On-Demand a Boon for the Channel

If you are like most VARs or integrators, you may be having a hard time sleeping at night because you’re wondering whether the new wave of on-demand services represent a threat or an opportunity for your business.

Being “disintermediated” is a common fear among channel organizations nowadays as the demand for SAAS (software as a service), managed services and other forms of on-demand services rises.

Plenty of VARs and integrators got rich in the past helping customers of all sizes select, customize and implement complex enterprise applications or system/network management systems. In some cases, customers paid up to 10 times the cost of their original enterprise application licenses to implement the software. In other cases, customers never fully implemented their system/network management systems and failed to generate their full benefits.

The growing array of new turnkey alternatives promise to eliminate much of the complexity and frustration associated with legacy applications and traditional management systems. They are easier to implement, generate value more rapidly and allow the customer to pay for the functionality on a variable expense rather than a capital expenditure basis.

In theory, these new services also enable users to acquire all the functionality they need directly from the vendors without relying on VARs and integrators. Of course, if users buy a greater proportion of their solutions directly from vendors, the vendors stand to gain a greater share of the profits. This has raised concerns among VARs and integrators that the vendors are intentionally seeking to expand their on-demand offerings to cut out the channel.

While ThinkStrategies’ research shows that the growth of on-demand services such as SAAS and managed services is for real, we have also found plenty of ways for channel partners to capitalize on the on-demand trend. A couple of examples of companies that have taken advantage of the fertile opportunities in this new market follow.

Bluewolf is an independent consulting company founded in 2000 that specializes in the deployment of SAAS in general and Salesforce.com in particular. Although Bluewolf is hardly a household name outside of the Salesforce.com “ecosystem,” it has quickly become the largest integrator of on-demand CRM (customer relationship management) solutions with successful deployments at Bank of America, ADP, General Electric, Wall Street Journal, Staples and Ann Taylor. It is now expanding into other sectors of the SAAS market.

At the other end of the SAAS spectrum, CompUSA recently inked a deal to become the first mass-market retailer to offer on-demand software to SMBs (small and midsize businesses). Specifically, CompUSA is offering NetSuite’s on-demand business management software suite of accounting/ERP (enterprise resource planning), CRM and e-commerce solutions. CompUSA will offer NetSuite implementation, training and support services to SMBs through its 1,100-person, 250-store network.

On the managed services side, management solution vendors like Everdream, Kaseya, Klir Technologies, Logix Resource Group, and SilverBack Technologies are adding an assortment of regional and national resellers who want to offer MSPs (managed service providers) to their channel networks. These new channel partners want to add another level of remote management services to their portfolios that provide greater value while lowering their on-site support costs. In each case, they are leveraging new remote services to generate revenue streams and gaining greater profitability while building more loyal customers in an increasingly competitive market.

Click here to view exclusive channel research from Amazon Consulting.

At the opening of Microsoft’s Velocity 2006 worldwide partner conference in Boston, CEO Steve Ballmer formally launched the company’s Dynamics CRM Live platform, acknowledging, “This industry is full of change. Some call it a disruption. But change is the nature of our industry, and the change that we’ll go from running [technology] infrastructure on the Internet is inevitable.” He went on to say, “Microsoft has to embrace it, and our partners have to embrace it. We need to work together to find new opportunities.”

Making the transition to an on-demand business orientation is not easy for established VARs or integrators. It means retraining sales and delivery staff, restructuring go-to-market strategies, and revamping your revenue recognition models.

But, as an increasing number of creative and committed channel organizations are discovering, on-demand can also put you in an advantageous position among customers who are no longer willing to accept the old ways of doing business.

Jeff Kaplan is the managing director of ThinkStrategies, a Wellesley, Mass.-based strategic consulting services company, and the founder of the Managed Services Showplace and Software-as-a-Service Showplace. He can be reached at jkaplan@thinkstrategies.com.