The Role of VARs in SaaS


I just got back from Las Vegas from having participated in a panel for CompTIA Breakaway 2009 where the focus of the panel was on the role that VARs can play in the SaaS space.

First I need to get something off my chest that has been boiling inside of me since my first few conversations with some of the attendees and VARs at the conference: Hosted Exchange or managed IIS servers is NOT SaaS, call it Managed Services, or whatever you want to call it but it certainly is NOT SaaS and certainly not PaaS for that matter.

Now with that out of the way ;) it doesn’t mean that VARs don’t have a role in SaaS and frankly the reason why most VARs use the term SaaS interchangeably with Managed Services is because they really can’t be bothered with the details that actually define SaaS; they simply care that you use it as you go and it lives outside of your premises. SaaS just happens to be today’s cool buzzword, so why not ride the wave, right?

Anyways, back to the point I wanted to talk about; VARs and Channel players are normally considered the Trusted Expert for their customers and as such they can still provide expertise on SaaS applications and arguably much easier than traditional on premises applications.

There are many ways that VARs can make money in SaaS and a lot of them, the same ways they make money today; here are just a few:

Commissions: Many SaaS vendors have referral programs were you can make a decent commission by a simple referral. Even if some of the vendors don’t have an official referral program, I’m sure that most would be happy to talk to you about making something like that work for you if you are bringing them real business that wasn’t already part of their pipeline.

Training & Support: Become real experts of the solutions that you are proposing and go to the extent to offer training & support. Even if the SaaS vendors offer support and training on their own, you have the upper hand of up-selling your existing customers who already trust you as their loyal advisor plus it will make you that much better selling the solution since you know it so well.

Integrations: Native SaaS applications are inherently built to scale (the ones that are properly architected at least and if yours isn’t, check out SaaSGrid for some help!), this requires the applications to be built as service oriented applications so by default most properly written SaaS applications will automatically expose APIs for extensibility and integrations via web services. If you are a technical enough shop, you can actually provide value added services by extending the SaaS application or bridging two solutions much easier than you would normally be able to do in an on premises application.

Consolidation: If you are offering your customers multiple services, you can actually consolidate the services for them and give them additional benefits like central billing and alike.

Clearly these are only a few ways that VARs can play a role in the space and some changes to your core business model might need to be made but what I’m interested to know is really what you think? Are you a VAR making money with SaaS? If so, what are you doing and how is it different than your other traditional on premises offerings; also, how is it affecting your bottom line? If not, why not?

Join us and share your thoughts through the comments. Also If you’d like to mingle with others in the SaaS space, the SaaSBlogs group on LinkedIn now has 2400+ members and is growing every day; make sure you’ re not missing out and join today!

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August 7th, 2009
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Comment Number:
1
Written by:
Michael Dunham
Posted on:
August 7, 2009 at 2:21 pm

I agree whole heartedly!

There are lots of ways VARS can help and the main thing to keep in mind is that SaaS is a service business after all. If VARS are extending the service down to the individual client and their endusers - everyone wins!

What services? As you said: training, business and technical integration, implementation planning, the list depends a lot on the industry and application involved.

That said though, the SaaS Vendor needs to take the opportunity by the horns and make it work as a part of their operations. Some parts of the relationship can be embodied in the application itself (sales recognition, service leads, etc) but more importantly, the vendor needs to consider their strategies and how leveraging VARs might fit. It can be a lot more effective than trying to go it alone…

Mike

Comment Number:
2
Written by:
Steve Plunkett
Posted on:
August 8, 2009 at 3:25 am

You have touched on a very interesting point Abe. As the migration to SaaS increases, the role of the intermediaries making a living between the SaaS vendor and the end user will change dramatically. This is not just the VARs but the outsourcers and other service organisations. I have looked at this in some detail (what is known as the servitization of the software industry) and posted part 1 of a 2 part article on our site here that might be of interest:

http://servitizer.com/blog/2009/08/07/saas-and-the-servitization-of-the-software-industry-part-1/

Steve

Comment Number:
3
Written by:
Vincent OHare
Posted on:
August 8, 2009 at 5:20 pm

Hi Abe,

I recently attended the SIIA On-Demand (Europe) 2009 event in Amsterdam, where several European SaaS Vendors gave ‘best practice’ talks. I noticed that a few of the companies stated that they raised between 15% and 25% of their revenues via VARS. While this probably does represent ‘best practice’, maybe the SaaS vendors could do more, within their applications, to encourage VAR’s to participate. After all, many SaaS Vendors suffer relatively high customer acquisition costs and could benefit from the esisting customer relations that VAR’s have.
Also, maybe Apprenda could provide a ‘referral’ module in the SaaSGrid pricing/billing mechanism?

Comment Number:
4
Written by:
Abe Sultan
Posted on:
August 8, 2009 at 9:14 pm

Hi Vince,

I think that a VAR module is a great idea and it is something that we have big plans for at Apprenda since we believe that they can certainly play an important role in the life of any SaaS company.

Thanks for the ideas and please keep them comming!

Cheers,
Abe

Comment Number:
5
Written by:
Steve Plunkett
Posted on:
August 11, 2009 at 11:52 am

Abe,

I have posted the second part of my blog entry on our site and would welcome thoughts and comments (beware, its a long read!):

http://servitizer.com/blog/2009/08/11/saas-and-the-servitization-of-the-software-industry-%E2%80%93-part-2/

Steve

Comment Number:
6
Written by:
Ron Watson
Posted on:
August 11, 2009 at 1:09 pm

Very good information.

I have to agree with you in terms of the difference between SaaS and Managed Services.

Comment Number:
7
Written by:
Larry Velez
Posted on:
August 13, 2009 at 8:52 am

We are in the outsourced IT for small business space. At the end of the day we are what you have listed as a consolidator putting together various solutions (Hosted Exchange, HelpDesk, Monitoring, Solution Babysitting, etc) under a simpler service that includes many of these as a package.

We think we have to carefully architect a path into the future that appropriately values the disruption that SaaS will bring to the small business space and make sure we have a relevant role on the other side of any drastic shift.

Some companies in our space have chosen to continue to have a VAR model around hardware and software implementation. I think companies like these are the ones that you seem frustrated by. It is possible that they will never see the world the way the SaaS generation sees it. This is similar to the way programmers in the days of punch cards laughed at the time-sharing-teletypes of the 1960s… each decade thinks differently.

Comment Number:
8
Written by:
Abe Sultan
Posted on:
August 13, 2009 at 9:30 am

Larry great points,

One thing that is important to understand is that in the Software Industry and in the IT industry for that matter the one thing that is constant is CHANGE so if you are in the business you HAVE to cope with change very well and adapt to the newer technologies and paradigms or you risk being left behind and frankly you are probably in the wrong business.

Cheers,
Abe