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The Problem with SAAS

The problem with Software as a Service isn’t the fact that the technology isn’t ready, it isn’t the fact that end users aren’t ready, it is the fact that SAAS vendors are blinded by confusion as to how SAAS and the channel can work together. One of the major problems in the past with SAAS […]

Written By: Sara Driscoll

Apr 4, 2008

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The problem with Software as a Service isn’t the fact that the technology isn’t ready, it isn’t the fact that end users aren’t ready, it is the fact that SAAS vendors are blinded by confusion as to how SAAS and the channel can work together.

One of the major problems in the past with SAAS has been a combination of end-user trust – many firms still want to host their software on site, and one of demand – many end users still were not sure about what SAAS was really about. But the real problem now is that vendors need the channel as the conduit to get this new delivery method for software off the ground, but cannot work out the right way to utilize solution providers in the best way.

Having previously only had one true major player in the game, Salesforce.com, the entrance of Microsoft and Google has helped to legitimize this market in the eyes of the end user, and therefore demand for SAAS is growing.

But the challenge is that vendors cannot work out how VARs should be recompensed for this type of software delivery; whether they should be paid a referral fee, paid for implementation and consulting, or paid in ways such as an agency model. And until vendors can get their heads around this new type of rebate or compensation structure in the channel, the SAAS market could falter.

While large enterprises still have issues regarding holding their software off site, and realistically there are only 20,000 or so very large companies in the United States, it is the midmarket and below where technology battles are won. Hence the onslaught of vendors over the past several years to own this market segment. IBM, Cisco, Dell, Microsoft and HP – all have launched SMB initiatives in their hundreds within the past five years, and each has declared very publically how they need to win the SMB space.

And who are the guardians of SMB’s technology? The channel. The challenge comes because when SMBs start looking at SAAS and ask their trusted adviser – the solution provider – many VARs will either be ill-equipped to offer such a solution because of lack of vendor training, or they will know that they are unlikely to be compensated as well for on-demand software services and encourage the SMB to stick with the on-premise solution.

So, if SAAS, which does represent a good incremental chunk of business for the channel, has any future, vendors must organize their channel programs, their training and their remuneration structure to give this sector any chance of taking off and help to boost channel coffers.

The Problem with SAAS

Sara Driscoll

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