It recently dawned on me that the world of software sales is eerily comparable to the underground world of the international narcotic trade.
They are parallel markets with much of the same structure and progression into methods of sales and distribution.
Back in the mid 80’s, Pablo Escobar was a rising figure in the world of cocaine manufacture where he created his product in his home country of Colombia and trafficked the narcotics via routes into the US and Europe.
During that same period, another man in the US was a rising star and that man was Bill Gates. Producing his product in his home country, which he would supply to computer manufacturers ready to be distributed around the globe.
Both products started on the same journey, which would set the benchmark for the way that the distribution chain would follow for years to come.
Manufacturer -> Distributor -> Reseller -> End User
Producer -> Distributor -> Street Dealer -> End User
It follows the exact same pattern.
These people were the revolutionaries in global distribution and managed to get products to market in a quick and efficient manner.
Is that the only similarity in the way that these two industries work?
The model stayed the same for 40 years with in-country distributors being tasked with building the market and supplying the local resellers with their products to keep their end users happy.
There were rivalries, there were fallings out and, in some instances, there were outright wars between suppliers.
The new ways of doing things are following in parallel with software companies that are appearing at a rapid rate in comparison to the bedroom manufacturers who are making their home-made products that are sold into their own markets and if they get lucky, markets further afield.
The distribution chain didn’t change but instead it broadened the availability and choice of solutions to people’s problems. They can buy direct from a local producer, they can buy from a reseller for a mature product, they can even decide to resell if they know the distributor or even buy direct if the relationship with the manufacturer is strong enough.
The way that these products are being sold changed with the introduction of marketplaces. Azure, AWS, The Silk Road…. all very different places, but the exact same concept.
The narcotic markets follow the software markets, or the software markets follow the narcotic markets. Whichever it is, it’s undeniable that they are running in parallel and following each other’s methods.
The acquisition of both software and narcotics has become as easy as logging into a marketplace and ordering what you want.
Has this affected the distribution chain?
There has likely been disruption from a distributor perspective with the marketplaces cutting out that layer but what about the people are who not savvy enough to work the marketplaces?
The distributors still have a key role in the chain by being there to support the local resellers who may not be selling through marketplaces but instead through other methods.
Why are both markets working with the same model?
Could it be that they are copying each other or is there another power at play here?
If we look at the pharmaceutical industry, they work with distribution and are stuck in that distribution model with their doctors acting as referral partners and the order fulfilled by the resellers (the pharmacies). They can’t switch to a marketplace model (legally) because of restrictions on the distribution of controlled medicine. That’s what is holding them back.
It seems that the two markets of discussion in this document can move quickly due to lack of regulation on the sales of the goods (or failure on the regulation as the case may be).
It seems that the quickest way to market for an established product that has a need is through the distribution chain and a way into other markets that wouldn’t be accessible through distribution is via the marketplaces.
What does the future look like for the software and narcotic distribution chain?
In Russia, there was news recently of a narcotic marketplace coming live that introduced an Uber style delivery service which is anonymous to all concerned. Could the software industry follow a similar path? Anonymous delivery of cyber security products to keep everyone in the chain protected and nobody knowing what anyone has purchased?
Could we be getting a rise in more marketplaces appearing with varying levels of technical knowledge requirements to work them?
Could we have a thousand marketplaces that are niche, cropping up with specialist products available from a reliable and trustworthy source?
The distributors are going nowhere in both instances. There will always be a requirement for a distributors in specific markets and specific sectors to support the transaction and the people lower down in the chain. Remove the distributors and local level people and you remove access to products for a large section of society.
It will be interesting to see what happens in both markets in the coming years and whether they will continue to follow the same path or if they will go rogue and end up using totally different methods for routes to market.