IDC: Software channel funding favours VARs

IDC: Software channel funding favours VARs

Value-added resellers of software products across the SMB space will be the biggest winners of increasing channel expenditure by vendors, according to new IDC research.

Director for the software, business strategies research program, Cushing Anderson, said it had identified a shift in investment towards value-added resellers and ISVs in preference to traditional volume-based resellers.

Anderson said it was hard to tell whether the SMB market had demanded more comprehensive software solutions, or software vendors had instigated the push of enterprise-class products into the smaller business space. Regardless, SMBs were becoming broader users of both software and hardware technologies, he said.

As these more complicated business software solutions moved into SMB, vendors had found themselves increasingly reliant on resellers offering end-user services, Anderson said.

“Software vendors don’t have the services capabilities to deal with SMB customers; they have a hard time making money on this market,” he said. “Channel partners can make money on smaller jobs however – they can better optimise staff, and usually have a local presence.”

Consequently, value-added resellers or those offering software consulting and applications development solutions were becoming a focal point for investment funding and resources, Anderson said.

With so many software companies now trying to grab a slice of the SMB market, smaller resellers working at the ground level were literally being put into the driver’s seat, he said.

“Software companies are really trying to draw customers from the same pool when it comes to SMB,” Anderson said.

“It is at the point where resellers can pick which vendor they want to work with.”

In Australia, this trend was even more prevalent given the size of the SMB base, Anderson said.

According to IDC, software vendors spent $US5 billion worldwide on partner programs in 2003.

In turn, partners either generated or influenced two-thirds of global software revenue, the research company said.

IDC predicted this figure would rise to 70 per cent of all software revenue by 2010, as vendors poured additional funding into their partner programs.

While the figures were not a big jump on those recorded in 2002, Anderson said they proved software vendors continued to spend incrementally on channel initiatives.

“It is not a volatile market,” he said. “The bottom won’t fall out of the market. It will continue to grow steadily in the next four to five years.”

The IDC figures are based on revenue and expenditure data from 1000 software companies on their partnerships and alliances globally.

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