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 SAM 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)
  • SAM as a Service

Weaknesses:

  • Perhaps no proprietary SAM software
  • Exclusivity deals with SAM suite vendors (potentially limiting the scope of SAM consultancy engagements)
  • An absence of an internal SAM training programme
  • Shrinking margins from software vendors

Opportunities:

  • Offering cloud services (SaaS, PaaS, IaaS if feeling adventurous)
  • Spotting where SAM feeds other areas of IT (Info Sec, Help Desk, BCM/DR, Governance)
  • SAM Training
  • SAM Services (both consultancy and SAM as a Service)
  • Buying a SAM 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 SAM service whilst also selling you software at the same time)
  • The big five software vendors going direct to the market
  • Competitors in the Channel
  • Reduced margins on volume sales/agreements
  • SAM 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.