Vendors to tighten grip on the channel: Gartner

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Commoditised business applications could make resellers, service providers and end-users increasingly dependent on vendors, analysts said at a recent industry conference.

Analysts on a panel discussion at this year's Gartner Symposium and IT Expo claimed ERP business applications would become more commoditised in the next five years -- sparking a situation where vendors increasingly call the shots.

“The challenge is we'll lose some negotiation capability with the vendors -– they'll lock you more and more into their products,” Gartner Research vice-president and research director Betsy Burton told the audience.

Kristian Steenstrup, research vice-president at Gartner Research, said that internal components in ERP-type software stacks were becoming increasingly componentised – the way car parts had in the last 30 years or so.

When that happened the overall product became more homogeneous -– meaning that the makers had to seek out new ways to differentiate their product and keep earning money, Steenstrup said.

“Those are tell-tale signs of it becoming a commodity,” Burton said.

One way vendors could keep control was to limit the interoperability of their components with other vendors' software stacks. Another way was to move more into services and seek to control the way those stacks were managed and used in the field, the analysts agreed.

“In CRM [already], there's five times greater revenue from services than from the actual software,” Burton pointed out.

However, Derek Prior, research director at Gartner Research, argued that some of the internal components of business application stacks were a long way from being truly commoditised.

“Customers who use some of them find [the software] does a really good job and some does not,” he said.

Prior said vendors could still get significant differentiation from improving the actual products further. Too few fulfilled the promises often made about them.

Simon Hayward, vice-president and research fellow at Gartner Research, argued that a certain amount of inter-stack flexibility would need to be maintained.

“However megalomaniac a vendor is, they have to provide some capability to link with other vendors' [products],” Hayward said.

Burton agreed, saying there would be multiple vendor business application stacks but added that companies such as IBM, who were trying not to alienate any of their software developers, were walking a fine line although it was true open standards had come a long way.

“They want to be able to play with those other vendors,” she said.

The risk was, however, that open standards would get perverted away from the interoperability ideal and become tools of individual vendors, Burton said.

Meanwhile, SMB-focused Microsoft was competing more in the same space as companies such as IBM -- partly since so many businesses around the world could be classified as SMBs.

“[For instance] 90 percent of companies in Brazil are SMBs,” Burton said. “So I believe Microsoft is going to move more and more into the business application space.”

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