Making the most of SaaS

Cloud computing, including Software as a Service (SaaS) is here to stay and continues to become a larger piece of the IT budgets of small businesses, as well as global organisations. Twenty one percent of companies are piloting SaaS applications, according to a recent Forrester Research (FORR) Report. Gartner Research (NYSE: IT) just predicted that the SaaS market reached $9.6bn in 2009. Not bad in a tough economic year. In fact, the research firm predicts growth of a similar fashion for the next four years and in 2013 Gartner is forecasting the SaaS market to reach $16bn.
“Adoption of the on-demand deployment model has grown for nearly a decade, but its popularity has increased significantly within the last five years,” says Sharon Mertz, research director at Gartner.
 
Radical shift
SaaS applications today span a variety of traditional applications like Payroll or Tax to Customer Relationship Management (CRM) software as well as email and security. More of the SaaS vendors each day expand their sales strategy to embrace the channel as a viable approach to help them cost effectively increase their reach into the market. Although many Value-Added-Resellers (VARs) recognise the growth opportunity that SaaS-based services could have on their business, they continue to struggle with a business model that allows them to embrace such a radical paradigm shift in their business.
Compounded with all is the stark reality that the economic conditions globally have caused many businesses to scale back on spending. So invariably when I meet with traditional software VARs, I am often asked a very basic question. Can a VAR ever hope to exploit the benefits of offering SaaS solutions to their clients without a dramatic shift in their business model?
 
Confusion
To answer this fully, let me start by getting to the heart of some common areas of confusion about SaaS-based services. First off, many VARs selling traditional software earn approximately one to three times revenue selling services to the client to implement the solution. With SaaS, this opportunity not only does not go away, but is enhanced.
Consider a VAR that is an expert in accounting selling and implementing traditional accounting software for a client. They understand the application and can leverage their consultative sales skills to identify the requirements and propose a customised solution for their client.
 
Implementation
Step one, they sell the application and make a margin on that transaction (once). They then begin the implementation process by perhaps installing a server, as well as all the supporting services like the database, and eventually the application. In many cases they may need to set up printers, various systems drivers, etc. Although competent at all these tasks, the true value of their expertise has yet to be exploited. They are accounting experts and so far have spent perhaps days without yet getting to the thing that the customer needs most – a customised accounting system.
Eventually that work begins. In contrast, the same application being offered in a SaaS model allows them to start the process with the customisation and setup of the application and therefore focus on the higher value services and expertise that the VAR is bringing in this equation.