Commonly Used Definitions in the Software Industry Front Office – 1
In a business model (as defined by Alexander Osterwalder & Yves Pigneur in their book ”Business Model Generation,” John Wiley & Sons 2010) context the Channel is the way you take (sell) your products and services to your customers.
In the software industry the term Channel is often used to describe the situation where independent 3rd party companies resell the software vendor’s products to the final customer.
In order to comply with the business model definition the Channel must promote your brand to the customers. The customers must perceive the software vendor as their “supplier” even though the delivery, the invoice and the support comes through an independent 3rd party company.
If your brand is not visible to the reseller’s customer, then the reseller is not your channel, but rather your final customer.
Although the term “Business Partner” indicates some kind of partnership (in a real partnership the partners will somehow share at least the profit and the loss of their joint activities) this is almost never the case when the term is used in the software industry.
In the software industry the term Business Partner is used casually for any relationship where you work together as 3rd parties each responsible for your own activities and your own P&L.
Independent Software Vendor is a term used in the software industry for companies developing their own software, which they take to the market under their own brand.
ISVs will typically use software components from other ISVs (or open source components) and thus become target customer segments for these ISVs.
When ISVs are small and less known they may promote that their software runs on the components of more recognized ISV (e.g. powered by Microsoft SQL). However, as ISVs grow and gain more market awareness they will typically suppress the presence of third party components in their promotion.
ISVs can also grow from within the large Value Added Reseller ecosystems. A Value Added Reseller of Microsoft Dynamics AX may have developed a vertical add-on solution, which he produces and sells to other Value Added Resellers. This is an ISV activity, which is often co-branded with the software platform on which it depends. As the ISV activity grows the software company will extend the solution to more ERP platforms gaining access to a larger market.
Because Independent Software Vendors have a strong interest in promoting their own brands and suppress the brands of their suppliers they are not considered a “channel,” but rather a customer segment in their own right.
About this series of posts
This series of posts provides a definition for the most commonly used abbreviations and terms used in the software industry front office.
Other Posts in this Series
Commonly Used Definitions in the Software Industry – Part 2
Commonly Used Definitions in the Software Industry – Part 3
Commonly Used Definitions in the Software Industry – Part 4
Commonly Used Definitions in the Software Industry – Part 5
Please check out my book Building Successful Partner Channels