Analytics and Call Recording: The SaaS Opportunity for Resellers and Service Providers
SaaS vendors in the IT and telecoms market have a number of new and specific challenges. For a small start-up, the commercial investment and time to revenue is long and protracted. These companies have to give a lot away for very little money for quite some time before they start to even begin billing, let alone hit profitability. There is also a perception the price point for SaaS-based products needs to be significantly lower than the on-premise equivalent. These factors alone are likely to bankrupt them before their products see the light of day.
For established software vendors things are a little easier. If they are introducing the SaaS version of their existing software, they can dual run for some time and benefit from a gentle switch over within existing channels. It’s important to note that SaaS isn’t about stopping one thing and swapping immediately to another, it’s about managed transitions where SaaS products may sit naturally alongside an existing service, delivering an increase in customer revenue and customer lifetime value.
The Channel Benefit
There is clear benefit for the owners of reseller organisations to sell software on a recurring revenue basis as it provides stability and can significantly increase the value of their business when planning to exit. However, everything in their business has to adapt to selling SaaS. The key questions to face are, how do you differentiate your offering, and how do you fund your business? And, critically, how can you get your sales team to buy into a new “pay per month” commission plan?
It is, however, clear that SaaS offers new opportunities to the channel, and that a SaaS delivered solution with a fixed monthly cost is often more appealing to the end customer. Common characteristics like a lack of upfront investment are typical, but there is still differentiation to be found in ease of deployment and use, feature sets, and whether there are “freemium” options that allow customers to trial the solution before they buy without the normal investment cost, commitment and risk.
Ultimately, the opportunity SaaS brings in terms of reducing costs, opening up new markets, driving up shareholder value etc, are significant and will undoubtably outweigh the disadvantages. As long as the move towards cloud and SaaS is done in a phased approach, with careful management and minimal disruption, it should benefit everyone involved: from the vendor to the end customer.
Partnerships That Work
Building a channel willing to promote, sell and support your products is not always easy. The channel is ensconced and well-invested in Capex sales, high levels of engineering expertise, proven sales models and rich, upfront income to fund sales commissions, marketing and customer support. Under this model, the risk lies with the end customer, not the reseller or the vendor. However, in the SaaS world it’s much easier for the end customer to churn or switch to an alternative product or service.
For a reseller, the cloud SaaS model means vendor selection is more critical than ever. The reseller could be effectively “married” to a vendor for many years to come – not necessarily because of lock-in, but because of the investment required in selecting a suitable solution. The channel must do their due diligence to a much higher level when choosing a SaaS vendor, and look for different things to when they would have evaluated an on-premise solution. These SaaS vendors will differentiate based on things like strong roadmaps, innovation, commitment to security, focus on quality of product and service, support, ability to scale and long-term commitment. There’s a lot of new vendors in the SaaS market looking to rapidly build a customer base and sell up.
It’s also key to look at vendors who can demonstrate financial stability and long-term profitability. SaaS vendors who depend on major investment to succeed and may have not yet turned a profit, need to be considered very carefully. After all, the SaaS disruptors can be very quickly disrupted by new vendors and business models.