The Insider's Guide to Next-Generation BPM
By Scott Waldrum, IPA , 08/17/2009
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As the SaaS and cloud markets mature, an increasing number of established and new vendors alike embark on implementing channel sales or reseller strategies to scale their businesses. This past year alone has seen announcements from top SaaS companies such as Intacct, Salesforce and Netsuite regarding new channels they have put in place.
An examination of this trend clearly demonstrates that the emergence of the channel in the SaaS market is being driven by two distinct sides. On the vendor side, larger SaaS providers reach a point where direct sales strategies will no longer sustain the needed growth curve. As a result, they look for increased reach into new customer segments and have identified solutions in value added resellers (VARs) and traditional system integrators (SIs) that have been working in those markets for years.
On the channel side, many VARs and SIs have been reluctant to embrace SaaS offerings due to the lower initial revenue they can generate by bringing a SaaS product online for their customers. However, trends toward SaaS solutions have grown so strong the channel players are quickly trying to identify what their role will be in delivering cloud based solutions to their customers.
With both sides now moving feverishly towards the reseller trend, determining the most seamless and effective model for handling the customer becomes an important issue for consideration.
The clear and growing trend towards channel sales and reseller strategies offers a unique ability for expansion and the ultimate in scalability for businesses. But as with any new endeavor the organization and management of new channels present challenges left to manage by the companies embarking down the reseller path.
SaaS channel challenge 1: slicing the subscription pie
Traditional VAR and SI channel partners looking at a move into reselling SaaS offerings now face the same economic issue that many early SaaS companies endured when launching their businesses. Primarily, it takes more money and more time to bring a subscription business to profitability than traditional licensed software businesses.
For these channel partners, instead of getting the large implementation services fees and a percentage of the large up-front license payment for the software, they now need to build their business model around smaller recurring reseller fees and lower initial implementation services fees.
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