Mergers and acquisitions are extremely popular in a modern PLM economy. According to CIMdata 2021 PLM industry research, the industry counted 197 acquisitions, and resellers, partners, and service providers acquisition was a big part of this number. Service providers and VARs channels are consolidating and also buying technological companies to increase their position and value proposition.
My favorite example from CIMdata is Accenture which continued its buying spree with 50(!), six in Industry X practice • Pollux, Electro 80, umlaut, DI Square, T.A. Cook, and Advoco
A few more examples from recent press announcements (thanks to Schnitger Corp blog) for sharing the information – VAR Resellers Consolidations Continuous.
Last week we learned that Addnode acquired Microdesk to create the largest single Autodesk partner in the world, Symetri. Addnode also acquired DESYS, a German Dassault Systèmes partner, which will join TECHNIA, Addnode’s Product Lifecycle Management Division. Consolidation.
The news made me think about what is the trajectory of VARs consolidations and what does it mean for the PLM economy? In the past, customers (especially in the SME space, but also enterprises) worked with resellers that delivered a dedicated solution approach, customization, and training to customers. Will bigger partners and VARs deliver better? What customers can expect from these consolidations and what does it mean to PLM software vendors?
An Elephant In The Room – Sales Roles Are Changing
Let’s say the truth, the role of VARs in the sales process is changing. Unlike 20 years ago, PLM vendors don’t need VARs to run the lead generation process. The digital transformation of sales made it and nowadays, everyone can run digital campaigns to find leads and to make customer outreach.
Modern SaaS applications can be delivered at a no-cost basis, providing complete online education services, which fundamentally change the value proposition of VARs as a source to deliver products, install, educate, and integrate. Does it? Let’s talk about it a bit more.
Online Revolution – Does It Eliminate VAR’s Role?
A new digital ecosystem changed everything, there is no need to deliver boxes of CD ROMs, install them, talk to local IT people, and train customers on-site. All these roles have changed dramatically overnight. Companies can access information online and have people doing the same job while working for software vendors.
However, not everything is that perfect. The problem is that for most PLM software vendors, it means mixing both enterprise and SMB sales. Traditionally, SMBs were the main target for PLM vendors and the commonly agreed opinion was that it is more cost-effective and less risky to run indirect channels using VARs and resellers when working with SMBs. I’d not be taking these things for granted in today’s fast-changing business world. PLM newcomers are successfully delivering services to both organizations.
Nevertheless, channel economics would be one of the main characteristics for any SaaS vendor to decide if to hire VARs or build their own sales organization.
Do we still need to have a local VAR?
The “local” element was one of the critical things in the PLM global business. Despite being really global, manufacturing companies can be very different when it comes to people mentality, local business-specific, and relationships. For this reason, every sales organization, even the large enterprise organization, is usually divided between territories.
Local experience will continue to be a significant differentiation factor for PLM sales. This is a place where language and mentality will continue to play an important role. However, getting back to the same questions of economics will be important.
Future Partners and Competitive Competence
So, what future is waiting for PLM VARs, resellers, and service organizations? A combination of local experience and unique differentiators will be the game-changer. Existing PLM partners, VARs, and service organizations might take a trajectory of bringing their unique knowledge and differentiation in technologies, implementation, and planning. This is one of the reasons why services IT and PLM organizations are buying technology companies these days.
At the same time, future consolidation will mean improved economics for VARs and partners. So, expect more consolidation to come in the future. The old resellers and service channels will be replaced with new digital channels. Let’s talk about why it will happen.
Digital Channels
According to CIMdata 2021 industry research, services are representing about 50% of the PLM market. The services organizations are powerful and at this moment, they represent “the last mile” in the PLM solution delivery chain. It is a foundation that can be used to build new digital channels helping PLM vendors to reach out to their customers and create a new type of digital PLM experience.
What is my conclusion?
The roles of VARs and partners are changing, but at the same time, VARs and service partners will continue to be part of the PLM economy in the future. Local specifics are still important, even if VARs don’t need to travel to local offices, but mentality makes a difference, so PLM vendors will continue to work with partners in different countries. Technological competence in the era of cloud solutions is needed, but the roles are changing from installers to advisors. Customers like people that can speak to them and dedicate their time to help build successful solutions. It will change the VARs approach and focus by moving from lead generation and pure sales to customer education and nurturing. One of the opportunities for VARs and partners is to build efficient digital channels that can be used by vendors. While PLM vendors are focusing on building new SaaS platforms, service companies and VARs are focusing on building new channels. What is clear is that transformation is happening in manufacturing and it is the land of new opportunities. Just my thoughts…
Best, Oleg
Disclaimer: I’m co-founder and CEO of OpenBOM developing a digital cloud-native PLM platform that manages product data and connects manufacturers, construction companies, and their supply chain networks. My opinion can be unintentionally biased.
