SaaS And The Evolution Of The VAR
These days, the term 'on-demand' is most readily associated with the world of cable television — defining a service where your favorite programs can be accessed for your viewing pleasure at any time convenient to you. The term 'on-demand' is also a popular buzzword used to refer to a breed of software. While not quite as widespread as the cable reference, this use of 'on-demand' will have decidedly more impact on the VAR community. As most of you are probably aware, on-demand software is hosted by a third party and users pay a fee (either on a monthly or usage basis) to access the features of the software as a service. SaaS (software as a service) packages initially gained acceptance and notoriety through CRM (customer relationship management) applications like Salesforce.com. Nowadays, the SaaS concept has extended to software packages across most information technologies including ECM (enterprise content management), data storage, and network and security monitoring. So, just how is SaaS affecting VAR sales strategies?
SaaS Appeals To SMBs
The first thing many VARs are experiencing is that SaaS can be a great means to earn SMB business. SaaS options appeal particularly to SMBs because this audience may not be able to afford an in-house software application or have the IT resources available to support one. Furthermore, SaaS applications are born out of the Internet age and are generally designed to be more consumable by the layperson, making them an attractive option for companies where knowledge workers will be responsible for using the application.
This is not to say that SaaS solutions are a fit for SMBs alone. Individual departments in larger organizations are looking to SaaS offerings as a way to test-drive the software and illustrate the benefit of the technology before an enterprise-wide deployment of the technology either via SaaS or an in-house system. All in all, offering SaaS options can be a good way for you to begin a relationship with a customer and offer additional hardware, software, and services as the partnership progresses. Furthermore, while the upfront sale of SaaS software may result in limited return, the platform provides a regular stream of recurring revenue that helps VARs smooth out peaks and valleys in their sales performance.
A Move Toward Managed Services
For most VARs, SaaS options will simply be a complementary technology that they add to their line cards. It will not fully replace legacy software; it will simply be that other option that appeals to clients with budget and IT restrictions. However, for others, the emergence of SaaS has ushered in the next VAR evolution. Some VARs have begun to invest in the infrastructure to host their own SaaS applications and increase the revenue they receive from SaaS deployments rather than just relying on the margins they receive from selling a vendor's SaaS offering. As SaaS continues to mature, I believe you will see this trend continue. Since the advent of the channel, solutions providers have evolved from mere resellers to systems integrators and service providers. The next phase of this evolution (which is already occurring) is VARs transitioning into full-blown managed service providers. While the delivery model might be different, the challenge for the VAR will remain the same — to add value to the client beyond the features of the technology itself. To succeed in a managed services world, VARs will still need to possess the technical, vertical, and application expertise that helps differentiate their offerings.