THINK IT Services

Last year, I predicted that 2009 would be the year of the channel in the Software-as-a-Service (SaaS) market and a growing number of SaaS industry leaders have obliged me by expanding their sales efforts in this direction.

The latest is Salesforce.com which announced today that it is launching a new value-added reseller (VAR) program to encourage third-party companies to build on its Force.com platform and extend the reach of its AppExchange into new market segments.

Salesforce.com’s announcement comes on the heels of NetSuite’s recent enhancements to its VAR program aimed at strengthening its position in the market.

Because of Salesforce.com’s greater prominence in the marketplace, its new initiative is bound to bring even more attention to the rapidly evolving role of channel companies in the SaaS market. In Salesforce.com’s case, there move represents an important milestone in the company’s evolution and that of the SaaS movement as a whole.

Until now, the company has placed all of its sales efforts on selling directly to end-users. Although it was also well-aware of the importance of encouraging third-party developers to build applications that enhanced its core applications via the AppExchange and ultimately the Force.com platform, it readily admitted in the past that it didn’t see much opportunity to build channel partners into its go-to-market strategies. As a result, the company aggressively recruited enterprise salespeople instead to attack the mid- and large-scale enterprise market.

In my view, the following forces have combined to change Salesforce.com’s attitude toward VARs in the SaaS market,

1. Today’s economic environment has made it more difficult to penetrate new accounts. With the cost of sales escalating, SaaS vendors must find more economical ways to win new business instead of relying on high-priced sales executives. (Salesforce.com recently recruited Doug Dennerline from Cisco’s Collaboration/WebEx unit to become its new Executive VP for enterprise sales in the Americas to reinvigorate its direct sales efforts.) 
2. VARs are a natural target for sales expansion. Although customers are fed up with their legacy applications, they are still wedded to their ‘trusted’ suppliers, and are reluctant to move to new products or technologies without the help of their current suppliers. These ‘trusted’ suppliers tend to be their local and/or industry-specific VARs.
3. Enlightened VARs are increasingly recognizing that they must migrate to a SaaS orientation in order to survive and thrive in the future. Traditional VARs have been fearful and resistent to SaaS solutions because they threatened their fundamental value proposition (complexity) and potentially undercut their relationship with the customer (account control). Now, they are willing to explore ways to build SaaS into their business model.  
4. Technological advancements are also facilitating third-party development and delivery of SaaS applications. Today’s Platform-as-a-Service (PaaS) offerings, such as Force.com, make it possible for VARs to develop and deliver industry-specific solutions.
5. Maturing SaaS vendors are identifying new revenue-sharing opportunities in the SaaS supply/value-chain that can permit them to enlist VARs, and other channnel partners, without seriously hurting their operating margins.

In addition to these market forces, Salesforce.com’s VAR program is built on its own history of success working with companies, such as Veeva Systems (formerly, Verticals OnDemand), who have been configuring its basic apps into industry-specific solutions for years. I suspect that more companies of this nature will emerge as a result of Salesforce.com’s new program.

At the same time, a new generation of professional services/system integrator is also arising. This new breed is typified by Appirio which not only helps customers build unique apps on top of PaaS offerings, but they also retain the marketing rights to these custom apps so they can be resold via AppExchange and other online outlets. In so doing, these new PS/SI companies are blurring the line of demarcation between their role and that of the traditional VAR.

A case in point is Appirio’s latest professional services automation (PSA) offering, which escalates its growing competition with NetSuite’s PSA suite built on the combined resources of OpenAir and QuickArrow.

All of this adds up to an exciting new dimension of third-party activity surrounding the rapidly evolving SaaS and cloud computing world.

PS: In addition to reporting and consulting on these topics on an ongoing basis, I’m pleased to be participating in the following industry events which will also examine the implications of these trends: Cloud Futures and the SIIA’s OnDemand Conference.

Contact me at info@thinkstrategies.com if you’d like to discuss these trends further or need help addressing these issues.

After chairing last week’s Cloud World conference in San Francisco last week, I’m pleased to be serving as the chairman of the Cloud Futures for Software Vendors Conference taking place in San Jose, CA, this October 5 – 6.
 
This event is for established software vendors who are attempting to overcome the challenges associated with migrating to a Software-as-a-Service (SaaS) and cloud computing model so they can capitalize on this rapidly growing market.
 
The conference will include speakers from the National Institute of Standards and Technology (NIST), Forrester Research and Cloud Security Alliance, along with presentations by representatives of many leading vendors in the SaaS and cloud computing industry, including Amazon Web Services, IBM, Salesforce.com, LiveOps, Callidus Software, Enomaly and others.
 
Our goal is to help software vendors achieve:

• CLOUD ECO-SYSTEM EXCELLENCE: Identify the partners you need to get your SaaS off the ground and run it the way you want – without compromise or change to your goals.
• SAAS BUSINESS MODEL BEST PRACTICES: Find out the best way to re-architect your applications, re-phrase your marketing and re-structure your pricing and distribution model to make sure you are reaping the in your SaaS profits as soon as possible.
• REACH NEW REVENUE THROUGH THE CLOUD: Take home the top tips to take your business global and access brand new markets through the SaaS distribution channel – enabling you to rack up revenue from across the world and on-demand.
• GET BROAD BUY-IN FOR CLOUD: Learn how to overcome your board’s concerns on security, data and supply chain management by delivering a projected balance sheet that clearly shows cloud computing’s silver lining – big time profits.
• BUILD A CLOUD COMPUTING ROADMAP: Discover the best way to take your first steps into the cloud by hearing how top SaaS providers such as Callidus On-Demand built their profitable businesses from the ground up.
• REDUCE RISK AND RAMP UP CLOUD SECURITY: What you need to know about enterprise risk, information & lifecycle management, compliance and audit, incident response and more.

You can find the rapidly evolving conference agenda at www.cloudfutures.com/usa/agenda.shtml.
 
You can obtain a $200 voucher by following these easy steps:

1) Register for the conference online at secure.firstconf.com/cloudfutures/usa/register.htm and type “think1633″ into the discount box provided, or

2) Call the Cloud Futures team at 800-814-3458 ext 220 and mention “think1633″ when you register, or

3) Email ravi@cloudfutures.com and type “think1633″ into the subject line (don’t forget to include your contact details). 
 
Contact me at info@thinkstrategies.com if you are interested in speaking and sponsorship opportunities, or have any further questions.

I look forward to seeing you in San Jose.