Does a Channel Sales Strategy Still Make Sense for Enterprise IT ISVs?

We think that the recent, well publicized pivot on the part of Microsoft® Corporation with regard to its channel strategy should give enterprise IT ISVs reason to carefully review their assumptions about where and how it makes sense to build a channel/partner component for marketing and sales strategies.

For the last 10 or more years Microsoft has represented one of the last technology vendors to successfully utilize a broad channel strategy to add substantial revenue to enterprise IT sales. Given much of the recent press about the debut of the Surface tablet, we can’t help but conclude that this channel revenue has started to drop off and, perhaps, precipitously. After all, why else would Microsoft proceed on a very public about face on very high level OEM partners?

But the changes in Microsoft’s partner strategy are not simply confined to the Surface hardware tablet. If one considers how Visual Studio is now provisioned to developers who need to take advantage of a free-of-charge acquisition option, one notes, as pointed out by the Ars Technica blog site, that acquiring a free-of-charge version of Visual Studio is strictly limited to Microsoft Partners developing Windows 8 Metro apps. Evidently the value of further application development for Windows 7, XP, etc no longer delivers the benefits, for Microsoft, as it did in the past, else why restrict access to this free-of-charge development tool?

Enterprise IT ISVs, especially those with SaaS offerings, may not need channel partners at all. In fact, it may very well make sense to opt to develop SaaS products as a means of retaining margin that would otherwise have to be paid out to channel partners. Admittedly, many enterprise IT ISVs with SaaS offerings have also concluded that it makes sense to entirely dispense with sales personnel, altogether. For the record, we don’t see how a viable business strategy can, in fact, be created without a sales component. We had first hand experience working with one of these businesses over the last couple of years. We can attest that they successfully signed a very large customer as a subscriber to their offer, but we think they would be better off with a basket of customers of similar size, which they do not have. Bottom line: they need a sales team to put together a group of customers, which will provide them with insulation from the shock of losing one of these essential revenue sources.

If you are mulling over a decision about the type of distribution strategy that will make the most sense for your enterprise IT ISV, we think you need to carefully consider the changes implicit in Microsoft’s recent string of decisions. We can certainly help you frame a viable opinion on this question. You can contact us online or telephone us at +1 631-673-2929. The first 15 mins of any consultation is always on us.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved

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