Enterprise application vendors are turning to indirect sales channels to win smaller customers, but their efforts can backfire on inadequate support.
Indirect strategies to target companies under $500 million have been adopted in the past six months by Baan, SAP and Oracle, and are set to be emulated by JD Edwards, Peoplesoft and others this year. However, analysts at Forrester Research believe vendors run the risk of lowering their standards or service to users, and over-stretching themselves by trying to support too many resellers. "Baan will find itself stretched to support 200 channel partners," said Thomas Gormley, author of a new report, 'Middle Market in Transition'. Recruiting, training and supporting more than 30 partners in the first year will be difficult, he predicts, and the quality of the Vars will be inconsistent.
Gormley believes Oracle has an advantage over its rivals in the large corporate applications space because of its huge consulting resources. These can be drafted in to offer on-the-job support and "handholding" for partners on customer sites, which Forrester believes is essential in the early days. "Even with training, channel partners will be green vis-a-vis the vendor's technology and methodology," the report says.
Customer support must be maintained at all costs. "Indirect efforts, if not managed well, will violate a critical middle market requirement: the assurance of direct involvement by the application vendor as necessary to support the user," wrote Gormley. Vendor-supplied 24-hour telephone and Web support should be backed up with paid-for services, provided onsite by a local partner.
For all the caveats, Forrester agrees the move to channel partners is unavoidable for these software giants. Their margins and quality of service cannot be maintained through directly selling in the more price-sensitive middle business market. Some even see their new channels as a first step to a component-based future where components will be sold via integrators and application houses and high cost distribution structures will be less necessary.
The latest apps vendor to announce plans for a channel to address medium-sized companies is JD Edwards with its Genesis programme, currently being implemented in the US, with Europe to follow. Baan announced it will recruit 200 resellers to sell Baan IV to companies with sales of $100-$350 million, emulating the Microsoft channel model. Last month, Oracle announced its Applications Dealer Network for customers under $250 in revenues, which will recruit 20 dealers by the end of the year, some in Europe, and is targeted to deliver 30 per cent of apps revenue next year. First off the block in this market was SAP< which announced its Certified Business Solutions programme last summer and now has 14 resellers serving customers of under $200 million, mainly with NT solutions.
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