted in previous posts, there are lots of changes afoot pushing, prodding, and driving established companies like Microsoft to change the way they do business. One question though: Why isn't anyone talking about the importance of sales channels?

Part of Microsoft/IBM/Novell/etc.'s historical success has arisen because of their influence over the sales channel. If you're a VAR or retailer with strong incentives (i.e. financial now and long-term) to put more effort into a given product (e.g. Windows, Office, etc.), why would you bother with a newer player that may have a technically "better" product?

You wouldn't. And by and large, the channels haven't bothered.

So what's different now? Add a few things together and you see significant changes for disruption to traditional channel-supported markets:

1. Broadband
2. Public betas
3. Open APIs
4. AJAX
5. Less integration (at least up front)
6. Faster development cycles
7. Increasingly technically saavy business and consumer users

Traditional software sales channels (i.e. shrinkwrapped software) are under major pressure - or soon will be (I doubt recent financials suggest shrinkwrap is "dead") - from light software applications that hit the market faster, allow many people to develop extensions/applications on the core product (e.g. search, maps), require less processing power/bandwidth/RAM . . . and provide users with more choice.

Traditional sales channels may matter less and less as core applications are web-enabled (esp. Office Live, OpenOffice?) and function as well as or better than full software suites. Increased application choice may reduce the power of the OS platform, if only because users can select non-bundled solutions to their varied application needs.

Although I'd love to spend some time discussing broader possible impacts on companies like Microsoft and complementary products/tech players. I'll finish with a few quick declarative thoughts.

• Make the application the platform. Open application APIs so users can develop new ways of using their data and tools. Google is doing it anyway, so change is-a-comin one way or the other.
• Accept pain now for long-term benefit. Existing full-featured shrink-wrapped apps will lose share to web-based versions. Accept some cannibalization and move where the market wants to be.
• PC makers will suffer as users use online apps, because they won't require continually greater processsing power and memory to handle larger and larger amounts of bundles OS and application code.

So no death knell prouncements, just a recognition that big change is on the way. Add content/data syndication to the mix, and it's a whole new world of challenge and opportunity.

Comments

[kayvaan]

Great post. Channel marketing is a fascinating topic and I think deserves a lot of discussion for software marketers.

The question of how newer generations of hosted and light(er) weight software will affect channel marketing is key. All seven of your bulleted change factors are right on.

Businesses will always be making the decision of Build Vs. Buy. And if a business chooses to Buy, they need to buy from someone, and marketing channels exist to put the right someone in the right place. Especially with software, which is a complicated product, the role of "trusted advisor" is key in selling. And "trusted advisors" in the past have typically been channel partners like VARs, ISVs, integrators, etc.

So who are the new "trusted advisors" in the brave new world you describe? Forward thinking VARs, ISVs and integrators? Or someone else?

[John Reed]

Good point about trusted advisors. The challenge for groups traditionally occupying these roles is their distributor position with accompanying product mark-up.

For years now, the press, pundits, and "experts" have proclaimed how open source software would displace incumbents . . . because it'd be "free." But in many cases, the software (e.g. Linux) has only been free in terms of initial purchase cost. Implemenation, maintenance, learning, etc. has been anything but free, hence one of the reasons for the success of Windows server and the continuing viability of VARs.

But what happens when/if: "free" software is actually easy to use and on par with paid software? Netscape/IE comes to mind.

Also, what happens as computer users become increasingly sophisticated (and self sufficient?)? Would this allow an organization with 10,000 people to use something like OpenOffice in place of Microsoft Office?

Maybe. Probably? Linux hasn't achieved the level of usability to allow everyday consumers to switch, especially since most people only change their OS when they get a new computer.

Is that the case with productivity software? Probably. If so, that means changes in channels may not matter quite as much as I'd thought.

But based on Microsoft's ongoing response to Google, I think they're taking it very seriously.