Making Channels Work to Grow Your SaaS / Cloud Business
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Making Channels Work to Grow Your SaaS / Cloud Business

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Presented this for OpSource on February 10, 2010....

Presented this for OpSource on February 10, 2010.

The notion of channels in the distribution of SaaS & Cloud is a topic with very little consensus in the industry. Many people seem to think: "if it's on the Web then the Web is the channel." This view can significantly stagnate growth. There are industries and market segments where the people making the purchasing decisions do not spend their time searching the Web for the best solution. In these cases they turn to trusted advisors for recommendations.

While traditional channels like VARs and SIs might be having trouble with SaaS, new and exciting channels have opened up and savvy vendors are taking advantage of these opportunities. Thriving SaaS vendors have realized that there can be a significant benefit to leveraging intermediaries.

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  • 1. Making Channels Work to Grow your SaaS / Cloud Business Presented for OpSource Cloud February 10, 2010 Copyright© 2010 Sixteen Ventures. All rights reserved.
  • 2. Agenda • Setting the Stage • The Channel is Dead? • Business Architecture Issues • Opportunity Recognition • Channel Motivation • Partner Empowerment • Legacy Disruption • Transparency & Trust • Customer Ownership http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 3. Legacy Software Business Structure Intellectual Marketing Property Technology Revenue Model Loosely-coupled, at best http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 4. Legacy Software Customers Developers Channels Three basic elements http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 5. Software-as-a-Service (SaaS) Customers Developers Channels Same elements http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 6. Software-as-a-Service (SaaS) Producers Consumers Ecosystem Different approach http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 7. Software-as-a-Service (SaaS) Producers Consumers Network Effect Ecosystem Very different approach http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 8. Software-as-a-Service (SaaS) Producers Consumers Network Effect Key differentiators Ecosystem http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 9. SaaS Business Architecture Intellectual Marketing Property Network Centricity Revenue Technology Model All aspects are tightly coupled http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 10. Agenda • Setting the Stage • The Channel is Dead? • Business Architecture Issues • Opportunity Recognition • Channel Motivation • Partner Empowerment • Legacy Disruption • Transparency & Trust • Customer Ownership http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 11. SaaS Distribution - Channels are Dead? Traditional SaaS Vendor End Customer Channels Value-added Resellers, System Integrators, etc. http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 12. SaaS Distribution - Channels are Dead? Traditional SaaS Vendor End Customer Channels Traditional technology channels are having the hardest time with SaaS – no technology to manage and fundamentaly mis-alinged business models http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 13. SaaS Distribution - Myth SaaS Vendor Cloud End Customer The common fantasy is since its “in the cloud” that the web is the distribution channel. Maybe, but you might want to explore that further; just to be sure. http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 14. SaaS Distribution - Myth SaaS Vendor Cloud End Customer http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 15. SaaS Distribution - Channels aren’t Dead, they are Just Different You might not know about them! Intermediary / Trusted SaaS Vendor End Customer Advisor / App Store What if you don’t have to use an intermediary? Can you? Its called leverage, but the key is to remember that rarely will you compel 3rd parties with only revenue share agreements for SaaS. The vendor should dig deeper and find out what they can solve for them. http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 16. SaaS Distribution - Non-Technical Intermediary SaaS Company Intermediary End-customer Consumer Manufacturers EDI Vendor Rep Packaged Goods Manufacturer Marketing Create value-pull by marketing directly to the End-Customer http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 17. SaaS Distribution – App Stores SaaS Company Intermediary End-customer Document United States apps.gov Management Governement Marketing The end-customer cannot buy directly from you! http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 18. SaaS Channel Strategy Equation for Success + = Channel Dev/ Successful Inbuilt channel Management SaaS Channel support best practices Strategy http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 19. Agenda • Setting the Stage • The Channel is Dead? • Business Architecture Issues • Opportunity Recognition • Channel Motivation • Partner Empowerment • Legacy Disruption • Transparency & Trust • Customer Ownership http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 20. Business Architecture Issues Revenue Intellectual Model Property Product Price Network Centricity Marketing Mix Technology Marketing Place Promotion Distribution / Channels are part of Place & Promotion http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 21. SaaS Distribution - Linear Value Chain view is too limited Industry Association Intermediary Intermediary Intermediary Intermediary SaaS Vendor Intermediary Intermediary End Customer Intermediary Intermediary Intermediary Independent Developers http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 22. SaaS Distribution - Value Network Trusted Advisors Analyst Firms Traditional Channels Stand-alone Industry Associations Intermediaries Consumers SaaS Vendor Individuals Independent Developers Application Enterprises Other Software Vendors Platform Customer SaaS Vendor sits in the middle of everything! http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 23. SaaS Distribution - Value Network Stand-alone Intermediaries Consumers SaaS Vendor Application Platform Customer The possibilities are endless! http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 24. Multi-Tenancy in SaaS - Technical Deep Dive This page intentionally left blank http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 25. Agenda • Setting the Stage • The Channel is Dead? • Business Architecture Issues • Opportunity Recognition • Channel Motivation • Partner Empowerment • Legacy Disruption • Transparency & Trust • Customer Ownership http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 26. Multi-Tenancy in SaaS - Single Instance for all Customers Customer Customer Customer Customer Customer Customer Customer Customer Customer Network Effect! http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 27. Multi-Tenancy in SaaS - Its not just Customers! Customer Partner Developer Industry Customer Partner Customer Developer Customer Ecosystem! http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 28. SaaS Distribution - Value Network Reality Stand-alone Intermediaries Consumers SaaS Vendor Application Platform Customer The possibilities are endless! http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 29. 