INDUSTRY VIEWPOINT - Take your partner by the hand

Partnership between hardware and software suppliers has become a topic of debate since the arrival of the minicomputer in the 70s. This was accompanied by the emergence of application software companies that would target their development for a specific minicomputer hardware/operating system, proprietary to a hardware vendor.

In most cases, the finished application would operate only on the proprietary environment from that hardware vendor. The vendor would encourage the software developer to resell its hardware to offer a total system to the customer, thus the developer became a Var.

In many cases, hardware was the most significant portion of the overall cost of a system and the main focus was placed on the hardware choice.

Preferred hardware suppliers became the norm and the involvement of the hardware vendor in the sale was key to overcoming any 'preferred supplier' objections.

As a result, the vendor had control. A ruthless vendor could dictate terms and apply control because their resellers could only sell their hardware, this being the only platform on which the Var's software would operate. This led to discussion about partnership, channel management and levels of seniority of Var.

Several vendors did not abuse their position and worked closely with their indirect channels, allowing them to grow their businesses successfully.

Some had up to 70 per cent of their sales generated via their 'third party channel'.

The vendors were happy to do this as the Var reduced the vendor's cost of sale and hardware was still expensive, net margins were high and the Var had to sell the hardware vendor's product.

This continued until the introduction of Unix. With more users adopting this platform, the cost of computing was reduced and hardware costs came down.

This meant margins to both parties went down, direct sales staff of the vendor became more eager to take sales directly as their targets increased and the value of the hardware came down.

Gradually, hardware vendors' indirect infrastructures had to be reduced as the volume of business from Vars reduced, with Vars preferring to sell more software than larger hardware boxes, especially as the new Unix hardware was so powerful. Also, the number of vendors offering Unix mushroomed, so competition for margins for resellers rose.

This resulted in a downward spiral from the relationship between developer and vendor to one of anarchy, as, for the first time, the vendor could not control the Var.

With the advent of NT, the situation has moved on; in a reverse position with respect to control between vendor and developer. This time the developer can choose which vendor to recommend.

Also, customers can take a more pragmatic view to hardware. Most don't have significant investment in NT, so few preferred hardware policies prevail and there is little need with a standard platform.

The focus of interest has moved to applications and their implementation, which now represents the majority of the cost. The choice of hardware is almost an afterthought once the software decision is made.

So what happens now - is there no room for partnership? I think there is. Indeed, there is an argument that the need is greater as the differentiation between products is smaller with emphasis placed on the quality of the services, support and the people involved from suppliers.

Customers still require software and hardware to meet requirements and want suppliers to work together and ensure problems are resolved and cost competitive. This time it is the developer who must take the lead.

The relationships that work are stronger because both parties have learned a thing or two and elected to meet in the middle.

Those partnerships which are productive usually involve two successful companies, one focused on supplying software the other supplying hardware and both supplying a range of complimentary services offering a unified, professional face and a solution to the potential new customer.

John Crooks is managing director of Agresso UK.