The VAR Guy is scratching his head in confusion. When our resident blogger’s web site officially launched in January 2008, open source was all the rage. And quite a few open source companies were building channel partner programs at the time. Fast forward to the present and it seems like some open source channel partner programs have gone silent — especially as cloud computing continues to generate so much freakin’ hype. But don’t lose hope. Here’s why.
First, what went wrong? Let’s rewind to 2009, when Synnex and Red Hat launched the Open Source Channel Alliance (OSCA) and Tech Data launched the Open Tech effort. The situation looked so darn promising, especially as open source ERP, CRM and groupware companies worked to promote their wares through the OSCA and Open Tech.
But ultimately, OSCA and Open Tech have gone silent. The VAR Guy doesn’t hear much — if anything — about either channel effort. Seems like Synnex and Tech Data VARs are far more interested in traditional on-premise and cloud solutions. Indeed, distributor revenues have surged in the past year as corporations finally refreshed mobile devices, PCs and servers.
Meanwhile, open source companies themselves have been hit-and-miss on the channel partner front. Red Hat is marching toward $1 billion in annual revenues and more than have of the company’s sales come from channel partners. Even better, Red Hat has pushed beyond Linux to promote Jboss Middleware and Red Hat Enterprise Virtualization (RHEV) to channel partners. Sounds promising. The Red Hat Summit is set for May 3-4 in Boston. The agenda looks promising… but so far it’s difficult to find out if Red Hat channel partners will have a dedicated day of activities on May 2…
Digium, another super-promising open source company, just wrapped up participation in the Digium Asterisk World conference in Miami Beach, Fla. Plenty of VARs and distributors are embracing Asterisk, the open source IP PBX. And there are signs partners will push Asterisk into the cloud. But for the most part, Digium had little or no news to share at Asterisk World… quite a head-scratcher for The VAR Guy and his loyal readers.
Also, Pentaho was somewhat quiet during the company’s recent partner Global Partner Summit in San Francisco. Yes, the open source business intelligence company is committed to channel partners. But Pentaho can crank up the partner volume. One piece of news lots of folks overlooked: Pentaho’s global partners of the year list.
Second Chance in the Cloud
In some respects, it seems like cloud computing has stolen open source’s thunder. Or has it? Take a closer look and you’ll discover that the smartest open source companies are adjusting their channel messages to embrace the cloud. Three prime examples:
Open-Xchange, positioned as an open source alternative to Microsoft Exchange, seems to announce a new SaaS channel partner every week. The company expects to have 40 million users by the end of this year; many of those users leverage Open-Xchange deployments that channel partners host on their own.
Zimbra, the open source email platform from VMware, also has a growing list of hosting partners across the channel. And Zimbra 7, launching this week, could further accelerate Zimbra’s partner strategy — especially as Zimbra solutions providers flock to this week’s VMware Partner Exchange conference in Orlando, Fla.
Meanwhile, SugarCRM channel partners are balancing on-premise, self-hosted and cloud-hosted opportunities, according to CEO Larry Augustin. Also, SugarCRM is extending its open source mindset to include more aggressive sales and marketing training with channel partners, Augustin says. The result: SugarCRM revenues rose 50 percent in 2010 vs. 2009.
So, there’s plenty of hope and opportunity for open source in the channel… and in the cloud. Open Source companies just have to do a better job promoting their progress to the masses… and to The VAR Guy.
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VARs don’t specialize in open source, they specialize in solving customer problems. Many early efforts to get VARs excited about open source software did help get momentum rolling but then the natural thing seems to have happened which is that, like any other products, open source software is now another source of parts from which VARs can solve customer problems.
At Novell, for example, VARs that use SUSE Linux Enterprise Server to solve customer problems live in the same program with the same benefits and entitlements as partners that deliver solutions based on Novell Identity Manager or Novell ZENworks Configuration Management. Partners handle the majority of these sales, make some margin on the products, some on 3rd party additional products and value added services.
From a business perspective the difference in the technicalities of whether one is selling a software product or supporting services for a free open source software product are nearly invisible other than 1st year and nth year being the same price vs. a license + maintenance model.
I can’t speak for all the vendors that offer open source products solely or in a mixed source model but at Novell we’ve seen open source products in our portfolio move from being new and different to being part of the range of “tools in the bag” and they fit in our partner program as well as any of our other products.
Scott
Scott: The VAR Guy appreciates and respects your perspectives. Novell’s channel team has done a solid job in the past year or two on both the big picture and on tactical moves (example: SUSE Linux appliance strategy). But it seems like the larger open source ecosystem has failed to engage and educate the channel masses… open source relationships with distributors in particular seem to be mixed at best.
Still, The VAR Guy knows the open source ecosystem continues to grow, and he’ll be watching to see how the channel fits into that story.
