A report from Gartner has shone a light on how software resellers are perceived by their customers, including what kind of business they appear to be, how well they differentiate themselves from the competition and how important cost is when deciding who to go with.
In the Survey Analysis: How Software Resellers Are Used in a Cloud-Led Market report by Gartner analyst Stephen White, IT and business leaders from around the world participated in a survey on the perceptions of software resellers.
Of those surveyed, 42 per cent described software resellers as service providers, 31 per cent consider them to be fulfillment-oriented and the remaining 27 per cent are seen as a licensing advisor.
By being defined as a service provider, White noted that this may expand the reseller beyond their intended purpose.
“Categorisation as a service provider reflects engagement of software resellers to deliver professional and managed services, utilising the breadth of software resellers to deliver services across a broad portfolio or engaging specialised expertise,” White said.
“In these cases, customer relationships may deliver service profitability that significantly exceeds software resale alone.”
Further, over half of the respondents classified their software reseller primarily as a purchasing agent, focusing on procurement or low unit cost.
With a large emphasis on software resellers being seen as service providers, identifying points of difference between resellers was seen as difficult, with 55 per cent of respondents claiming the differences between reseller propositions were not clear enough.
However, this has fallen from 71 per cent in the 2015 survey, which White notes that this could signify resellers are improving at differentiation.
Regardless, if businesses are having trouble identifying the difference between resellers, the report then claims that decisions being made are primarily focused on price; when asked for the key element when selecting a software reseller, businesses said pricing and commercial terms was the most significant.
With cloud technology being adapted by resellers, those that use online marketplaces like AWS Marketplace, Microsoft Azure Marketplace and Salesforce AppExchange were generally found to see their expenses increase when the software reseller relationship focused on fulfillment, as opposed to advisory or services.
“In these circumstances, when the proportion of software delivered as cloud services increases, the potential for use of online marketplaces also increases given the absence of additional value provided by the software reseller,” White said.
“Such fulfilment-only clients working with software resellers on a low-margin basis are arguably better suited to marketplace procurement and may benefit from the automated execution the marketplaces provide.”
Although this points to what the report considered as an “erosion of some reseller business”, White stated it does not outright remove resellers from doing business in cloud services.
“Where respondents use their reseller as a service provider, which the marketplaces won’t replicate, the licensing advisory relationships will also see reduced erosion,” White noted.
As businesses see their cloud adoption increase, over a third of respondents at 37 per cent expected an increase of demand for management services from software resellers, such as service provisioning, support, monitoring, usage metering, cost optimisation and bill management.
The annual churn rate from businesses going from one software reseller to another declined to 7 per cent from 2015’s 10 per cent, the last time the survey was conducted, which translates to 21 per cent of respondents changing their primary software reseller over the last three years.
For those that did, or intend to, move from one reseller to another, price and commercial terms were a main focus, which the report claims that this is “implying that price commitments may have been week or omitted from prior arrangements.”