The Changing Channel

Analysis: Is There Still a Microsoft Partner Channel?

Channel guru Howard Cohen debates whether the Microsoft partner channel is really still a channel at all.

• By Howard M. Cohen
• January 19, 2012

It was 30 years ago this past August that IBM introduced its first PC. IBM's was not the first PC, but it did validate and launch an industry. IBM had a policy challenge, in that nobody but IBM was allowed to sell IBM -- so how was the company going to allow Sears Business Centers, Nynex and ComputerLand do so? The solution was to sell the IBM PC to these companies and allow them not to "sell" them, but to "resell" them, thus creating a new sales channel that would quickly come to be known as "the reseller channel" and, later, "the channel."

Today we talk about the channel with an innate fondness. For many of us, it's where we grew up, where we built our own personal business networks and rode a business roller coaster for the past 30 years.

Change: The Only Constant
It is said that the only constant is change, and the channel has been no exception. Part of what has kept it so engaging for so many is that there is always constant change.

This column is about those changes, how they impact all of us in the channel, hopefully with some good insight into how we should react and respond to changes as they occur. Taken in the context of the history of our industry, we will work together to learn the lessons of the past so we don't have to repeat them. We'll examine the influences and events that are constantly remolding and reshaping our channel, and hopefully gain insight into our best strategies for surviving and thriving within all that change.

Is It Still a Channel?
One of the issues I'll address in coming installments of this series is whether the Microsoft partner channel is really still a channel at all. About three decades ago, most people entering this channel were there to sell hardware and software products on behalf of manufacturers and software publishers. It wasn't long before a few resellers began to discount heavily causing profit margins to spiral downward. A few recognized early that the key to ongoing success would be to sell and deliver the services that surrounded these products. They started by selling "product-attached" services along with every hardware sale, such as configuration, installation and maintenance. Soon they were recommending consultative and supporting services.

Today, many IT firms have decided to cease selling products at all, preferring to refer a qualified fulfillment partner to supply the products needed. By taking no profit from the sale of products, they hope to distance themselves from responsibility for the performance of those products.

Many of these solution providers who have walked away from product sales over the past decade are no longer in business. While shedding the costs of credit for their customers and tissue-thin margins on the products they also severed the important strategic bond between them and the principal manufacturers whose products they originally went into business to represent and support. Without those relationships they lost their true differentiators, the strategic advantages that separated them from their competition. If you're not selling a manufacturer's products then you're not a true reseller or any other kind of sales channel. As more and more channel firms move away from product sales, does the channel cease to truly be a channel?

We'll talk with VARs who say yes, we're still a channel, and with consultants who will likely ask why that matters. We'll learn about what specific manufacturers, software publishers, distributors, service providers and others expect from the channel and how well they feel they're serving the channel and how well the channel is serving them.

While some are busy figuring out new ways to move more products to more customers, others are marching headlong toward becoming true professional service practices. Which are you? Where are you headed? What would you like to know? I hope you'll participate and make The Changing Channel a thriving dialogue about our business, our home, our channel.