Thursday, August 7, 2008

Food for Thought: In a World Of Partner Solutions Does the ISV or SI Partner Designation Matter?

Old World Definition Of Software Partners Still Prevalent
From a vendor's point of view, partners can play a critical role in expediting time to market, improving sales reach, or delivering a complimentary solution to a customer. There traditionally have been 5 defined categories:
  • ISV - Independent Software Vendors specialize in delivery software. They typically partner to complement a solution offering or create an integrated solution offering for a target market.
  • SI - System Integrators focus on bringing various technology components including software to ensure a complete solution. They bring a solution offering to life and may also provide additional business transformation services.
  • VAR - Value added resellers build on top of existing solutions and to resell the "value add" on top of an existing product. VARs partner by expanding a solution offering for a geography, market segment, industry, or role.
  • OEM -Original Equipment Manufacturers develop components for use by another company in their product. In this context, the vendor provides their solution as an OEM to be embedded by a partner.
  • Technology Partner - Technology partners supply solutions in other areas such as hardware, networking, tools, and related components.
Next Generation Partner Solutions Blur the Lines
Recent discussions with over 150 customers and partners of software vendors and their partners at Microsoft, IBM, Oracle, SAP, Lawson, SalesForce.com, and NetSuite highlight two trends:
  • ISV's continue to provide system integration via new services. The hunt for quarter to quarter growth has many of the ISV's bulking up their pro services offerings. While many of these vendors continue to build additional partnerships to expand their reach, there remains considerable investment in internal professional services teams and other value added consulting offerings. Some examples include additional "value added" support services or business value services offerings.
  • System integrators break ISV dependencies by delivering solutions via SaaS or PaaS. Previously, the large consulting firms have invested in solution platforms for custom delivery to clients such as a specific utility billing platform, tax collection system, or telecom call center solution. By moving to a one to many multi-tenant deployment option, system integrators break their dependency on a vendor and can now mitigate the cost of supporting clients should they choose a multi-tenant approach. This means they can deliver one to many support and get into the solutions game without worrying about excessive costs to support various client templates and deployment intricacies
The bottom line.
In the world of partners and partner solutions, customers remain confused at all these designations. At the end of the day, they just want to know the solution is offered in a consistent fashion, certified, supported, and part of a socialized ecosystem.

Your turn.
You've heard my view. As I write this, I'm in the midst of my next report on solution centric ecosystems. Do you agree or disagree that these designation no longer have the same meaning? Is there value in having a uniform way of evaluating these new partner solutions sans the old world monikers? Would a maturity model help? Looking forward to your comments!

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers. All NDA's have been honored.)
Copyrighted 2008 by R Wang. All rights reserved.

7 comments:

Howie Steinberg said...

System integrators who deliver solutions have been around for awhile. Take all the work Accenture did in telecom. These guys put in custom solutions that were tough to maintain. Time will tell if onDemand will make it easier for them to break their dependency from Oracle and SAP.

Charles V said...

We still see value in calling out our designations. You can be an SI partner with a solution b/c most your biz is in implementation. What is more confusing to me these days is VAR vs SI.

AustinTechTrek said...

I agree with Charles in the blurring distinction between VAR and SI. Here's my take: as ISVs are bypassing VARs and LARs with SAAS, the VARs are reaching into higher margin services that puts them in the territory of SIs. The distinctions are useful, but perhaps reclassifications are necessary?

Shiro Yamasaki said...

I completely disagree here with austin and charles as well as ray. There is an inherent nature of an ISV that is different from an SI. An ISV's business model is focused on license not services and consequently is focused on making the product simple enough for the consumer. An SI is focused on services and they inherently like complexity b/c that means more service dollars. I think this is going to be a hard to change the DNA of an SI vs an ISV.

Wendell Simmons said...

It would be interesting to graph these companies on a percent of services revenue vs. license revenue chart and see if we get any natural clustering. This might guide us to new categorizations. On the other hand, what if there's no clustering? Does that imply that the concept of labels has lost its value in this space?

Alexandro G. said...

Wendell, you got a great point. Would you count SaaS offerings as service or license revenue? This is the main question if SI's start delivering solutions from their PaaS.

Michael Ni said...

The blurring has been happening due to SI/VAR's increasingly productizing their knowledge and less ISV's getting sucked into services. This trend is accelerating in both reality and hype. The reality is that product innovation (read process for most CRM/ERP apps) is increasingly happening at the edges powered by the increasing shift of vendors to verticals and platform plays. Process tools and portability of VAR/SI work make some level of productization inevitable, even if you just call it an accelerator. The aspect which is part reality and part high-visibility hype is SaaS VAR's who fundamentally are building SaaS apps to supplement a disrupted business model and see the fatter product margins, lower costs to sell products via online markets (e.g., salesforce.com's AppExchange) and expanded platform capabilities (e.g., NetSuite's SuiteFlex and Salesforce.com's Force.com) as attractive alternative revenue.