Technology vendors have long viewed VARs (value-added resellers) as an important bridge into the SMB market. Rather than using their direct sales teams to woo SMBs, vendors recruit partners to do it for them.
But Google's isn't just any technology vendor. And it apparently wants its partner channel to be as minimalistic as its famous search interface. After purchasing e-mail security company Postini, Google promptly cut the prices charged for its services by up to 75 percent.
This has left Postini's resellers understandably miffed, notes New York Times blogger Saul Hansell. Google also apparently plans to handle service for all but the smallest of its customers, cutting off another revenue opportunity for its partners.
Hansell questions the move:
... enterprise customers want their hands held. And if you cut prices too low, there simply isn't enough money for Google or a reseller to provide much service. It will be very interesting to see if the market demands that Google actually raise its prices in order to compete.
Do most companies really want their hands held? Or is it necessary simply because most software is unnecessarily complicated?
Google is banking on the idea that it can put together a package of apps so easy to use that it won't require much in the way of service and support. Rather than using service revenues as a partner perk, Google seemingly wants to streamline service to cut its costs -- savings which, to its credit, it seems to be passing along to customers.
Interestingly, in my July interview with Illuminata analyst Wayne Kernochan, he suggested that small ISVs offered a better access point to the SMB market than VARs. He said:
... you don't have this kind of middle person between you and the ultimate buyer who can screw up your understanding of how the market is doing right now. If the SMB ISV likes your product, particularly the SMB application service provider, you're going to see the revenue immediately. Whereas if you are dealing with a regional VAR, that VAR, in order to preserve its relationship with you, would buy your product ahead of time and then turn around and try to sell it to the customer. Sometimes they didn't succeed, so you didn't know for six months or so that all that revenue you booked wasn't real.