You're In The Wrong Business If You're Upset That Your Supplier Is More Efficient
from the welcome-to-reality dept
Saul Hansell at the NY Times has an interesting blog post about how various value added resellers (VARs) of Postini's anti-spam email solutions are upset at Postini's new parent company, Google, for drastically cutting the prices on Postini's offerings. Basically, they're upset that it's much more difficult for them to make a profit, and also because Google can now more efficiently service smaller customers, who Postini used to ignore, leaving them to the VARs. So, instead, these VARs are dropping Postini and looking for competitive vendors. Hansell even wonders if Google will be forced to raise the price just to keep the VARs happy.My guess is that Google honestly couldn't care much less about what the VARs want. It seems to believe that the service was priced artificially high in the first place, and the company can do much better dropping the price and making the offering much more widely available. If VARs can't handle that, that's not Google's problem. What's more interesting, though, is this idea that VARs now think the solution is to go to a more expensive Postini competitor. Sure, it may seem like a better way to get the necessary margins, but eventually those efficiencies come home to roost, and customers will begin asking why they should pay so much to the VAR when they can just go direct to Google and buy Postini for a tiny fraction of the cost. If your supplier is much more efficient and can drop the price of something supplied, the answer should never be to drop them and sign up with a much more expensive supplier. You may fool some of your customers for a short period of time, but it's a losing long term bet.
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Filed Under: efficiency, postini, suppliers, vars
Companies: google
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US Companies
It is all about how can I make the company look for this quarter.
Makes me happy I work at a company where we have meetings talking about 5, 10, 20 years from now and our long term plans.
Feel a lot safer here than I would elsewhere.
Oh, and this is actually a French company. Just work for the North American business unit. Maybe that is why they are more long term.
About the only time I am ever happy it is run by old people.
At least they are seriously innovation based. Had the 60th anniversay gala last year. Was all about showing people from around the world who went to France and work for our company (I was very lucky to be one selected to go).
Even with all of the different showings of our company's innovations, they never once mentioned anything regarding patents and how that makes us good *cough apple cough*.
Long term goals ftw!
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Disclaimer for my post#1
And that is just how it appears to me with all I hear these days. And what I read here most of the time.
Constantly major company after major company declaring bankruptcy and yet the CEOs still get paid millions.
Delphi for example, goes bankrupt and yet in their bankrupt deal thing with the gov, they pay the CEOS 16million dollars (wanted to pay 80mil). Soooo, the CEOs can drive the company into the ground, and then get bonuses for doing so in the claim that "it helps the company stay competitive for paying the CEO". Where is the incentive at all to make a company do good?
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Merlin Mann on "value add," via Twitter...
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Well...
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gotta disagree
1) Access to markets you wouldn't be able to get access to otherwise, e.g. overseas, industry verticals, etc.
2) Access to a large and varied sales force without a significant investment.
3) VAR's ability to provide support and solution integration.
So if Google is making their reseller program less appealing, they are saying that 1) it's a commodity product that doesn't really require much support or integration or 2) they are ready and willing to support the user base themselves and 3) they have access to same range of customers that the VARs did and don't really need them.
My theory: Google is not really in the business of selling software, so they could be forgiven for not understanding reseller networks (a lot of businesses that could use them successfully don't).
Supplier's pricing is always kept artificially high versus the VARs pricing otherwise the model doesn't work. Typical VAR discounts exceed 50%. VARs have limited time and resources, and they have access to many similar products, so if they cannot get the margins or supplier support for a particular product, they will switch in a heartbeat. Their end-customers will in most cases never know the difference, because they are most likely buying a bundled solution and not seeing or caring about the individual components.
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Not a new concept
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Re: gotta disagree
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Deal with it
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Re: Deal with it
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Re: ceo's
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You Get What You Pay For
If you compete with your own resellers on price you are going to lose your resellers. You better be darn sure that you don't need them.
As a Postini customer am I better off with support from the local Postini consulting firm, or support from a Google call center attendant reading solutions from a script? Do I really save money with a lower price?
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Re: You Get What You Pay For
If they can't compete with the supplier because their price is too low then their customers obviously don't perceive the added value of buying from the VAR as being worth the added cost. In this case they are nothing but a middle-man with no real added value. If the supplier sees a way to cut out the middle man most consumers would agree this is a good thing.
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It's the relationship, not the price
The price change is a red herring. The resellers are unhappy that Google is selling direct and bypassing them, not that the price of the service is going down.
To wit, if a VAR can add $20 of value to a $30 service and sell it for $50, why can't they also add $20 of value to a $3 service and sell it for $23? If customers want to buy support from a VAR the fact that the cost of the underlying product has gone down shouldn't change that fact.
The only reasons the VARs would prefer to resell a more expensive product is because A. it better meets the needs of their customers or B. the product is sold only through VARs so they do not have to compete with their own supplier.
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Nothing New
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ahh yes, Google is now the new Wal-Mart...
Wal-Mart does the same thing, drastically lowers the price and makes the difference in _huge_ volume.
Google was originally a search portal, still is; but now Google can use its size and search capabilities to make money in other areas.
I see the Google Bashing that use to be Wal-Mart Bashing. Same Game, new name.
This is always the case when a large competitor enters the market. Large companies think big, think price, think volume and think profit.
A Business is in the business to make money.
Don't fault a business for doing what it is in the business to do.
P.S.
Don't confuse a business with a thief.
Theft is not a business model; the only way theft works is if it is under government control, ie. taxes.
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There's a point here somewhere...
The idea of open standards/GPL is interesting because there are is a multitude of tools in the toolchest that have little or no cost associated with them, whereas the propietary route is generally filled with third or fourth party EULAs that need to be licensed before a product can go to market.
When utilizing the propietary route, implementation is (generally) by design meant to be streamlined, which, maybe for the purposes of this conversation, could make it a less scarce resource simply because design methodology is meant to be commoditized and repeatable.
Foe example, consider email in the old days when BBSes were around and we had to configure FidoMail network to work with programs like FrontDoor, InterMail, BNU Fossil Drivers. Back then, it was probably one of the more scarce of resources, which probably seeded ideas of community and collaboration on a worldwide scale. BBSs that had this technology saw it as a contributer to their success, but it was not the end-all contributer, and this skillset was useful. It took several years, but the same concept was adopted by business utilizing the TCP/IP stack.
Today everyone has email, partially because of adoption of systems such as Exchange.
But what's most interesting is that when one camp thinks they are exclusive of the other, when the reality is that both methodologies need each other, and have a very specific role in adoption of a set application or standard.
So I know i've really strayed off the original topic, but after I reviewed this, I just didn't have the heart to abandon the submit button.
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Channel sales helped the SMB...
No business was too small to help out. Our goal was to make sure that anyone that wanted Postini could get it. Postini has had and still has the largest user base of hosted as/av services.
If you can manage the service yourself, that is great and a minority to the exception, but many could not and were happy to accept our services.
The lower pricing will certainly help spur sales, but I do not see it reducing the support needed, at least not yet.
As a partner we not only sold to SMB, but also to other service providers, who also were able to afford the service for their customers.
No matter what the price, support service will always be available. Look at the companies that support Google Apps and charge for the setup for it. There are companies that support Adword users, helping them learn the system, or directly manage it for them. Service sells.
For those VAR's looking elsewhere, as they say the grass isn't always greener... IMO, you are up for more of a challenge to move your customer than to keep them, as your customer may not share your motives. Looking for other products is one thing, flipping the customer is another.
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Business model innovation opportunities in designi
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