Software Resellers Who Provide High-Value Software Services Will Experience Increased Margins, According To IDC
FRAMINGHAM, MA – NOVEMBER 25, 2002 – Software resellers will be forced to offer new services and more customized products in order to increase their margins in current economic conditions, according to IDC.
"Changes in the way vendors package and deliver their software, particularly licensing, software as a service, and nonperpetual licenses, are likely to continue pushing down margins in the medium term," said Steve McHale, vice president of software partnering and alliances research at IDC. "Overall, resellers seek to increase their margins and the largest gains go to companies that specialize in providing additional services that sell high- value software, rather than those that sell in volume."
According to IDC, the more a software vendor offers its reseller partners in training, marketing, and technical support, as well as other benefits available through its partner programs, the lower the discounts (and therefore the margins) will be for its products. Products that are complex or require specialization by partners typically generate higher margins. As vendors add more resources to their partner programs, the costs of these services subsequently drive down the available dollars for discounts.
IDC's recently published bulletin, Justify Yourself: An Analysis of 2002 North American Software Margins (IDC #28229) analyzes software margin expectations of North American resellers from 1999-2002. Existing and anticipated margins are tracked by type and revenue of the reseller as well as major product categories. This bulletin provides a comprehensive view of margin activity to help vendors and channel players evaluate the most lucrative software categories and better understand what is happening to partners across the industry and in various product areas.
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