A good few years ago the favourite buzzword for a growing corner of the IT vendors was ‘co-opetition’, the appreciation that no individual vendor—even the biggest—could always fully service the needs of customers. Sometimes, they needed to work with others, including competitors.
This notion has not only been accepted as workable by the major vendors, it has now become an integral part of everyday business. The emergence of SaaS as a business model, however, is set take co-opetition to new levels of integration and collaboration and the key to it will be the existing partner channel, in its widest sense, reborn into the market front for vendors.
You can take this as New Year whimsy if you like, but the combination of SaaS as a service delivery mechanism and the wide swathe of business partners out there at the coalface of the market, could be the first emergence of a new approach to political-economic management… Collective Capitalism.
The channel partners have for years represented the mundane end of the business IT systems marketplace—rarely making the headlines, but delivering (mostly) small, workable solutions to the business needs of thousands of small and not so small companies. They have also provided the big-name vendors with the only way in which the latter could ever supply product and services to such a diverse range of customers. The cost of sales in trying to sell direct to that lot would bring even IBM to its knees in short order.
Yet each one of those channel partners, be they a significant Systems Integrator or the smallest supplier of accounting systems in the smallest of hick towns, has it within their grasp to be something that the big-name vendors cannot be—the ‘brand master’ for something, even if that is being the only supplier of accounting systems in a 50 mile radius. But the idea of brand mastery is wider than just the traditional VAR/SI channel; it opens up new opportunities for other organisations to become channel partners. For example, in this context a brand master could well be an established and reputable industry trade association that becomes the source of those niche, industry-specific services required by its market sector.
Before SaaS, such levels of brand mastery has meant, at best, the chance to be a big fish in a small pond. After SaaS, however, the rules are changing, particularly as the move towards service aggregation gets under way. Service aggregation offers interesting potential, for it cuts both ways. Large service suppliers such as HP, IBM and a combination of Microsoft and BT are seriously looking at the potential to provide the online resources—such as datacentre hosting, management services, billing and applications-based services—as Utility Services.
There is revenue to be generated by them in providing the tools they currently sell to customers as online services delivered on an annuity-based cost/time model. They can deliver such services with better control over resource utilisation and cost, for example. And they can do this with a much lower cost of sale, because they would be selling their own hardware and management tools to themselves.
Such services could be readily delivered not only to individual customers but, through the channel partners, to a wide range of smaller users as well, and the range of applications-based services would not be limited to their own applications. There is no reason why they could not cut deals with current SaaS specialists such as NetSuite and Saleforce.com and become channel partners for those service vendors.
This is where the SaaS aggregation model starts to cut not just both ways, but any number of ways. Those vendors that would have been ‘principals’ become ‘channel’ and vice versa, as and when the business opportunities demand. Those partners that have some degree of brand mastery—for example in the form of a specific application or service capability in a niche market—could find the major aggregators acting as their channel partners, offering their service to a much wider marketplace as part of the aggregator's shopping list of available services. Some, in particular organisations such as trade associations, could also find themselves effectively aggregating selections of services from a variety of aggregators.
In all such combinations and re-combinations of business partnership, the one common thread will be that the various participants are acting collectively regardless of which participant is the brand with which the customer most identifies. Collective capitalism is brand capitalism, and vice versa. But either way, as this develops it will represent a major change in the way that IT products and services are sold, and all sectors of the industry need to start planning for it.
This is particularly important for the channel partners to consider. The business potential and advantages for them in the long run are significant, but that does not mask the fact that many of them are currently ill-equipped—both in terms of capital and management structures and in underlying business philosophy and emotion—to cope with the change of business model from the up-front revenue hit of a product or licence sale, to the drip feed of an annuity revenue model. Neither are many yet equipped to cope with the notion of partnering. The model of being a subservient outlet to a number of large vendor principals is well understood, but the idea of becoming an equal within a collective of vendors and service providers, working together to build a win:win:win between themselves, the customer AND those other participants in the collective, will prove extremely radical for many of them.