Customers, Channel Now Rely on Appliances to Deliver Latest Software Functionality

Independent software vendors (ISVs) that sell software based on x86 hardware platforms face a new type of challenge in today’s economic environment. While their software can run on any vendor’s hardware platform, the time it takes for them to install, configure and support their software on each platform gives resellers pause and is prompting resellers and customers alike to look for the ISV’s software in the form of appliance-based solutions. In this first of a 3-part series, DCIG meets with Tom Baylark, an independent consultant to Bell Micro, to discuss why ISVs should consider offering their software on an appliance and how appliances can improve their relationship with the channel.

DCIG: Why should ISVs consider making their software part of an appliance? How will this help them in the channel?

Tom: If you take a look around, customers are starting to rely more on appliances in all aspects of life whether it is the MRI or CAT Scan machine at the hospital or the remote data terminals that are popping up in healthcare. These are all appliances meaning they are running a specific application on a specific piece of dedicated computer hardware.
People who have digital video recorders (DVRs) today in the form of TiVO or whatever brand they have built into their satellite literally have a little Linux server inside of their house with a specific type of application that is running on top of it. In the data center, customers have firewalls and networked attached storage which again are dedicated servers running a specific type of application.

Can you imagine having to purchase the operating system and the software functionality to implement a TiVO? Can you imagine having to purchase that stack to implement your network attached storage?
No, customers want it all-in-one; it’s simpler. This is always a real plus that an ISV has when they can say, “Put this system or this solution to a specific problem in your environment, turn it on and in a very small period of time, it will rapidly configure, you can install it and you can see all of the benefits and none of the hassles of trying to make sure it integrates into your business.”

In regards to the channel, the appliance fits well with the traditional channel because the channel likes to sell their experiences and promote their success in “fixing” entities. The channel likes to say, “I have a server”, “I have a piece of storage”, “I have a switch”, “I have a NAS box”, “I have this piece of functionality” that it can sell you and it doesn’t have to be an expert on the software functionality.

The channel doesn’t like selling Oracle databases because they have to be Oracle database savvy. Due to the amount of products that traditional channel partners are trying to contend with, having to develop expertise on any particular piece of software is not really practical plus then they have to supply support for it. They know they can’t just sell software and run away as the customer will want to call them when it is not working and if they don’t have the expertise to manage it, that doesn’t look good in the eyes of the customers. The channel is very good at selling fixed entities such as appliances. It’s here, it has a SKU and I can sell it. It is an easy sell.

Software vendors, even those that work through the channel, don’t always know that. What is your experience in this regards?

With very horizontal applications like backup and recovery, over time the reseller may embrace the idea of putting together a practice around being able to go and execute a holistic sales cycle around those types of solutions. But for the most part, if the customer wants a specific software solution, the reseller will get the box of software and leave it on the customer to manage the implementation and all of the life cycle of the software stack.
I don’t see that changing any time soon. From a perception standpoint, software is many times seen by the channel as a real headache.

DCIG: So resellers see software as taking too long to sell?

Tom: Absolutely. The sales cycles goes through the roof because, from a customer perspective, hardware is pretty simply to buy as customers have been buying hardware for a long time. When it gets down to the software functionality, customers have to do significantly more expensive testing, the decision cycle takes longer to happen and, since software is more expensive, it has to go through more levels of review during the sales cycle. Resellers just do not want to deal with that.

Further, hardware does add some tangibility to what it is that the reseller is selling. The customer can see it, the brand name is sitting there and the blinking lights are happening on the reseller’s behalf.

DCIG: When you are talking to ISVs about the Bell Micro OEM business, what is their reaction? Does it convince them or are they still skeptical?
Tom: ISVs are very interesting folks. The only value they see is in their piece of software. From the ISV perspective, isn’t hardware just free? Heck, it is an X86, just plug it in and go. That’s the model that has been successful for them.

But there are challenges that are going on today that are going to change how ISVs have to act in order to be successful and grow effectively. There are some companies that have been very happy with the status quo. Well, the status quo is going downhill if you have looked at your 401(k) lately.
There are resellers who are just marking time and trying to hang on as they have no growth strategy for 2009. The goal of two of the resellers I have talked to is to just be around in 2010. At the end of 2010, they just want to be here. They are marking time and saying they plan to keep on doing things just the way they have been doing them.
As you get into the public sector or larger enterprises, these sectors give to their technology providers a list of preferred vendors and anything they buy has to have a specific vendor’s logo on it. It is pretty cool when you put together a solution and it is all HP running this vendor’s software.

That is an immediate pull. If a reseller goes into a data center now and the reseller wants to implement an email recovery system, the data center may say, “Great!” But when the data center looks at the solution and sees a little white box, it may say, “No way! We are not putting a white box in because we only buy HP servers.” In that situation, it behooves the ISV to align with a specific hardware vendor like HP and manufacture some sort of appliance.

In part 2 of this 3-part series, Tom discusses why some standardized hardware platforms are better solutions than a heterogeneous, white box solution and how branded solutions differ.

In part 3 of this 3-part series, Tom discusses how offering software on an appliance can broaden software’s appeal without increasing and even possibly lowering ISV costs.

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