SaaS and the Channel- What is happening? Part #2

2011 April 13
tags: , ,
by Justin Pirie

In my first post Anders and I looked at how Cloud is changing the traditional IT supply chain and discussed some of the transformation that needs to take place.

As usual- the most interesting responses to the post were offline- but it gave me some deeper insight into how some sectors are thinking at the moment.

One of the most interesting was the comment that:

“Traditional vendors are just looking at their Channel for sales now”

Where the vendor used to use their channel to add value to the sale by installing, configuring and maintaining the software/hardware/etc, the majority of that work is done by the vendor now. And by default, if the Channel doesn’t change what it does, it’s becoming not much more than sales.

Now I think that’s a pretty cynical view- but I suspect they were playing devils advocate to make the point.

And it’s a point well made. The good times, as we knew it in the IT channel are gone. Remember the perfect storm? Economic and Technical change at once?

I think the good times will return, they’ll just be different.

How can the Channel evolve and adopt Cloud?

• Why should the Channel take the initiative?
• What assets do the Channel have today which they can leverage?
• How does the channel make money? (hint: Cloud support won’t replace on-premise support)
• Where should the Channel start?
• Why won’t Customers do it themselves?
• Why is Cloud positive for Customers and the Channel?
• What value can the Channel add?

We also run thorough the top ten list from my IAMCP presentation.

If you’re in the Channel- your reputation is on the line.

SaaS and the Channel Part 2 from justinpirie on Vimeo.

from → SaaS

  • http://bit.ly/1Gu8Ha Firas Raouf

    Justin, I think you’re on the right track… I recently wrote about this topic on my blog http://bit.ly/fAkVpf, Here’s the intro to that post:nnThe reseller channel generally does not work for SaaS companies, especially at the early stages (sub-$20M in revenue). This is driven by two things: n1. SaaS solutions generally don’t require an intermediary. They are easy to find (online), easy to deploy (nothing to deploy), and easy to use. This is obviously not the case with SaaS solutions that require a significant process change on the customer’s side, but more on that below.n2. SaaS license revenue stream in the first year (where the reseller needs to make the most of his money) is a fraction of what perpetual license products receive. So the reseller either has to settle for a fraction of the revenue he expects from his perpetual license vendors, or he needs to get a cut of subsequent year subscriptions (which would be a waste of your money).nnThe only way to engage an indirect channel in an SaaS delivery model is around the professional services that need to encompass your solution. In effect, the only indirect channel I’ve seen work for SaaS companies is the value-added service provider partner. This is where a partner delivers the business process re-engineering required to successfully implement your solution at a customer site. In that case, the service provider derives his revenue from the services billed directly to the customer… while deriving less revenue from the SaaS license margin you would provide on top of that.nn

  • http://www.justinpirie.com Justin Pirie

    Great post Firas! I really like your thinking on channels.nnAs a counterpoint to your blog post, I would argue there are some cases where building a channel early can benefit, where I work we have a very successful channel model that started way before your suggested revenue target- but then the channel wanted to sell our type of solution. So the only exception to your rule is if the channel are actively seeking that product to sell, then I think it would be foolish to turn them away.nnHowever, I don’t think that’s a normal use case… The majority of SaaS apps are disruptive and are taking complexity away from the end user, an as such don’t need as many services to install and maintain. Being disruptive isn’t always a good thing if you want to build a channel…nnBut in essence you’re right, if you want a channel, you need to create what I call “channel pull”. Essentially you have to create direct demand in the marketplace before channel will start selling. If you don’t do that, the channel won’t sell anything…nnAnd your remarks on what it takes to make a successful channel work are absolutely spot on. We have a dedicated channel team supporting them.nnIn essence- from a SaaS vendor perspective, building a channel is not something that should be taken lightly. For me- “we’ll create a channel” should go in the same bucket as “it’ll go viral”…

  • http://bit.ly/1Gu8Ha Firas Raouf

    Justin, I think you and I are on the exact same page. I would love to bring our combined thoughts together into an article that we can post on our community site http://www.OpenViewLabs.com We’re always looking for SaaS thought leaders to contribute.

  • http://www.justinpirie.com Justin Pirie

    Thanks- that sounds great! I’ve got a call with Corey today- so I’ll mention it to her ;) nnJustin

  • http://twitter.com/ITLab_JasonC Jason Currill

    Distribution is dead – data residency makes it breath again! discuss?