What if your reseller went away?

by admin on February 4, 2010

in Cloud Computing/SaaS

Reseller issues are an emerging topic for SaaS vendors. That means it should also be a topic for buyers.

For years, buyers haven’t needed to give a second thought as to whether their software reseller will be around. Despite some consolidation, it has been a case of business as usual. SaaS disrupts that market in several ways:

  • Comparative growth between SaaS and on-premise solutions suggests that at the very worst, SaaS is growing at the expense of incumbent vendors. That means resellers have less to sell. In some cases this is exacerbated by vendors not investing to bring differentiated functionality to market or to innovate against changing customer needs.
  • Most SaaS applications are not seen as reseller friendly because very often, there is little ‘value add’ that a reseller can usefully load into the business model. That’s not entirely true because for example, vendors like Kashflow that offer a comprehensive API can provide a development pathway which restores that revenue line item.
  • SaaS solutions are often at headline prices that beat the on-premise competition on both TCO and ROI measures. They take out the hardware investment, time and effort needed to deploy and so suck even more out of the channel both at top and bottom lines.
  • In the accounting world, increased attention is being paid to addressing and meeting practice needs. That diverts the channel and serves as another revenue reduction mechanism.

All of which creates a situation where it is not easy to see how resellers might respond or survive. I have heard of some cases where resellers are banding together to build their own data centres for hosting Microsoft solutions. That’s plain madness when Rackspace, Amazon and others have already done the heavy lifting.

The SaaS vendors know they need to build channels in order to scale but it is far from clear which models are most likely to succeed. This was the question I posed yesterday when commenting upon NetSuite‘s decision to partner with Hein & Associates. In comments, Dave Turner of FinancialForce.com wondered if I was making the case for a situation where a modified channel environment and a growing Paltform-a-a-service (PaaS) environment are mutually exclusive. There is a case to be made but I am not clear how it might arise. Right now I am merely pointing to the possibility.

This topic was also part of the conversation I had with Intacct in discussing their relationship with AICPA. As an aside and contrary to what I said in April 2009, that relationship is working very well with more than 1,000 CPA firms in the Intacct sales pipeline. Clearly a good number of US firms are biting the SaaS bullet with an offering geared towards their needs. And perhaps therein lies the key.

In Ben Kepes analysis of NetSuite’s announcement, he made the point that:

…while I like the idea of professional services firms helping ease the on ramp (and smooth the ongoing path) for larger customers, I’d especially like to see some real customization of solutions for specific verticals come out of the larger players…

Well, it is happening. Whether we call it configuration options in the style of Intacct with 30 verticals under its belt, access to an API that can provide specific needs for verticals or a pure platform play where resellers can develop entirely new applications, the broad methods of providing two way value for resellers and SaaS vendors are taking shape.

That still leaves the SaaS vendor with choices and decisions to make. In discussing this topic with Duane Jackson, CEO Kashflow, he acknowledged that each of the handful of reseller deals the company has inked are different. Requirements from one to another are different along with different levels of understanding about how the SaaS model works and what resellers need to take on by way of training colour each deal. It’s a time consuming and exhausting process fraught with legalese. My view is Kashflow should be thinking about how the platform elements of the offering translates into reseller and customer value. This should lead to a relatively stable model that can be articulated in a well written contract. Kashflow already make clear they’re willing to tweak for customer requirements. All to the good and worth crowing about.

It is clear the reseller channel for SaaS needs to look, feel and behave as a different beast from that which exists today. It has important implications for all and should be part of any buyer’s considerations as they look at SaaS solutions.

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Geoff D. February 5, 2010 at 4:39 am

great post!

Geoff D. February 5, 2010 at 7:39 am

great post!

Geoff D. February 5, 2010 at 4:39 am

great post!

Kent Henderson February 5, 2010 at 3:37 pm

Great topic and just to type of blog I was intending to find when I set up a feed to pull “SaaS & Channel.” At Cisco (specifically Cisco WebEx), we also see XaaS as a departure from your father’s channel model, but primarily different only for the HW and SW integrators at whom we’re looking to get our offering most effectively broadcast to the market. These partners are used to seeing sku’s on pricelists and the self-sufficiencies that come with buy-for-9-sell-for-10-add-ProfServ model.

XaaS agreements are generally 12-month contracts–several pages each– with nits and gnats all needing negotiation. Not so easy on the uptake for partners who have so many other things to worry about outside of our offerings. SXaaS also require billing systems supportive of monthly recurring revenue, overages, upsells, etc. These systems generally don’t exist. And adoption services? Even more requirements that the channel isn’t quite ready to meet.

SaaS providers are service providers, so we’ve chosen to take a page from the SP/Telco channel program playbook. Most commonly, this model sees orders written on SP paper, with a commission being paid to the partner. We feel that as long as there are significant requirements for professional services, that the Integrators will cross the chasm to embrace a commission-based model, and hence bring SaaS into their bucket of competencies.

Kent Henderson February 5, 2010 at 6:37 pm

Great topic and just to type of blog I was intending to find when I set up a feed to pull "SaaS & Channel." At Cisco (specifically Cisco WebEx), we also see XaaS as a departure from your father's channel model, but primarily different only for the HW and SW integrators at whom we're looking to get our offering most effectively broadcast to the market. These partners are used to seeing sku's on pricelists and the self-sufficiencies that come with buy-for-9-sell-for-10-add-ProfServ model.XaaS agreements are generally 12-month contracts–several pages each– with nits and gnats all needing negotiation. Not so easy on the uptake for partners who have so many other things to worry about outside of our offerings. SXaaS also require billing systems supportive of monthly recurring revenue, overages, upsells, etc. These systems generally don't exist. And adoption services? Even more requirements that the channel isn't quite ready to meet.SaaS providers are service providers, so we've chosen to take a page from the SP/Telco channel program playbook. Most commonly, this model sees orders written on SP paper, with a commission being paid to the partner. We feel that as long as there are significant requirements for professional services, that the Integrators will cross the chasm to embrace a commission-based model, and hence bring SaaS into their bucket of competencies.

Kent Henderson February 5, 2010 at 3:37 pm

Great topic and just to type of blog I was intending to find when I set up a feed to pull “SaaS & Channel.” At Cisco (specifically Cisco WebEx), we also see XaaS as a departure from your father's channel model, but primarily different only for the HW and SW integrators at whom we're looking to get our offering most effectively broadcast to the market. These partners are used to seeing sku's on pricelists and the self-sufficiencies that come with buy-for-9-sell-for-10-add-ProfServ model.

XaaS agreements are generally 12-month contracts–several pages each– with nits and gnats all needing negotiation. Not so easy on the uptake for partners who have so many other things to worry about outside of our offerings. SXaaS also require billing systems supportive of monthly recurring revenue, overages, upsells, etc. These systems generally don't exist. And adoption services? Even more requirements that the channel isn't quite ready to meet.

SaaS providers are service providers, so we've chosen to take a page from the SP/Telco channel program playbook. Most commonly, this model sees orders written on SP paper, with a commission being paid to the partner. We feel that as long as there are significant requirements for professional services, that the Integrators will cross the chasm to embrace a commission-based model, and hence bring SaaS into their bucket of competencies.

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