Channels Come. Channels Go

About 25 years ago, a new trade newspaper entered a market serving what were then called computer specialty stores. As they say in the business, it was the fifth book in a seven- book market in terms of the measurement that counted—advertising revenue. When it went out of business in 1989, Computer+Software News was the No. 2 publication in a two-book market. Now, it’s a no-book market. That’s because computer specialty stores don’t really exist anymore. These were the stores best known through the chains such as ComputerLand and MicroAge that started out primarily selling hardware, but got squeezed out by direct sales organizations like Dell Computer and the mass marketers like Computer Depot. That one magazine left in that market was then called Computer Reseller News, and although other publications came and went, CRN, as it came to be called was the only one left from the mid-1980s. And it doesn’t really do the same thing, and in the face of the Web, has cut back its once-weekly frequency. That scenario comes to mind many times when I talked with VARs who sell mid-market accounting software. They could disappear in just the same way, or change so much that they aren’t the same kind of businesses. The reason for indirect distribution, the use of resellers, occurs because the cost of some products is low enough that the manufacturers can’t afford to employ sales forces to sell them. The Web changes things since there’s no software to physically distribute, and it removes some of the rationale for using VARs. There has already been talk, since as a prediction a few years ago by Doug Burgum, the longtime head of Great Plains and then Microsoft Business Solutions, that the market would some day have margin-less software. Certainly, the trend from vendors is always to reduce profit margins. And then there are the conflicts between vendors, whose direct sale forces can offer cheaper prices, and the resellers selling the same products. There are credible reports of serious conflict between resellers and the sales forces for NetSuite and Sage Software. It’s too early to predict these factors will result in the end of software reselling as we know it. But it’s something that could happen.