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SaaS Sales Channel Model

Many value-added resellers [VARs] and systems integrators fear disintermediation from direct sales and delivery capabilities. However, this is not necessarily true. What is real, is that SaaS will require service providers to redesign how they operate to accommodate the new model. This will include software development, delivery, sales and support units.

With products below the $100 range and its focus on the mid market, direct selling can become an expensive undertaking.

SaaS companies are seeking alternatives by selling through value-added resellers [VARs], Managed Service Providers [MSPs], Master Managed Service Providers (MMSPs) and similar alliance partners. But since SaaS is not only a different delivery mechanism but a different business model and different technology as well, selling through channels has its own challenges.

Software Development

SaaS customers all rely on the same multi-tenant source code, with only minor modifications possible. This will require software developers to develop custom and industry-specific configurations, based on the SaaS source code.

Delivery

In the traditional client-server model - availability and performance of the application was the customer’s responsibility. SaaS moves this to the software vendor. As most SaaS vendors have a high level of service availability and performance, the support focus shifts from customers with technical issues to helping them maximize the business value of the SaaS solutions [training and change management].

Selling

The sales focus will move to demonstrating how the customer can fully utilize the application rather than how to deploy it. This changes the skill set of sales people from one of selling technical features to IT managers to one of helping business decision makers recognize how a solution can meet their needs. See SaaS Sales Model

Collaboration

Traditional software is generally updated every 18 to 24 months, SaaS solutions are continuously enhanced based on customer feedback. This requires developers and support staff to maintain an ongoing watch for changes. It also provides more of an opportunity to feed suggestions to the SaaS vendor. This collaborative environment is producing more rapid product development results.

Sales Commission

Salespeople accustomed to long sales cycles, based on a consultative sales style and yielding big paychecks may have a tough time selling SaaS.

SaaS sales commissions are quite different from traditional, on-premise applications. SaaS solutions sell at a lower price point, meaning salespeople must accept lower commissions. In turn, this dictate selling a higher volume of SaaS contracts to maintain legacy application business revenue.

Selling SaaS will require salespeople who are comfortable in a high-volume, transaction-oriented sales environment where the size of the deals and commission checks are smaller than those in the legacy application business.

This will be a difficult change for many service providers seeking to participate in the SaaS market.

Next: The SaaS Sales Model