Thursday, March 5, 2009

Is SaaS Channel an oxymoron?

In my last position I was working for a SaaS vendor that has a legacy premise based product being sold through the channel.  As our SaaS business picked up the channel was going to being selling that product as well.  Stepping away from this business I needed to take a look at how a SaaS based channel product differed from a premise based software or hardware for that matter.

Biggest difference?  MARGIN.  To sell something that has a one time cost of $1M is very different then selling something that has a lifetime cash value of $1M.  How do you incent your partners?  How are they compensated?  There's not much out there about this.  When searching on google the most recent document I found is from 2006.  

Anyone have more information or is doing this right now?


  1. You focus on recurring revenue potential, and have partners focus on value added services. SAAS can be positioned as both a 'foot in the door' for revenue, but also an opportunity to deliver higher-value expertise. Partners could specialize in connecting CRM with SAAS and BI systems to help customers further understand their end users. Designing the channel program is paramount to fostering this type of partner eco-system that focuses not so much on the margins from delivering/reselling a SAAS offering, but on delivering higher value, highly differentiated service engagements that = high margins for the channel partner.

  2. Excellent points Andrew thank you. Solution selling has been the refocus of many vendors and solution providers anyhow. Those who do it well will certainly succeed.

  3. Partners also like to win when the supplier wins. So those companies who have offered partners a margin on the recurring revenue tend to have a loyal channel. SalesNet followed this model before they were acquired and quickly developed an eco-system referred to previously. Sharing the wealth, so to speak, is a difficult thing for vendors to grasp in the SaaS market. Maybe this explains Microsoft's confusing approach to direct partner billing, see: Microsoft: Partners to handle Dynamics CRM Online billing (,289142,sid96_gci1350457,00.html)

  4. ...and what if Saas Channel was not an oxymoron but rather a new possible model? A vertical Channel composed by non contractual, business consultants, selling online or through market places?