Software to ditch retail?

Follow a statement from Microsoft that it is to offer its hugely profitable Office software directly to consumers through downloads later this year, a growing number of industry figures are becoming fearful retail is being muscled out of the software business.

Many IT retailers make a large amount of their profit through software, so when the biggest software vendor of them all followed firms like Adobe and Google in offering a huge part of its portfolio directly to consumers – reportedly in some cases for free – alarm bells rang across the channel.

Microsoft insisted the move was about offering customers choice: "Customer requirements have changed," Peter King, Office Server Group manager for Microsoft UK told us. "As technology has advanced so have expectations and there is increasing customer demand for flexible technologies that enable people to work where, when and how they want. The IT industry must continue to meet changing customer needs if they are to remain competitive."

However, many think the trend will become ever more popular, precipitate more companies moving into the market, and will ultimately be at the expense of traditional retail. "Expect new players in the channel, such as telcos, ISPs, managed service providers and others starting to offer new software products to consumers. This is a threat to the software business of the traditional channel," said Alastair Edwards, senior analyst at Canalys.

Hendy Armstrong, owner of independent store Easy PC and ITACS spokesperson added: "Withdrawing such areas where independents can make money will hasten the inability of the bricks and mortar model to survive. I have long been suspicious of organisations squeezing themselves between us and our customers. The trend will continue within the channel and ultimately damage both retail and service."

The scenario isn’t limited to utility software – PC gaming firm Valve has made significant gains distributing PC games directly to consumers with its Steam service. The rapidly growing popularity of this and many other similar services has resulted in many anticipating the end of boxed product PC games entirely.

However distributors, many of which are ramping up online – or ‘software as a service’ – schemes of their own, have been quick to defend such models, and insist that offering software in modes other than a boxed product is a good thing.

"We are developing a number of schemes globally, and we are aware of a growing need for things such as ‘software on demand’, but there are many more who will still want to buy through retail," said Cathi Low, director of value business at Ingram Micro.

Neil Handa, marketing manager at Gem, added: "Digital distribution is something that will affect all sectors of the software market, however retail still offers benefits which are crucial to the consumer."

Meanwhile, other distributors are sceptical of the damaging potential of online software in the first place: "Consumers still want to have the security inherent in owning a tangible product," said Phil Bowery, Microsoft onsite champ at VIP Computers.

"Ultimately, software programmers will need to work very hard to build confidence in end users and the scale of the infrastructure needed to support anything like this will mean that many software companies simply won’t be able to do this yet."