Branded OEM Appliance Solutions Can Deliver both Lower Costs AND Increased Revenue

Delivering software specific solutions in the form of appliances have turned niche software applications such as deduplication into some of today’s hottest mainstream technologies. But independent software vendors (ISVs) can still be fearful that offering their software in the form of an appliance can rob from existing revenue streams and create new support costs. In this final segment of a 3-part series, independent consultant to Bell Micro, Tom Baylark, discusses how offering software on an appliance can broaden software’s appeal without increasing and even possibly lower ISV costs.

DCIG: Is this a net new revenue stream for ISVs or does it steal from existing ones?

Tom:  The answer is yes to both of these questions. There will be a set of customers who will choose to have an integrated appliance versus another standalone appliance that they have to manage. Right now the customer manages all of that complexity today.

But it opens up new revenue streams by exposing ISVs to a set of customers that they would normally not have access to. It is an incremental revenue stream so it will not replace a huge part of ISVs’ business initially. It will start small and grow as people begin to adopt it.

Look at deduplication. That is one technology that is very hot. There have been data deduplication vendors for a quite a long time. Now people are looking to buy appliances that they can put on the network and just perform that function for them.

What we haven’t talked about yet is what appliances save. If we ask ISVs today, “How much of their support calls end up being hardware related?”, this is something that many of them can’t put their finger on.

I was dealing with a financial services vendor last year who told me that 80+% of the time when it went to install its software, the configuration (software stack) put together by the customer according to the ISV’s specifications was wrong. So the ISV had to do the install and configuration again and again before it was right.
 
How many times do ISVs get a call from the customer that their software isn’t working right only to find out the server is broken? Wouldn’t it be nice to call the appliance/server vendor and have them go out to do the diagnostics and field replacement of that appliance of this server, especially if it is installed some place like Singapore?

DCIG: When you say 80% of the problems are hardware related, are you referring to the OS stack on down?

Tom: It would be the OS stack on down but to the ISV that amounts to the hardware. Using an appliance opens up new markets and saves time, money, people – all costs that ISVs would like to shed.

DCIG: Some ISVs are sensitive to remaining hardware agnostic. How do they bring a standardized appliance into their portfolio to their customers?

Tom: You promote the functionality of the appliance and not what is inside. Going back to the example of the TiVo, you don’t know what kind of hardware it is running on or what version of Linux is on it. Branding becomes essential to brand recognition. Depending on how ISVs implement this, hardware vendors will now let the ISV have their brand on the appliance.

This is now the ISV’s data deduplication appliance and if a customer wants to buy data deduplication, then it is just another SKU that the channel sells the customer just like it always has been as it is just another hardware product. Then, by the way, if the customer still wants to buy the software to run on its agnostic server, fine.

This also opens up is out of band management as a revenue stream for the channel. The channel is not adding more stress to the customer’s already stressed infrastructure by saying, “You, Mr. Customer, need to have my monitoring software running on your server.”

The monitoring software is already baked into the appliance that the reseller is supplying so the customer does not have to add the reseller’s remote monitoring software to its software stack. But because it is baked in, the reseller can now get into software as a service or functionality as a service since this appliance is running in the customer’s environment.

Selling the appliance greatly increases an ISV’s sales force by making its product channel friendly. There is nothing like having more people out there talking about your product on your behalf.

DCIG: Any final comments or thoughts that you would like to share?

Tom: Entering into this whole concept of delivering appliances to the market can be full of challenges and perceived costs. Like anything today, one way of mitigating cost and risk while reaping all of the rewards and returns is by effective partnering. Choosing the right partner is absolutely paramount to success in this space to help ISVs overcome the challenges and not experience the downsides of making mistakes in this space.

The Bell Micro “Build OEM Better” program leverages Bell’s experience in delivering OEM solutions to the market. It leverages Bell’s experience and infrastructure to allow ISVs to have a holistic offering and support the end-to-end needs that they had throughout the life cycle of bringing a solution to market. Helping to manage the engineering challenges, helping to handle the stocking of products in remote locations, handling the certification, handling the testing, and even handling the integration of the products if ISVs still want to ship software to Bell Micro and have Bell Micro do all of the integration and testing.

An ISV could well come into this space and say, “I am an ISV, I run on x86 hardware and I want to get into the appliance space.” Here are my target customers and here is my solution. Bell Micro can take it from there and help them very quickly realize a solution that will meet their needs in this space. There is not a lot of that going on in the market from my perspective. I have not seen anyone else come out with this sort of program that touches people at every point of need throughout the life cycle of supporting the ongoing issues of ISV appliance solutions.

In part 1 of this 3-part series, DCIG met with Tom to discuss why ISVs should consider offering their software on an appliance and how appliances can improve their relationship with the channel.

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

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