The SAAS Paradox

By Pedro Pereira  |  Posted 2007-11-30 Email Print this article Print

Opinion: Confused about whether SAAS is a threat or opportunity? That's because it's both.

Being a solution provider in the dynamic IT channel is tough enough, and it becomes especially so as you try to wrap your mind around new trends such as software as a service.

The fundamental question about this new software delivery model revolves around whether it poses a threat or creates an opportunity for solution providers. Answers seem to differ as much as the direction of a windsock.

Solution providers trying to figure out whether to get involved could be excused if they are confused. Proponents of the model, of course, claim SAAS creates new profit opportunities for the channel.

Others are more cautious, but in their caution start to sound almost paradoxical. Gartner, for instance, tells us that conditions in the software market, including the move toward delivering applications as a service, "are not favorable to the channel." But then the research firm also tells us the model creates opportunity for solution providers.

The thing is, even if they seem contradictory, both assertions are valid. SAAS requires solution providers to do business differently, and as such, it is a threat because some companies may either miss the necessity to make adjustments, ignore that necessity or, in trying to address the need, lose the game to poor execution.

The model also presents an opportunity because for those providers that make the necessary adjustments, they will be in a position to profit from delivering software as a service.

But even providers who succeed in retooling their business models to accommodate SAAS will face other challenges. They have to achieve a delicate balance in pricing their offerings to avoid overpricing, but, on the other hand, they must not charge so little that they get themselves into financial trouble.

As is true of another, newer trend gaining popularity in the IT channel—managed services—the financial model of delivering technology as a service is one of the toughest challenges for solution providers considering SAAS.

Of course, providers that add SAAS purely as an incremental business will face less of a challenge in that regard. A VAR, for instance, that is adding a Citrix Online application to its offerings should have little trouble making a profit from the service.

However, things get more complicated with applications that solution providers traditionally have delivered as licenses with on-site deployment and all the maintenance and integration that typically accompanies those projects.

In addition to the financial challenges, solution providers must also take care to train their staffs on how to sell and support applications delivered as a service. This is another challenge also relevant to the adoption of the managed-services model.

Ultimately, though it may appear more daunting than past transformative trends in the channel, software as a service is simply another milestone in the evolution of the channel. Countless solution providers already have had to contend with the transformation from hardware-focused models to a services-centric approach. Some of the most successful companies have figured out how to retain enough of the old business while adjusting to the new models to achieve a workable balance.

"This is not an all-or-nothing scenario—balancing traditional project-based business with alternative delivery models will provide the time needed to determine which is the best model for growth over the long term, gain acceptance from internal personnel and existing clients, and put a plan in place," said Tiffani Bova, channel sales research director at Gartner.

Achieving that balance, of course, will require careful planning and execution. For those providers that succeed in this, they will no longer have to wonder if SAAS is a threat or opportunity.

Pedro Pereira is editor of eWEEK Strategic Partner and a contributing editor for The Channel Insider. He can be reached at ppereira@­


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