SaaS companies are growing revenue 5 percent faster than companies without a channel.

April 1, 2019

5 Min Read
SaaS

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Rob Spee

By Rob Spee, Founder and CEO, Channel Journeys Consulting

Channel-Partners-Insights-logo-300x109.pngLast week’s 9th annual SaaS Connect conference, hosted by the Cloud Software Association drew 200 vendors, platform and API specialists, marketplace leaders, distributors, resellers and investors who are all focused on the software-as-a-service channel. Over the two-day event, held in San Francisco, I heard the latest trends and compared notes on how other channel pros are tackling the channel transformation driven by cloud and SaaS. Following are four key take-aways from the show.

1. The Importance of Channel to SaaS. The exact role of the channel for SaaS companies is still evolving, but there’s no doubt that the channel plays a critical role in SaaS growth. According to a survey of 1,000 SaaS companies shared by Rob Belcher of SaaS Capital, 53 percent of SaaS companies have channel sales. Those with a channel have an average of 22 percent of their revenue coming from channel. That number rose from 10 percent in last year’s survey but is still a long way from the roughly 70 percent of on-premise software sold through the channel. More importantly, the SaaS companies with a channel are growing revenue 5 percent faster than the companies without a channel.

Thousands of SaaS companies are launching around the world. And they are shifting the idea of what the channel can and should mean. SaaS start-ups are increasingly viewing the channel as more than a network of resellers or referral partners and agents who provide professional services. They see the channel as an ecosystem of technology partners with APIs redefining the nature and value of partnering.

2. The SaaS channel — what’s different. When comparing the SaaS channel with that of traditional IT vendors, there are many similarities and a few key differences. The core channel fundamentals are no different for a SaaS company versus a traditional IT vendor — strategy, internal alignment, team building, focus on quality partners and enablement. These core principals apply. What’s different is the types of partners, the revenue models and the challenges of distribution.

SaaS companies can and do leverage the traditional channel of VARs, system integrators, and managed service providers (MSPs). They need a network of referral partners. And many would benefit from an app store and/or marketplace with APIs to attract partners who will develop targeted solutions on top of their SaaS offering.

According to Daniel Saks, co-CEO of App Direct, 84 percent of ISVs agree that APIs are the only way to quickly innovate by vertical. Digital services are taking over traditional services at an increasing rate. The digital service economy has already reached $1 trillion. And it’s happening in every vertical from manufacturing to health care to entertainment. This is a huge opportunity for SaaS channel partners.

3. The SaaSification of channel management. SaaS is transforming all areas of business and it’s starting to transform channel management. I’ve worked with several SaaS channel technology vendors as a Channel Chief and met a few new ones at SaaS Connect with innovative solutions.

One of these is SaaS start-up called Crossbeam. Bob Moore, the co-founder of RJ Metrics and Stitch, launched Crossbeam after his two prior companies were acquired. Bob presented how they are solving the Partner Prisoner’s dilemma. The Prisoner’s Dilemma of game theory was solved by mathematician John Nash, who was portrayed by Russell Crowe in the movie “A Beautiful Mind.” The prisoner’s dilemma happens when …

… two guilty individuals are arrested. It shows why two completely rational individuals are best served by not cooperating. Channel sales are often held back from their full potential by rational individuals when the vendor and the partner don’t cooperate in sharing sales and customer data. Crossbeam serves as an escrow service for data, allowing the vendor and the partner to find overlapping customers and prospects, while keeping the rest of their data private and secure.

Fulfillment through the channel is still a major challenge for SaaS, one that multiple channel technology start-ups are working to solve. One example is AppBind, a SaaS startup founded by Sunir Shah. AppBind offers a way for agencies to seamlessly buy and manage multiple SaaS offerings on behalf of their clients. With AppBind, they can add a mark-up and provide a single bill to their clients that includes the SaaS subscriptions and their own services.

4. The channel AI opportunity Is enormous. There is a massive opportunity for SaaS vendors, system integrators, and other channel partners to build artificial intelligence into their SaaS offerings. Google is taking a partner-first strategy with its AI platform. Naresh Venkat, head of Machine Learning and AI Partnerships at Google, presented a view of the future where AI will be part of every SaaS solution. Venkat made the point that APIs are democratizing AI. That certainly seems true given the ease in which partners can have access to AI from Google Cloud, Amazon AWS, Microsoft Azure and many other vendors.

I believe AI and RPA (robotic process automation) will soon dramatically transform channel management. It requires a whole new way of thinking. It’s not about automating current processes but eliminating inefficient processes that developed from old ways of thinking and limitations of technology.

I can’t wait to see what comes next, and I can’t wait to see you at next year’s SaaS Connect.

Rob Spee is founder and CEO of Channel Journeys Consulting and host of the Channel Journeys podcast. Rob applies his channel expertise to help clients create and execute channel strategies to accelerate revenue growth. His global channel experience spans from building channels at start-ups to vendors and distributors such as Arrow, BMC, Carbonite and SAS. Follow Rob @ChannelJourneys on Twitter and on LinkedIn.

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