4 Questions to Change your Business! 1) What is your Target Market? What ancillary or adjacent markets might also have a problem that your product solves? 2) What companies or types of companies also have customers in those markets? 3) Who are the trusted advisors to those companies and the end-customers in the target and adjacent markets? 4) Who is interested in the behavior of all of those companies you've identified? http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 30. Agenda • Setting the Stage • The Channel is Dead? • Business Architecture Issues • Opportunity Recognition • Channel Motivation • Partner Empowerment • Legacy Disruption • Transparency & Trust • Customer Ownership http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 31. Historical Methods of Channel Motivation •Discounts $$$ •Revenue Share •Spiffs $$$ •Co-marketing funds •Etc. Are these enough? http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 32. Difficulties with Historical Methods of Channel Motivation •Hard to motivate channels with revenue-share for low-price or recurring-revenue products •Many SaaS vendors have problems motivating internal sales teams let alone channels •Spiffs and other motivators can be costly for the SaaS vendor; especially early-stage companies •Often the SaaS vendor's business model is completely out of scale and alignment with the intermediary http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 33. Historical Methods of Channel Motivation •Existing methods aren't bad, they just might not be as powerful as they need to be to change behavior •Some SaaS/Cloud vendors won't offer much direct monetary benefit to intermediaries •Some could offer huge benefit to the core business of the intermediary •What can you do to change your unique value proposition to intermediaries? http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 34. Example of Deal Scale Misalignment •Software that aggregates data from building management systems for Carbon Accounting •Target market – Fortune 1000 companies, commercial real estate; owners, managers, etc. •Intermediary - BMS installers and consultants •Average deal size for them? $25M w/ 10 year contract •Software company's price? $150k over 10 years •Traditional rev-share? even at 25%, $37.5k over 10 years or just shy of $4k/yr http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 35. Agenda • Setting the Stage • The Channel is Dead? • Business Architecture Issues • Opportunity Recognition • Channel Motivation • Partner Empowerment • Legacy Disruption • Transparency & Trust • Customer Ownership http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 36. Tools for Channel Empowerment • Add something else to the deal, like the ability for the channel partner to: •Benchmark against others in the industry •Have visibility into activities of end-customers •Anonymous aggregate data •Customer management tools •Integration with CRM, Accounting, etc. http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 37. Add Layers of Stickiness •Get as deep into their business as you are in the end-customers •Done properly, this helps reduce churn of the end-customer even more •You have a champion in the value network that will encourage the end-customer’s use of the product •They might let the end-customer switch for a 10% cut but will work hard to keep them if there is additional benefits to them http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 38. Agenda • Setting the Stage • The Channel is Dead? • Business Architecture Issues • Opportunity Recognition • Channel Motivation • Partner Empowerment • Legacy Disruption • Transparency & Trust • Customer Ownership http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 39. Software-as-a-Service (SaaS) Producers Consumers Network Effect Key differentiators Ecosystem SaaS vs. Legacy Software http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 40. Leveraged properly, you can turn apples to apples comparisons... vs. SaaS vs. Legacy Software Photo via martinlabar http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 41. Into bowling ball to apple comparisons, in your favor... vs. SaaS vs. Legacy Software Bowling Ball Photo via definetheline Apple Photo via martinlabar http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 42. Change the focus to things legacy vendors cannot deliver! S M A S H SaaS vs. Legacy Software Bowling Ball Photo via definetheline Apple Photo via martinlabar http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 43. Agenda • Setting the Stage • The Channel is Dead? • Business Architecture Issues • Opportunity Recognition • Channel Motivation • Partner Empowerment • Legacy Disruption • Transparency & Trust • Customer Ownership http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 44. Dealing with Pushback as a SaaS / Cloud Vendor •Legacy vendors will spread FUD •Trust is a big deal in SaaS / Cloud •Intermediaries might not want to do business with you since they don't control what is ultimately being used by their customers •Understanding your position vis-a-vi the competition is critical http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 45. Transparency & Trust •You can give the intermediary the access and tools they need •Tools to help them manage and understand usage of the system by members of their team as well as their customers can help overcome objections •Give the end-customer visibility, too, such as customer-facing status dashboard, etc. •This can be the difference between getting a deal with a channel partner and not http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 46. Agenda • Setting the Stage • The Channel is Dead? • Business Architecture Issues • Opportunity Recognition • Channel Motivation • Partner Empowerment • Legacy Disruption • Transparency & Trust • Customer Ownership http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 47. Customer Ownership •This is between you and your channel partners •Existing relationships might need to be revisited •Anonymous Data ownership should be maintained even after clients and partners leave •Ensure your Terms of Service & Privacy Policies cover these things •Talk to your legal team; I am not a lawyer http://sixteenventures.com Copyright© 2010 Sixteen Ventures. All Rights Reserved
  • 48. SaaS Revenue Modeling & Business Architecture (972) 200-9317 lincoln@sixteenventures.com http://sixteenventures.com @lincolnmurphy