Model 2.0: The commoditization of distribution
The arrival of cloud computing represented a fundamental shift in our value chain. Its main disruption was not a new product, but the commoditization of distribution. By minimizing the complexities of implementation and access, the cloud allowed software manufacturers, for the first time, to reach global customers directly, redefining our role as local partners who were once indispensable for territorial expansion.
This structural change, an evolution that has deeply impacted IT channel partners, had two inevitable economic consequences. First, the shift from perpetual licenses to subscriptions fragmented the revenue stream into smaller transactions, eroding the basis on which our margins were calculated. Second, and more importantly, a false expectation arose that the intrinsic value of partners would decrease. The thinking was, if the cloud handled delivery and maintenance, the justification for margins disappeared. The result was a major margin compression across our ecosystem, which I saw fall to a range of 5–20%.
In reality, the cloud disintermediated the digital software transaction, but I argue it didn’t eliminate the need for commercial relationships and local specialization. Although a customer can technically buy software with a click, the process of selling, implementing, supporting a business solution and adding value with additional services aimed at continuing to grow the customer’s consumption requires much more than a simple transaction. This is where the local partner remains indispensable, for both the independent software vendors (ISVs) and the hyperscalers.