-TVG
VAR Guy. I agree with you. What I found was that focused open source programs with distributors weren’t the end point of the journey, just catalysts along the way. There is still a market for pre-assembled open source stacks though it isn’t clear how separate this market is from the broad market for mixed source stacks and solutions. We ran successful programs with distributors in several countries to ratchet up channel coverage of SUSE Linux but once we had improved traction we let the regular program take over. Some of the grander efforts to make open source specific markets seem to have slipped away. Some times that was for the reasons I’m describing and other times perhaps the enthusiasm for running that kind of market as distinct and separate faded on its own. It’d be interesting to hear from someone that was running one of those programs at a distributor and get their view.
Scott
Here at xTuple, we continue to grow our channel programs, and are daily seeing evidence of the great fit between open source ERP and a healthy channel. The problem we always saw with the Synnex style solution (and OEM-driven predecessors like the Red Hat Network) is that companies, especially SMBs, simply don’t buy a complex solution like ERP in that fashion – open source or otherwise.
That, to us, is a big part of why it’s a good fit for a more traditional VAR-driven channel program. It’s a very hands-on, consultative sales process – with a significant upfront requirements-gathering process (which is often a paid consulting engagement for our partners, btw). Our VARs put together a project plan, including setup, data migration, implementation, training, and any required enhancements to the software. Sometimes they do the enhancement work, sometimes we do – it depends on the partner’s bandwidth, interest, and skill sets. Often the partner provides hosting and managed services – sometimes in their own data center, sometimes in a “cloud” environment.
The process of careful piloting, cutover, and transition to production support is extremely hands-on. It lends itself very well to the value-add that a local partner can bring to the table for an xTuple customer.
And of course, it creates a lasting relationship of mutual trust based on successful solutions delivered.
Compare that with the big-distributor clearinghouse approach. What value are they adding, compared to the local VAR-driven project I just described? If you ask me, the market has spoken loudly and repeatedly on this topic.
Ned, your approach and distribution aren’t mutually exclusive but you’re spot on when it comes to why distribution probably doesn’t need a separate “program” for open source products. That’s not where they add value. Where they can add value is in their traditional roles (managing credit and AR, distributing physical goods, identifying and segmenting channel partners to aid vendors in building channels, etc.) and in new ways such as operating their own infrastructure and solutions for VARs to resell as cloud services. None of those are particularly specific to open source vs anything else.
Of course some open source products end up in very simple, mass marketable deliverables such as appliances that lend themselves even more to broad market distribution through distributors. Again though there’s nothing uniquely open source specific about such a play.
Scott
Update: VAR Guy spoke to soon. Red Hat preparing channel partner summit surprise. Details soon. Hush, hush in the meantime. Our resident blogger is running to airport for VMware Partner Exchange. More thoughts later today on Red Hat…
-TVG
Novell still has channel partners? I thought only Microsoft was selling their open source products.
@kdogwc, in the event your statement is your true belief and not just sarcasm I invite you to check the facts. Novell has thousands of partners actively helping customers with all of our products, open source or not. And Microsoft, who continues to be a good Alliance Partner, has never accounted for a majority of our sales in any category including open source or Linux specifically.
In 2010 Novell Partners that were consistently engaged with our enablement, with partner management and, most importantly, with customers, had a record year with unbelievable pipeline and revenue growth.
Give us a fresh look. We’re more partner centric than ever and have the programs, partner profitability and enablement to make great partnerships. Together with cloud security and cloud management, market leading identity and access management, end point management that makes WIndows 7 upgrades a breeze and new, real-time enterprise social collaboration products we can help a lot of customers together with the right partners.
Scott Lewis
VP Partner Marketing, Programs and Enablement
Novell
Thank you Scott, I appreciate your response. I have too much respect for the VAR Guys column to wax anything less than a true opinion on this site. What Novell has done with its ISV community is just mind numbing. Kudos to you for building out your ecosystem and bringing applications to the platform. That said, it is hard to believe that Microsoft’s contribution to selling SUSE subscriptions has never accounted for the majority of Novell’s SUSE sales. I am not necessarily challenging your assertion here, it is just that well, if Microsoft weren’t the majority, wouldn’t your Suse division be a whole lot bigger than it is now? A lot of us have wondered who besides Microsoft and Novell direct sales is selling SUSE. I would expect Europe to be a stronghold because of SUSE’s heritage. Just saying…
Appreciate you taking me at my word kdogwc. I don’t want to spend a lot more virtual ink distracting from the actual topic of the blog post but happy to chat with you further by email or phone. SUSE was about $45M in 2006 before we did the Microsoft partnership. This year isn’t reported yet but at the end of FY2009 SUSE was about $150M. I can’t break out the numbers but a lot of that growth came from other partnerships, from the huge growth in certified ISV apps on SUSE Linux Enterprise and from growing our own sales through our indirect channel and our field sales force. And, yes, some of it came from the Microsoft partnership. Partners participate in selling those certificates too and some have done quite well when selling to mixed Windows and Linux customers. SUSE is one of our better growth stories of the last several years and partners are a big part of the reason. We’ve taken share with their help but, as you know, we are still #2. We’ll keep working on changing that number.
Thanks for engaging in the conversation. If you want to discuss further shoot me an email (slewis at novell.com)
Scott