Are You Giving the Channel Too Much?

The role of software is becoming increasingly important, and not just for traditional software companies. Perhaps this is nowhere more true than at hardware-focused companies facing the commoditization of their hardware. Hardware without software is nothing more than useless metal and plastic. But if the software is so valuable, why do hardware companies generate so little revenue from it?
Here are three recent examples in how hardware and related pricing models are being transformed:

Our usual rule when facing any long-term challenge is that you need to change the rules. If a big competitor’s about to bombard the place where you’re standing, move someplace else. If your economic model is becoming obsolete, find a new model. In the case of people living and working in Silicon Valley, the challenge is the rapid migration of tech jobs to low-cost countries, andthe opportunity is to embrace and consciously accelerate the rate of change. Silicon Valley can’t be the cheapest place to write software, but it may survive by being the nimblest.

Our usual rule when facing any long-term challenge is that you need to change the rules. If a big competitor’s about to bombard the place where you’re standing, move someplace else. If your economic model is becoming obsolete, find a new model. In the case of people living and working in Silicon Valley, the challenge is the rapid migration of tech jobs to low-cost countries, andthe opportunity is to embrace and consciously accelerate the rate of change. Silicon Valley can’t be the cheapest place to write software, but it may survive by being the nimblest.

Any successful company in the tech industry eventually ends up competing against Microsoft in one way or another. But recently we’ve noted a rising tide of competitive action by Microsoft across much of our client base, all at once. In segment after segment — including financial software, antivirus, wireless e-mail, and graphics — Microsoft is making aggressive new pushes to displace the established leaders.
If you’re facing one of these assaults, you may feel like you’re being targeted individually, but the context is that Microsoft is trying to increase its growth by targeting many places at once. We think that now most of the antitrust complaints against Microsoft have been settled, it feels freer to be aggressive. And the company’s delayed delivery of new products has made it especially hungry for quick revenue growth.