Selling software on the Internet should be as natural as selling beer in a bar. After all, software is nothing but bits and the Internet is made to move bits - so where's the problem?
The answer is bandwidth: the pipes just aren't big enough to download big software titles fast enough, particularly for modem-using consumers.
But don't tell that to David Rubin. He's made quite a nice business out of electronic software distribution (ESD). Rubin is president and founder of California-based BitSource, which focuses on a market segment other ESD pioneers disdain - channel sales.
BitSource's customers are big value-added resellers (VARs). These customers' customers are big corporations who buy software in bulk, often dropping millions of dollars for thousands of licences to use a single software product.
BitSource's flagship product is a software vending machine called SmartShelf. If you're buying software in volume from a VAR that is a BitSource customer, that VAR can install a SmartShelf PC on your network. This system's hard drive contains all the software you might want to buy, in an encrypted form.
When you need another licence of, say, Windows NT Workstation, you purchase it from your VAR using the SmartShelf Web site. After the VAR approves the sale, BitSource transmits a digital "key" that unlocks the encrypted code on the SmartShelf PC.
The SmartShelf vending machine then places the software's decrypted installation files on a network volume, or burns the bits onto a CD-ROM on the spot.
The advantages to corporate purchasers are obvious: they get immediate delivery, electronic licences that are more easily managed than paper contracts, and standard network-based or CD-ROM-based installations.
What's more, BitSource's software can help corporate purchasing managers get better prices by suggesting the cheapest way to get to the next volume-discount tier.
Rubin's business model is interesting. The Internet isn't being used for delivering software, but licences. This is a significant enough difference that a new three-letter abbreviation has been coined to describe it: ELD, for electronic licence distribution.
Place your bets now: according to IDC, electronic distribution of software licences, which accounts for about 5 to 10 per cent of the software licence market, will achieve nearly 100 per cent market share by 2008.
I think IDC's estimates are much too conservative: ELD should account for almost all of the corporate software purchasing market within just a few years. It just makes too much sense not to happen quickly, and other ESD companies will certainly develop solutions similar to BitSource's.
Will there be a SmartShelf vending machine in every IT department? That depends on whether Rubin's 30-person company can successfully defend itself against ESD competitors like GlobeTrotter and Digital River.
But one thing's for sure: Corporate ESD - via ELD - will remain a much larger market than consumer ESD for as long as bandwidth remains a limited commodity.