Should Channel Partners Embrace or Flee SaaS?
Software-as-a-Service is generating lots of buzz and shows promise as a developing business model. However, it poses several serious challenges for resellers.
Software-as-a-Service (or SaaS) has been generating a whole lot of buzz in the channel lately as vendors roll out new SaaS programs for resellers. In some cases, the software companies are even trying to attract a new breed of non-IT partner into the channel using SaaS as the lure. This calls to mind many past can't-miss revolutionary channel business models (remember ASPs?), some of which were eagerly embraced and others of which flopped with a loud thud.
Even Microsoft is playing the SaaS game. SaaS "is increasingly popular for its ability to simplify deployment and reduce customer acquisition costs," the company touts on its Web site. "It also allows developers to support many customers with a single version of a product. SaaS is also often associated with a 'pay as you go' subscription licensing model." Microsoft even offers a SaaS "incubation program." So with all this hype, what's not to like?
It's simply not clear yet whether SaaS is destined to soar or crash. There are a few reasons for this. First, the immediate benefits aren't real clear to the channel. Second, tradeoffs are a little shaky. The channel is essentially being asked to give up control of the customer in return for cozying up to the vendor and getting a piece of the annual revenue stream. Inherently, this is anathema to resellers, who have a hard enough time trusting vendors to share simple customer leads, let alone promised revenue streams. (Historically, this channel skepticism often has been well-founded.)
Theoretically, a SaaS installation is all about remote software hosting; it obliterates the need for channel-intensive customer handholding involving such tasks as installation, configuration and integration. That's the theory anyhow. I'm not so convinced. My guess is if the solution provider has recruited the customer, or has any kind of established relationship, you can bet the farm that customer is going to come back to the solution provider when something goes astray (as it inevitably will). Have you tried calling any big software company for customer support lately?
To be sure, SaaS offers an interesting business model. It leverages the strength of the Web. It has the potential to invigorate the IT channel with different types of resellers. It should save customers money and offer strong ROI.
Despite all this, SaaS is not inevitable and still faces great obstacles. Not the least of these is how vendors and channel players figure to make a decent profit with SaaS, once configuration and service, two traditional profit generators, are pulled out of the equation.