CAD Reseller Outlook

Business Advantage has been gathering information on UK CAD/CAM resellers for 10 years. During our interviews this year with 174 of the most active and successful resellers, we took the opportunity to ask them their views on market trends and the opportunities and threats arising for them.

Market Trends

We put a series of statements to the resellers about potential directions that they or the market could be heading in, and asked if they agreed or disagreed with them.

The majority of resellers (67%) are expecting vendors to expand their e-sales facilities. Only 7% disagree strongly with this suggestion. It's likely that resellers of high-end CAD products are more likely to believe that their products are less well suited to this distribution method.

Resellers are fairly evenly split on this issue. Whilst it's possible that the majority of vendors will offer this option in future years, there are no signs that a majority of users are attracted to adopting this model in the foreseeable future. In May 2001 CAD SPAGHETTI revealed that only one in five CAD users were willing to consider the subscription option in future ('Attitudes To Renting Software Among CAD/CAM Users').

Only 14% of resellers disagreed with this notion to some extent. For the majority, the mature state of their market and the probability of vendors offering direct purchase or subscription options means that they must continue to find ways of helping customers to add value to what they have already by the surround services they offer.

Nearly two out of five resellers believe that forming partnerships will be important to help them maintain or increase market share.

The Threats

What issues are most likely to keep resellers awake at night? Even with the specter of vendors carving up their distribution channels hanging over them, it's the old fashioned fear of a rival undercutting prices that the highest proportion of resellers identified as a major threat to their business.

All the various options open to vendors for providing software to customers directly feature prominently. Of these options, the facility for customers to purchase via the web is seen as a major threat by the highest proportion of resellers (36%), while the possibility of customers renting via the ASP model was identified by one in five. Only three resellers identified the economic downturn as a major threat, while 28% were confident enough to state that they saw no major threats to their business in the coming year.

The Opportunities

Looking on the bright side, 93% of our sample identified at least one major opportunity for the next twelve months. No one mentioned selling a bucket load of new CAD/CAM systems . . . so no surprises that over three-quarters thought that developing new services is the way forward. Many resellers clearly see limits to what can be achieved in the design solution arena; diversification into new areas was a common theme.

Conclusion

There are widely differing views among VARs on the future of distribution channels, and no consensus on the long-term picture or the short-term implications to their business. More software vendors are sure to push the subscription model in future years, yet only 40% of resellers feel (to varying degrees) that the majority of customers will adopt it in the long term. It's perhaps surprising that one in five feel that the specific ASP subscription option is a threat for the coming year when various studies (including CAD SPAGHETTI's 'ASP Low Down') have shown that awareness of and positive intentions towards this model are low.

Over a third of resellers are worried about the short-term effects of customers purchasing directly from vendors; the fact that less concern (28%) is expressed about the subscription option is probably related to Autodesk's decision to offer subscription via it's authorized channel partners.