When did software-as-a-service emerge from the shadows and take centre stage? Xero’s emergence from a lightweight accounting product hosted on the cloud to a platform with its own partner ecosystem is as good a herald as any. For many in the software-as-a-service (SaaS) industry, it proved their time had come.
New Zealand-based Xero, a provider of accounting software services, may have made headlines last year with a $180 million investment and user base shy of 250,000, but it wasn’t the only SaaS vendor that made major strides. In 2013, SaaS and cloud started to become the default option for many customers, and partners needed a compelling reason to suggest an on-premise solution.
According to interviews Telsyte did with 324 Australian CIOs and IT decision-makers, SaaS penetration is as high as 63 percent. Telsyte predicts software spending to rise 5 percent this year as CIOs seek greater interoperability and certainty in subscription costs.
Looking ahead to 2015, CRN believes that partners without a go-to-market cloud strategy are at risk of irrelevance.
Alongside established SaaS vendors Dropbox, Salesforce, Evernote and Google Apps, a cohort including AccelOps, Custora and Rootstock offer fresh opportunity. However, partners may not need to go past existing relationships as vendors buy or build cloud solutions.
Time to research, audition and build relationships with promising SaaS vendors is the number one barrier. “The cloud has taken away a lot of systems integration complexity,” says Xero managing director Chris Ridd; in its place “the concept of a cloud integrator is starting to emerge”.
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• The origins of software-as-a-service
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For resellers, the SaaS opportunities are leavened with fear, uncertainty and doubt. How will I manage my cashflow as it transitions from big, upfront sales to annuities? What is to stop the vendor wedging between my customer and me? Won’t I have to cannibalise my existing products that have high profit margins?
While these are valid questions to ask, the fear can be over-amplified, says NewLease head of cloud strategy Stephen Parker.
“One of the great myths was somehow there would be this big dip in revenue,” Parker says.
“But you’re either a start-up in the cloud with low overheads who builds the book quickly or you’re an existing player who is going to continue selling what you’ve always sold and just a percentage will diminish as more cloud stuff comes onboard.
“How do you manage the transition? You have to say, ‘I’ll sell cloud in everything I do and the hybrid will shift over time’ or ‘I’ll have a start-up unit that I’ll load all the costs into’.”
Resellers must understand that consumption patterns have changed. The long, slow burning and big-dollar deals were replaced with rapid decision-making and incremental features. Think of SaaS like the discretionary lollies that line the supermarket checkout aisle. Now, imagine the whole supermarket is like that – that’s what selling SaaS is like.
“In a world where a customer can turn off a service, you must have great customer satisfaction because time to value is critical,” Parker says.
“The smart thing isn’t to sell $1.5 million of software but to deliver just enough to get a quick win and then come back in a month because I don’t want to complicate things. But for an extra $1 a mailbox I can give you the advanced reporting model.”
Next: Microsoft vs Google
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