SaaS: Why the Channel Does (and Doesn't) Buy It

Three Ways Belgium is… Like The Channel…

400 Beers, 400 Glasses

Certification is Important

TASTE VARIES…

Why The Channel Does (and doesn’t) Buy SaaS Bob Snyder Editor-in-Chief The Distribution Channel Ltd.

Oracle will release a suite of 43 Web-based software modules in 2010 to help corporations manage tasks from accounting and human resources to sales and procurement. What’s A Nice Guy Like You Doing in A SaaS-y Place Like This?

Gartner Research expects 2009 SaaS sales to surge 22% to a record $8 billion. They expect average annual rates of 19% through 2013 vs. 5% growth in business management software market.

The Opportunity
SaaS Growth 33% PA
Emaill, Sharepoint , CRM lead the way
1/3 of the world population on web by 2011
4 Billion Mobile Subscribers by end of 2008
15 PB of data generated everyday (more than all the books in all the US libraries
64 Billion credit card transactions per annum
52% of Europe’s IT Spend is in-direct i.e vendors are not trusted advisors to 52%

Software-as-a-Service moving to the mainstream
Zealots want us to believe that on-premise enterprise software will be as extinct as the dinosaurs in 10 years
Detractors call it “fad”’ and point to the minuscule market share of SaaS in the enterprise.

The Disparity
..there is enormous disparity in the performance of SaaS businesses - from rapidly growing startups to embarrassingly unprofitable public companies
Only a handful of true success stories like Salesforce.com and Taleo where growth, profitability and ROI have gone hand-in-hand.

If SaaS is to exceed in a mainstream way, it must win the hearts and minds of channel partners.

Why We Need Channel
To specialize in the deployment, management and billing of enterprise services for the SME
Vendors will provide vast cost savings to the SME by using the multi-tenanted architecture approach and will deliver profitable partnerships
Vendors business will NOT scale without the channel
Flexibility and responsiveness to assist with adoption of SaaS within business in terms of consulting and migration from on-premise – the channel will need to drive this for vendors

SaaS – Shifts in Responsibility Model Package Applications Model Software as a Service Model Delivery Customer pays on delivery of software and responsible for deployment Customer pays for delivery of business function Performance Customer responsible for software performance Provider responsible for software performance Business Requirements Customer responsible to customize software to business requirements Customer responsible to configure software to business requirements Maintenance Customer pays for maintenance to fix software Provider fixes software (or pays penalty) and delivers to all Currency Customer buys upgrades to keep current Provider ensures currency of solution

Channel Partners are Mugwumps To SaaS or Not? “ You first.” “ No, you first!”

Yes, We Like SaaS
It sounds like another Gold Rush…
It helps us to sell more solutions to our clients
It compensates for lower hardware margins
It offers steady income
It can give partners new name brands that add to reputation and line card impact

No, We Don’t Like SaaS…
Re-training staff – new skills and knowledge will be required
Re-purposing staff – customer services will be pro-active account management
Changing compensation plans to drive the new required behaviours
Investing in new technology to bill customers
Risking revenues today for revenues tomorrow
Changing role in vendor sales cycle

No, We Don’t…
False promise that Big Companies Make to Smaller Ones…
We’ve seen this before…

No, We Don’t…
Lack of clear compensation agreements…
How can we make some money, too?

No, We Don’t…
The multiple year revenue stream increases Risk of Exposure

No, We Don’t…
The vendors will keep all the Big Deals, even if we initiate the sales

The Vendor Says….
“’ I can’t trust anyone that’s not my direct sales force…”
+ Actual quote from vendor to reseller at this year’s IT CHANNEL VISION …

The Channel Response… Just because you don’t own your wife, doesn’t mean you can’t trust her… “ We thought this was supposed to be like a marriage?”

No, We Don’t…
The vendors will SUCK US IN, and then cut better deals with other channel…
Microsoft BPOS in Holland:
“ A miscommunication. We were just trying to open the market up for all of us…”

No, We Don’t…
It brings up all the old arguments but center on the core issue of yore:
WHO REALLY OWNS THE CUSTOMER?

No, We Don’t…
Weapon of SaaS Destruction: The Security Issue

No, We Don’t…
But even beyond “The Security Issue”…
The channel still questions the current RELIABILITY for Software as Utility… and IT as Utility

Recent High Profile Cases
Sidekick data disruptions, T-Mobile dropped this bomb: "Regrettably, based on Microsoft/Danger's latest recovery assessment of their systems , we must now inform you that personal information stored on your device — such as contacts, calendar entries, to-do lists or photos — that is no longer on your Sidekick almost certainly has been lost as a result of a server failure at Microsoft/Danger. …”

The Reliability of Utility
A power outage Sunday morning at an IBM data center took down the mainframe equipment handling Air New Zealand's check-in services, online booking system and call center, affecting more than 10,000 passengers…the passenger backlog didn't start to let up until the self check-in kiosks came back online 6 hours after the crash.
IBM expressed its regrets and said the likely cause was a failed oil pressure sensor on a backup generator during a scheduled maintenance session.

And, says the client…
Air New Zealand CEO Rob Fyfe
"In my 30-year working career, I am struggling to recall a time where I have seen a supplier so slow to react to a catastrophic system failure such as this and so unwilling to accept responsibility and apologize to its client and its client's customers."
"We were left high and dry and this is simply unacceptable. My expectations of IBM were far higher than the amateur results that were delivered yesterday, and I have been left with no option but to ask the IT team to review the full range of options available to us …"

“ Vendor: We Are As Safe As A Bank… Channel: Yes, that’s exactly what we are afraid of…

Rainbow of Solutions
Ways to
Win over
The Channel

Channel Challenges
Understanding the monthly cash flow and working capital requirements of your channel business. How will moving to an annuity model impact these?
Should the reseller invest in your own billing and management platform or use that of the distributor or vendor? Which can provide flexibility and granularity in customer reports?
Best practise SaaS or annuity resellers will have two types of sales people active in the account: "hunters" to acquire the customer and "farmers" to ensure the customer keeps billing or renewing. Churn is the enemy of annuity models

Channel Challenges
Review and/or redesign the appropriate sales compensation scheme to encourage annuity sales and customer longevity
Work to a plan and gradually start to build an annuity base. It will generally take approximately 12-18 months of steady work to build a customer base to a sufficient level
Recognize the reseller’s risk and try to add balance (and fairness!)

Get the Channel Using SaaS
Familiarity makes better sales people
You sell best what you know best

Solve the Sales Compensation Plan
Get an advisory group before pricing

Make Partners, Not Channel Slaves

TRUST YOUR CHANNEL TO FIND THE WAY
One way or another…
Channel Mentality
Hey, if you can’t make money selling VISTA, just sell the uninstalling of VISTA…

OUR CHANNEL E-NEWSLETTERS in EMEA esP– for IT Solution Providers in Europe Consumer IT – for retail and etail channels rAVe Europe – for Pro Video integrators DSNE – for digital signage integrators On CE – for consumer electronics channels ECI – for home networking channels www.it-sp.eu

SaaS: Why the Channel Does (and Doesn't) Buy It

by Bob Snyder

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