I've been reading recent announcements about the Open Source Channel Alliance and trying to figure out what it is really about. Sure it makes for good marketing but is there tangible value being delivered and is it a sustainable business model for open source today?

At this point I'm not sure I really get it but to be fair I haven't spent that much time digging into the details.  My first reaction is that these two worlds are incompatible and that traditional IT distribution and open source doesn't make sense yet.  But change is happening faster than we can understand it and things going on that don't make sense suddenly do as I wrote about in a recent blog Microsoft: Serving up more Open Source.

I also know that folks much smarter than I have spent lots of time putting this together so this must make sense - right?  I understand how this could be good for both sides:
  •  For Synnex it could move their business into the exciting world of open source and open up new market opportunities that didn't exist before.
  • For participating open source vendors it opens up a new channel that helps them get into a market that hasn't considered open source previously and may be willing to spend money.
So let's get beyond the hype and marketing, peel back a few layers, and figure out what really exists.

My Perspectives

I don't know Synnex well and what I see on their website doesn't fill me with confidence that they have a deep understanding of software or open source. But let's assume they do. I am sure their value is similar to most distributors which is...

1. Fulfill demand & manage logistics:  that is what any distributor does best and why vendors generally use distributors because they can handle transactions and get the product in the hands of partners more efficiently.

While there is lots of demand for open source applications, is the distributor model the best way to fulfill that? Most of the demand today is for free stuff and free information and while there is considerable growth in commercial enterprise versions, does it really require a distributor to fulfill?

And we're talking about software here so there aren't physical things to ship. A distributor's ability to add value begins to decrease if it is just electronic distribution unless they can simplify and streamline that process for the software vendor.

2 Create demand: not a strength for most distributors but some do a reasonable job helping their partners create new business opportunities and demand for products.

Introducing open source applications to a new group of partners who have focused on traditional business applications and  IT products is not a bad idea but to be successful there will need to be considerable investment to educate and train those partners.  That of course costs money and I wonder who will be making that investment. This also takes time - more time that most people want to admit. Has everyone set appropriate expectation for how long this could take?

3. Financial:  distributors add lots of value in the financial relationships they have with their partners, the credit that they extend to partners, and the financial risk they assume on behalf of vendors. This is very important for large transactions but I'm not sure the volume of $100k+ transactions with open source products is at a point where a distributor is required -- and vendors using other payment forms for smaller transactions such as  credit cards and PayPal also reduce their financial risk but at a smaller cost.

4. Large base of resellers: distributors make it easy to get to lots of resellers cheaper than doing it themselves.  The core of those resellers tend to be companies who derive more revenue from the resale of products. Open source partners on the other hand derive most of their revenue from service delivery and a successful deployment of any open source application requires strong technical competency to architect, develop, integrate and deploy it successfully. Is this a model that Synnex resellers can adapt to?

The distribution model makes sense when there is high volume and lots of transactions. Sure it could help align multiple and inconsistent channel strategies among the open source vendors but at what cost. Adding another layer will have a cost and I wonder if there is enough margin for all of those involved.

The open source model, which is based on community driven demand, self education and support, and paying for as little as possible does not seem like a ripe opportunity for distribution because they don't have a distribution problem.

However,  they do have a demand problem. Sure there is lots of interest but  is that with traditional business used to spending money on technology. It would be a huge win if Synnex can train and influence their partner channel to focus on the open source opportunity by creating awareness and interest among a customer base that has needs and will spend money - but that is also like changing the direction of a ship - it a slow process that takes a long time.

This is truly interesting, I really hope it works, and I'll continue to follow their progress.


The VAR Guy contributing blogger Scott DahlgrenContributing blogger Scott Dahlgren is an independent consultant helping small and mid-size technology companies extract greater value from their partner and channel relationships. And he also runs marathons through the woods of Connecticut. Here are all of Scott’s blog entries. The VAR Guy is updated multiple times daily. Don’t miss a single post. Subscribe to his newsletter, RSS feed, Twitter feed and Resource Center.