Dell first up to sell Microsoft software online 15 June, 2009 By Steve Wexler

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According to Dell, this is about simplifying access to Microsoft products, reducing software piracy, and reducing packaging waste. According to one report, the pricing is pretty aggressive compared to the Microsoft Store.

"With everyday savings plus on-demand access, the Dell Download Store addresses our customers' two main concerns: price and immediacy", stated Geoff Surkamer, general manager, Dell Global Digital Distribution. "In addition, downloading is a more environmentally friendly way to purchase and distribute software because there's no need for packaging material."

Microsoft got its initiation into online sales last November through The Microsoft Store (www.MicrosoftStore.com), which offers its entire consumer catalog, including desktop software, the Xbox console and related games, the Microsoft Zune, and all of the company's hardware, including mice, keyboards, web cameras, and joysticks. All pricing is at the manufacturer's suggested retail price (MSRP), allowing channel partners to compete through special pricing and discounts.

We polled a number of industry analysts for their take on the announcement and what it might mean for customers, competitors and the channel.

Tiffani Bova, VP, research, indirect channel programs & sales strategies WW, Gartner: "Outside of the Dell/Microsoft announcement, the industry is working hard to meet clients the way they want to procure technology and receive after sales support. These types of moves are less about cutting one sales channel out of the equation and replacing it with another and more about finding the best way to service customers, provide alternative buying channels, improve customer satisfaction and increase sales. Many actions are happening right now which will forever change the channel landscape: M&A between large manufacturers, alternative delivery models (cloud, SaaS, Utility computing), emerging markets capturing greater share of vendors -- total revenue, new IT suppliers entering the mix (Amazon, Google, Salesforce.com), channel companies and vendors moving to a more predictable and repeatable business model (managed services) and a continued interest in -- mid-market -- by major manufacturers (SAP, IBM, EMC, Oracle). Each of these things on their own has some impact, however when you consider the fact that all of these are happening at the same time -- the market is definitely changing above and beyond the Dell/MSFT deal."

Paul Edwards, director, SMB & Channel Strategies, IDC: "I think this represents an evolution of Microsoft's online sales strategy by extending it through partners such as Dell, so it's significant as a first step to opening this up further. And it makes sense that they form agreements with companies that have the online capacity to support seamless downloading, i.e. Dell and other online retailers, which I'm assuming could include the reseller channel, such as CDW, etc. I would be surprised if the volume resellers like Softchoice, CDW, etc. weren't offered this opportunity based on their position as LARs (large account resellers) for Microsoft.

Rob Enderle, Enderle Group: "What many seem to forget is that Dell is the second largest, behind Amazon, online retailer in the U.S. and this may not only be an effort to validate the download model but to strengthen Dell's on-line retail status by giving them an exclusive. This is the acceleration of a significant change away from packaged products to on-line downloaded fulfillment. The buyer gets their products more quickly, the seller gets reduced costs, and the world gets far less waste. Already concepts like Apple's Application Store which are entirely based on downloaded content are starting to proliferate to other platforms beyond cell phones and we are expecting Google, when they launch their desktop platform officially in 2010 to launch with this capability. I think this the true beginning of the end for packaged software as we finally move from the disk based delivery model of the 80s to the download models that define this decade and prep from the hosted models that will likely define this century. This trend will clearly reshape the software channel dramatically creating opportunities and risks for those firms currently operating in it."

Denise Sangster, president & CEO, Global Touch, Inc.: "This reminds me of when Microsoft began selling "suites" of applications--a necessity, but not necessarily one that thrilled the company. I don't think this is about piracy, but rather trying to recapture revenue when PCs and server says sales are down. Dell is a good partner for this strategy. It was the first PC manufacturer to offer a broad assortment of products with PCs. My question is what's the end game? How does Microsoft work with the channel in the future? Anyway, I personally don't see an issue with it, but if I were a customer, I would not want Microsoft to receive the POS data!"

Warren Shiau, The Strategic Counsel: "There's always going to be certain software that's suited to "shrink-wrap" type mass retail distribution -- of which online download is just another variant. And there's always going to be software that needs to be available through the channel because it requires channel support. I think it's pretty much business as usual, with the one note that in the long run going wide on distribution always means more discounting for the products in question."

Michelle Warren, MW Research & Consulting: "I applaud Microsoft on one hand, as they need to look for different channels to get its products to market. This is a creative and potentially prosperous way to increase sales. However, Microsoft relies heavily on its channel ecosystem. This move is indicative of a shift -- shift in a go-to-market strategy (not surprising, considering the popularity of online software sales) and creativity in reaching target markets. I don't for one minute suspect that Microsoft will forgo its channel relationships and suspect that it will announce some opportunities for the channel shortly. Considering its' channel relationships are undergoing a bit of a shift as well, the timing is ripe for an announcement."

Janet Waxman, VP, Channels and Alliances: Hardware Infrastructure, IDC: "This is no big deal. What Microsoft is saying is that they're extending access to its low-end products commodity products. It's not about the product, it's about the solution. It is making it easier for customers to buy and anything that makes it easier for customers to buy is good."

Microsoft is relaunching its channel program next month at its annual partner event and presumably more details on its online initiatives will be forthcoming at that time.