In my recent interview with Forrester Research senior analyst Michael Speyer, he explained that software-as-a-service is showing the typical "S curve" seen in adoption of new technologies. While big gains in adoption are common at first, they tend to level out as folks become more familiar with the technology.
One of the key factors that could hinder adoption, says Speyer, is SaaS vendors' lack of an effective sales channel for their products. SaaS vendors have traditionally used a direct sales model. While this has worked well for companies like Salesforce.com, it won't work as well for companies with more niche offerings. Says Speyer:
Success is going to be dependent on the channel. Software companies live and die by the channel. You can have the greatest product going, but if you have no channel program, you're never going to make it.
Indeed, as I blogged back in October, tech companies are scrambling to build strong partner relationships to reach the desirable SMB segment -- and that includes companies like Dell, which based its sales strategy almost exclusively on a direct model.
Part of the problem, says Speyer, is that SaaS revenues don't look as attractive as on-premise software for sales partners.
... the economics of the two are very different today. If you look at the money that can be made off licensing fees, it's much more for on-premise software. Then there's customization, that's almost taken off the table with SaaS. The integration work will still be there. More often than not, if you get a relatively rigid piece of software (like SaaS), businesses are going to have to figure out how to adapt to fit the software. So there might be a real market for business process consultants. But how many of these small systems integrators have consulting skills? We may see a model where you have consultants working on multiple projects -- instead of doing two or three projects a year, they might do 10 to 13 projects.
In addition to shifting of skills, as Speyer describes above, sales partners will likely have to contend with an expected SaaS market shakeout. He says:
There are so many SaaS vendors out there today. I think there is going to be a huge shakeout. How can there not be? It reminds me of 10 years ago, when you had all those comparative local exchange carriers (CLECs), all going after the SMB market.
At least one SaaS vendor, Intacct, is trying to attract potential channel partners by offering a sales model not unlike what they are used to with on-premise software. As ChannelWeb reports, partners will not only sell and implement Intacct's software, but also handle billing and other customer management tasks. Another incentive is what the company's sales VP calls "generous discounts" on subscription fees that should help partners build healthier margins.
In addition, Intacct sales reps will be paid incentives to work with channel partners. The company will also offer its partners implementation training and certification and the opportunity to work with Intacct engineers during their first few projects.
According to ChannelWeb, Intacct hopes that partners will help it shorten its sales cycles and give it a particular boost with companies that have 20 to 500 employees.