Can Sophisticated Partners Really Cash In On SaaS?
When I read The VAR Guy’s recent blog about Zoho’s growing SaaS partner program, it got me thinking: Do solutions providers whose livelihood is centered around developing and delivering business solutions to their customers, really believe that SaaS (software as a service) partner programs are good for their businesses?
Quite honestly I am struggling to understand how high-value partners can expand their business, create value for their customers, and differentiate themselves from their competitors when the software is developed and hosted by a company that makes it very easy and cheap to get on board.
Consider also that xTuple has had similar success attracting partners and their president and CEO, Ned Lilly stated that he has no plans to launch a SaaS platform because he does not want to compete with his channel partners.
SaaS Or No SaaS?
So who’s right: Zoho or xTuple?
Actually both may be correct — but the delivery model that you chose and your go-to-market strategy will determine the type of partners that make sense and who will be most interested in what you have to offer.
The traditional on-premise licensed software model that is most prevalent today generally requires partners with a level of technical competency to develop, customize, integrate and deploy the solution successfully.
There is lots of opportunity to make money through the delivery of professional services, providing user & product training, and ongoing support contracts to fix problems quickly when they occur.
Most open source companies today use this model, where the customer manages the application locally and depends on partners with the technical skills to customize their product to meet the needs of the customer, integrate it into their environment, and support the customer afterward. These partners need to invest in developing and maintaining their competency and they bear greater risk if they don’t know what they are doing – but the rewards are far greater.
On the other hand, the SaaS/hosted model is gaining momentum because it provides a quick, easy, and cheap way to access some very powerful solutions. This model may not be ideal for partners who focus on creating value through their technical competency — but it may be very viable for partners who focus on business strategy and process improvement or complimentary solution providers who’s solution is enhanced by the SaaS vendors offering.
It is easy for SaaS vendors to quickly build large partner channels because of the low barrier of entry and very little in the way of technical competency and training necessary to get a partner active and promoting the solution. This low barrier of entry also makes it easier for customers to implement SaaS on their own making it even more challenging for partners to add value unless it compliments a larger solution that they are delivering.
This is only scratching the surface of this emerging SaaS model and how it changes the dynamics of partner channels and relationships. There will surely be much more to learn as it evolves and matures.
Contributing blogger Scott Dahlgren is an independent consultant helping small and mid-size technology companies extract greater value from their partner and channel relationships. And he also runs marathons through the woods of Connecticut. The VAR Guy is updated multiple times daily. Don’t miss a single post. Subscribe to his newsletter, RSS feed, Twitter feed and Resource Center.
Scott,
As a firm that resells managed services (Google Apps, Online backup services, Google security and compliance, etc.), we see the profit in the “value add” that is too often forgotten by most VARs.
After Google acquired Postini, many so-called VARs complained about the pricing changes. For us, we went from including a suite of value-add services in our markup on price to bundling a suite of value-add services in our pricing. Our customers pay us as much as they did before the change, and our margins are greater.
Channel Partners will only get so much on the SaaS service itself, the real potential depends on how you add value.
Regards,
Allen
Allen – thanks for the feedback. As with any partnership, the more value you add the more money you can expect for that value. It sounds like you have figured out how to do that within the SaaS model. Without giving away your secrets, what value add might you provide when selling Google Apps, Online backup services, etc?
Thanks,
Scott