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Partner Advocate

Finding a Niche in SaaS

Microsoft Partner Program members tell us that they struggle to figure out how to shoehorn Software as a Service into existing business models.

Judging by conversations I've had with executives at both the biggest and smallest companies in the Microsoft Partner Program, nearly everyone is struggling to figure out how to shoehorn Software as a Service (SaaS) into existing business models.

On the plus side, there's a little time to figure it out. Most analysts currently peg SaaS in the low single digits in terms of its share of overall IT spending. Even at triple-digit compound annual growth rates, it will take a few years for SaaS to account for much more than a blip in overall revenues at most partner companies. Then again, you can't wait too long. In IT, things are small enough to ignore until they're big enough to destroy you.

Meanwhile, a few people are starting to publish some good thinking about the role the channel will play in SaaS.

Every year, researchers at analyst firm IDC release a list of their top predictions for the worldwide software business, which includes software channel trends. Among other things, their list predicted that two new kinds of SaaS business partners will emerge this year.

IDC identifies these partners as Business Domain Specialists and Business Services Providers. The domain specialists will be similar to regional systems integrators, according to IDC. Rather than focus on simplifying IT complexity, they'll help customers cut through business complexity. They'll concentrate on business process optimization, vertical knowledge, enablement and end-user training.

The services providers will be like super customers, IDC says. These partners will come by their vertical expertise from the opposite direction. An example might be a law firm that figures out a way to optimize a SaaS application for itself, then starts a business showing other firms how to do the same thing.

In his 2007 book, Channel Excellence, Axel Schultze uses the term "SaaS catalyst" to describe the role that he believes the channel will play in the SaaS market. The catalysts will "help customers to implement [SaaS] systems" and "adjust business processes or align business processes with the software," writes Schultze, the founder of BlueRoads and Xeequa. "Typically, there is no technical expertise needed at all other than configuring [software] for its business case in a browser."

SaaS catalysts, in Schultze's view, will find opportunities in deployment services, configuration services, integration, business-process alignment, reporting and analytics services and training and support.

As Schultze reiterates throughout his book, the ratio of companies using indirect sales to direct sales is about 5-to-1 despite the Internet revolution and supply-chain improvements of the last decade and a half. So there's no reason to think there won't be a place for the channel when SaaS really takes off.

What are you doing to keep your company relevant in a SaaS world? Let me know at sbekker@rcpmag.com.

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.