Why SaaS needs the traditional IT channel

Companies who deliver SaaS for business users are faced with a scaling challenge in their own business. Many who launch SaaS services labor under the impression that the...

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Companies who deliver SaaS for business users are faced with a scaling challenge in their own business. Many who launch SaaS services labor under the impression that the Internet is the scaling mechanism… and while that may be true for consumer applications that sit in the cloud, business customers buy in very different ways. Self-service will only go so far and works only for the simplest applications. Building a sales organization is expensive and really only makes sense for targeting enterprise business. But even with enterprise and particularly with mid-market, small and micro business, scaling your reach is a significant barrier.

The solution to this problem already exists in the form of the traditional “old school” IT channels. These are the system integrators, value-added resellers, manage service providers, etc. who have been delivering IT goods and services across the spectrum of business sizes for years. They have been and continue to be the trusted advisor when business and IT decision makers are searching for solutions. The emergence of cloud-based models for IT delivery created dire predictions about the decline of this channel, but the reality is that it is alive and well. More importantly, these traditional IT channel partners are hungry to resell cloud-based service. The question you should be asking is if your app is on their radar?

Tapping into this existing channel does require investment and focus on the part of the SaaS provider, but the payoff for good execution is well worth it. As an example, I’ll use two behemoths in the SaaS world… Google and Microsoft. Google was born in the cloud and built its business on consumer oriented services. With Google Apps for Enterprise (now Google Apps for Work) Google relied on a self-service model initially, then built a sales organization to target large businesses and finally started enabling the resale of these services through a partner channel. Google had the brand equity to make self-service work to some degree, but still recognized the need for assisted sales and ultimately some attempt at a partner channel play. The problem for Google is that anything beyond self-service was not a core competency. They had always relied on the natural scale of the Internet to reach their audience.

Microsoft on the other hand is a legacy packaged software company who was making the move to SaaS with Office 365. While Microsoft’s experience in the cloud was very limited, they have arguably the most effective partner channel in the industry. Their challenge was to build new go-to-market models for delivery of services and educate the existing channel on how to sell those services. While Microsoft has struggled with this task, they continue to focus on making it work. The net result for these two companies is that Office 365 has massively out performed Google Apps for Work in market penetration. The legacy packaged software company is beating the native cloud company in delivering business SaaS and one of the key differentiators has been an effective partner channel. That channel is available to any SaaS company willing to invest in a partner program and rethink the business model to include margin for resellers.

If you don’t have a partner program, start to think about how to recruit, retain and activate resellers, what support looks like and how revenue flow will work. If you already have a partner program, make sure it is a core part of your strategy and that you can confidently measure performance.

by Elliot Curtis @elliotdcurtis

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1 comment

  1. Dina Moskowitz

    AMEN Elliott! Reseller partners have the potential to bring astronomical returns to a SaaS provider. The Channel is responsible for more than 75% of all traditional Hardware Software and IT Services sold in the US and the SaaS sector could benefit tremendously from getting into it. SaaSMAX is a Value-Add SaaS Marketplace & Distributor focused exactly on helping SaaS vendors “Cross the SaaSm” – to reach Main Street customers via The Channel.

    (@elliottdcurtis may we publish this in the SaaSMAX blog http://www.WiseSaaS.com ?)

    SaaSMAX exists to bring reseller-friendly SaaS vendors to The Channel. We provide some great education and guidance to emerging SaaS companies who need to develop their Partner Programs but we primarily do the pro-active marketing and reseller matchmaking that accelerates their push into The Channel. We also help The Channel learn and about and understand how to leverage the new SaaS business opportunities. We’ll be showcasing for of our SaaS Vendors (Insperity, Phonami, AVG and NetDispatcher) next week at the Channel Partners Conference in Vegas.

    Elliott keep spreading the word…The Channel is not something to glance over. Its a huge sector that is already making the difference between putting along and accelerated growth to many smart SaaS companies.

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