TL;DR: Forget About Publisher Margins, Go Niche

accounting technology One of my 90 Minds fellow members just posted a link to an interesting Accounting Technology post by VAR advisor Terry Petrzelka. Some of you may know Terry who was the leader of uber-Microsoft VAR Tectura for 9 years before leaving in December 2010 to open his own consultancy where he advises VARS on best practices.

In the post Terry talks about two things: The future of VARS (mergers) and the future of the VAR industry (niche markets).  You can read the entire article here.

Here’s My Two Cents

The future of the VAR (Terry likes to call them Professional Services Business in the article) is in specialization in industry niches and no reliance on publisher margins.

None of these are new concepts (Microsoft has been pushing this for what seems like forever) but they are especially hard ones to implement.

Moving away from publisher margin is, for most VARS,  like kicking a 25 year heroin habit.

Dirty Little Secret of Niche:

In my experience/observation it is a lot easier to talk about entering a niche service market than to actually do so.

Oddly customers in  niches expect that you know their industry thoroughly and that’s not something learned in a webinar or through a whitepaper. The customer  senses right away if you  know their industry or are reading from a script.

Niches are also funny because they tend to narrow down the pool of customers and that can mean you’re regularly traveling outside your home area.

Sure some of this can happen via Internet but the good customers are ones that you’re going to see in person — especially on a new deal where I find prospects typically prefer local (at least good prospects who aren’t purely price shopping).

I agree 100% that software / service margins from publishers are going away. The only question in my mind is how quickly.

Wayne Schulz is a consultant who writes about the ERP industry and technology related news.