In this two part series, we will discuss the opportunity and threat to the channel from SaaS companies.
This is Part One of a Two-Part Series
As the IT industry continues its transformation, SaaS developers have emerged as some of most powerful agents of change. Today, SaaS developers are disrupting traditional vendors and giving challenge to many channel companies. At the same time SaaS companies offer tantalizing new opportunities for the channel IT consultants, MSPs, and cloud services providers. That’s because customers now find themselves with a tangle of different apps, contracts and integration issues after signing up for SaaS applications on their own for the past several years.
Theoretically, small and medium business (SMB) customers, which include influential line-of-business (LOB) buyers who work in business functions including sales, marketing, human resource, finance and more, could use a trusted MSP, CSP, telecom agent or other solution provider to help them navigate a complex and rapidly changing landscape. But will customers turn to them as anticipated?
In this two part series, we will discuss the opportunity and threat to the channel from SaaS companies. Part two will address the disruption we see with SaaS in the vendor community and how SaaS companies who desire to leverage the channel must behave.
When I look at the long trajectory of the market, I believe that the survivors and “thrivers” in the channel will specialize in verticals, high-value technology and business processes sold as services. If you agree, then you can only logically conclude that SaaS companies will play a major role in helping channel companies establish themselves trusted advisors to their customers.
That said, significant challenges exist for this to happen. According to Chris Rallo, a former channel executive and current industry cloud channel expert, there is misalignment between traditional channel companies that thrive on transaction margins, complementary product attachment rates and after-market services. The LOB customers require partners who have applications expertise, understand their business objectives possess industry knowledge.
If a channel partner has made the shift to recurring revenue, then expanding into SaaS may be a no brainer. What can the provide? Services that integrate IT applications and billing and administrative oversight. Examples could include human resources software, marketing automation applications, financial and customer analytics applications.
So what’s in it for you, the channel partner? Possible benefits can include:
- Incremental (and often long term annuity) revenue and profit from existing customer base
- Expanded influence with customer integrations and extensions of SaaS offerings
- Increased customer stickiness, i.e. loyalty and trusted advisor status
- Competitive differentiation in a local geo or market segment
The SaaS application wave is enveloping our customer base. I believe we owe it to our customers and our own employees to explore this significant and possibly revolutionary business opportunity. Stay tuned for Part 2 of this series where I explore the impact SaaS has on the vendor community and how SaaS companies must architect channel models to partner together.
Theresa Caragol is founder and principal consultant of TCC- Achieve Unite, a performance partnering solution provider that provides business acceleration services to global enterprises including partner and channel development, go-to-market planning, M&A channel integration and executive learning forums. She has more than 20 years’ experience in building and managing multi-million dollar indirect channel teams and strategic alliance business and programs from inception to sales success. Prior to founding TCC - Achieve, Theresa held senior executive roles at Extreme Networks, Ciena and Nortel. She also has co-founded a Channel Tech Industry Think Tank with Penton / Informa designed to influence and support the industry’s transformation.