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Are Software Resellers and Online Marketplaces Headed for a Crossroads?

By Stephen White | November 12, 2019 | 0 Comments

Sourcing, Procurement and Vendor Management LeadersresellerlicensingDriving Cost Optimization Across the Enterprisecloud

In early 2016 I wrote in a blog that software resellers are evolving, whilst views and perspectives of resellers vary significantly across their customers. The process of that evolution began many years prior, however the core of software reseller business remains, accordingly, changing perceptions may remain challenging.

Recently we published the results of a survey which examined the software reseller market and the following hypothesis:

  • Software resellers that evolve effectively will survive or thrive in a market that is increasingly oriented to online services
  • Software resellers that do not offer either additional services or advice and guidance will lose business to online marketplaces and other providers, such as system integrators
  • Clients remain challenged by identifying the software resellers that provide a differentiated offering and greatest value

Services, Licensing Advisor, Fulfillment?

As a component of our survey we probed perceptions of software resellers among customers. We asked respondents to categorize how they would primarily describe their business relationship with software resellers. Three categories were provided: Licensing Advisor, Service Provider, Fulfillment (Procurement) Vehicle. Responses varied regionally and by organization size, overall the service provider lead, although didn’t represent a majority.

Role As Cloud Adoption Increases

Our survey went on to probe use of software resellers as cloud adoption increases. Again responses varied by organization size, with many establishing the software reseller had a key role to play, however, 27% identified the role and extent of engagement as yet to be confirmed and 11% projected reduced need for a software reseller.

Marketplace Alternative

Responding to how organizations purchase cloud services, many identified use of multiple mechanisms, including online marketplaces being used by 27%. Whilst not mutually exclusive, there appears some potential for purchases to shift from software resellers to online marketplaces, as legacy on-premises services are replaced by cloud services.

Consider the two prior identified elements.

  • Firstly that customers who are yet to identify a role of the reseller as cloud service adoption increases or see a reduced role (total 38%) may shift to online marketplaces.
  • Secondly, a shift to online marketplaces may be more prevalent where the software reseller is classified primarily as a procurement vehicle (31%).

Customers identifying with these statements may see marketplaces as a valid purchase mechanism for their software expenditures. Those with service and advisory oriented relationships less so.

Differentiation Is Key, But Challenging

Beneath questions regarding future suppliers of cloud service lies a question of profitability. Will retaining high volume low value business without services attached be attractive?

To continue growing, profitably, software resellers must demonstrate value. That’s a straightforward conclusion to draw, yet challenged by:

  • 55% of customers find identifying differentiation amongst software resellers difficult
  • Enticing customers that treat their software reseller as a procurement vehicle to more valuable service and advisory offerings

For further detail see  Survey Analysis: How Software Resellers Are Used in a Cloud-Led Market

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