The Long Tail of the ChannelBy Michael Vizard | Posted 2006-09-06 Email Print
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Opinion: The ability to find products that have a Long Tailthose that can sell other productsseparates resellers trying to survive from solution providers that create strategic relationships and drive recurring revenue.
Back in October 2004, Chris Anderson wrote an article in Wired magazine that explained how a concept known as "The Long Tail" in the age of the Internet is fundamentally changing the impact that channels have on product adoption and distribution.
At the risk of oversimplifying the concept, Anderson made the observation that centralization of purchasing activity in any particular element of a channelfor example Amazon.comcreates a unique opportunity to sell additional related products that otherwise would have been nearly impossible to sell on their own.
Now anybody who has been in the channel may rightly wonder why this inherently obvious fact of life in the channel is hailed as a classic economic theory, but the fact remains that as even though the Long Tail principle embodies a pretty basic concept, it's amazing to see how often it's ignored in day-to-day channel operations.
Many solution providers today still fail to take into account the downstream opportunities that the selling of a particular product generates even though the margins on that product might be razor thin or may even require the solution provider to essentially give away the product in order to create the high margin opportunities later.
A good example of this scenario is the application performance monitoring tool NetSenory from Network Physics. In its own right, this product is a relatively simple box that sits on a network and identifies in real time where the bottleneck issues are concerning any given application. On the face of it, that may seem to be a relatively inconsequential solution, but in the hands of the right solution provider the information that this device generates is invaluable. That's because the information generated by the device enables a solution provider to generate a Long Tail effect by identifying specific opportunities where new routers, switches, servers or application performance accelerators could be deployed to service a need most customers don't know they have until an enterprising solution provider makes them aware of it.
And to their credit, Network Physics is one of the few companies selling emerging technology that offers a channel program that provides relatively easy terms under which a solution provider can deploy this type of product. For example, a solution provider can sign up for a proof-of-concept program, a demo program or a rental unit program where the amount of capital that solution providers have to put up to deploy devices that cost anywhere from $10,000 to $30,000 is greatly reduced, thanks to a formula developed by Network Physics channel chief Ernie Megazzini that essentially allows the devices to pay for themselves in as little as two months before any of the terms are due.
In fact, this program makes the pending 6.0 release of Network Physics' software and related new hardware in the first part of next year one of the few things actually worth paying to see at the upcoming Interop trade show in New York this month.
But whether you go to Interop or not, the point remains the same. Anybody can find a product and sell it. But finding products that have a Long Tail that can sell a whole lot of other products is what ultimately separates solution providers that create profitable strategic relationships that drive recurring revenue from resellers trying to simply survive by scrounging from deal to deal.
Michael Vizard is editorial director of Ziff Davis Media's Enterprise Technology group. He can be reached at firstname.lastname@example.org.