By Rob Spee, Founder and CEO, Channel Journeys Consulting
Last week’s 9th annual SaaS Connect conference, hosted by the Cloud Software Association drew 200 vendors, platform and API specialists, marketplace leaders, distributors, resellers and investors who are all focused on the software-as-a-service channel. Over the two-day event, held in San Francisco, I heard the latest trends and compared notes on how other channel pros are tackling the channel transformation driven by cloud and SaaS. Following are four key take-aways from the show.
1. The Importance of Channel to SaaS. The exact role of the channel for SaaS companies is still evolving, but there’s no doubt that the channel plays a critical role in SaaS growth. According to a survey of 1,000 SaaS companies shared by Rob Belcher of SaaS Capital, 53 percent of SaaS companies have channel sales. Those with a channel have an average of 22 percent of their revenue coming from channel. That number rose from 10 percent in last year’s survey but is still a long way from the roughly 70 percent of on-premise software sold through the channel. More importantly, the SaaS companies with a channel are growing revenue 5 percent faster than the companies without a channel.
Thousands of SaaS companies are launching around the world. And they are shifting the idea of what the channel can and should mean. SaaS start-ups are increasingly viewing the channel as more than a network of resellers or referral partners and agents who provide professional services. They see the channel as an ecosystem of technology partners with APIs redefining the nature and value of partnering.
2. The SaaS channel — what’s different. When comparing the SaaS channel with that of traditional IT vendors, there are many similarities and a few key differences. The core channel fundamentals are no different for a SaaS company versus a traditional IT vendor — strategy, internal alignment, team building, focus on quality partners and enablement. These core principals apply. What’s different is the types of partners, the revenue models and the challenges of distribution.
SaaS companies can and do leverage the traditional channel of VARs, system integrators, and managed service providers (MSPs). They need a network of referral partners. And many would benefit from an app store and/or marketplace with APIs to attract partners who will develop targeted solutions on top of their SaaS offering.
According to Daniel Saks, co-CEO of App Direct, 84 percent of ISVs agree that APIs are the only way to quickly innovate by vertical. Digital services are taking over traditional services at an increasing rate. The digital service economy has already reached $1 trillion. And it’s happening in every vertical from manufacturing to health care to entertainment. This is a huge opportunity for SaaS channel partners.
3. The SaaSification of channel management. SaaS is transforming all areas of business and it’s starting to transform channel management. I’ve worked with several SaaS channel technology vendors as a Channel Chief and met a few new ones at SaaS Connect with innovative solutions.
One of these is SaaS start-up called Crossbeam. Bob Moore, the co-founder of RJ Metrics and Stitch, launched Crossbeam after his two prior companies were acquired. Bob presented how they are solving the Partner Prisoner’s dilemma. The Prisoner’s Dilemma of game theory was solved by mathematician John Nash, who was portrayed by Russell Crowe in the movie “A Beautiful Mind.” The prisoner’s dilemma happens when …