Managed service providers and value-added resellers in the Australian marketplace develop different plans to succeed in business. Do many include making money from selling software-as-a-service? I doubt it.
With all this noise about cloud, it can be difficult to understand SaaS and cloud for what they actually are – more tools to achieve our original plans for growing IT businesses.
Let’s start with why the cloud exists.
SaaS is a great way of delivering innovative services to many people reliably, simply and cost effectively.
When SaaS is done right the vendor invests into building services with best practice implementation to ensure reliability – and through their success can cost effectively deliver the service to many people.
Customers of SaaS should experience a simpler delivery model where they no longer need to purchase hardware, software and implementation services to achieve their otherwise complicated computing requirements.
Examples of successful SaaS models locally are email filtering (for spam and virus), accounting software (Saasu/Xero), CRM (Salesforce/NetSuite), feature rich email services (Gmail/Managed Exchange), and knowledge sharing (Confluence, SharePoint and Wikis). Where the wheels fall off is when SaaS is poorly implemented, and this can result in services which do not achieve the SaaS promise of reliability, innovation and simplicity.
(Also, SaaS on its own without the right support systems for the market, direction and ongoing innovation is by virtue of the model unlikely to succeed.)
Now, this is all great for the end user, but not many IT businesses rejoice at the thought of their customers using less hardware, less software and not requiring installation or maintenance services – that is, unless the IT company is the one responsible for paying for all of this.
The simple answer to making money out of SaaS – and let’s face it, SaaS isn’t going away – is to turn the customer/IT provider model on its head and make the IT provider responsible for the costs of server hardware, support, maintenance, delivery and installation.
This is good news for MSPs out there as they are already using this model. For MSPs it is a case of selecting the right SaaS technology or partner that is aligned with their business goals and is well supported. The best SaaS solution is the one that reduces your support calls, simplifies delivery and maintenance of your services, provides a strong, best-of-breed but simple solution to your customers, and delivers the best support, training and certification of your team.
Support from the SaaS vendor can augment your technical resources in specialised areas, enhance best practice implementation and reduce troubleshooting/ implementation timeframes.
For VARs, time is money. Find a solution you are happy with that takes the least amount of your effort to provision and maintain. You must be confident that if you are ever in a spot you know that the SaaS provider will be there to back you up.
Most VARs that I have worked with have been big believers of the adage that “I don’t have to know how to do everything – I just need to know someone who does”. In the specialised worlds in email and web security, compliance solutions, backups – your Saas provider becomes your “go-to guy” for anything in this space, so make sure you pick a company that you know will be there!
Did I mention margin? Margin is always important and should be linked to the aggregate amount of seats you currently maintain and aim to achieve. Many SaaS vendors try to migrate existing telco and software distribution models of “price breaks, per volume, per each of your customers”. In SaaS, your vendor should be providing discounts/buy rates based on total aggregate seats across all services that you sell.
Making money from SaaS sales directly is a long, but worthwhile road. Keep in mind that, with the average SaaS services (email filtering, email archive, web filtering, managed mail) costing around $6.00 per user per month and the average MSP being between 200 and 2000 seats, even at 30 percent margin you are making $1.80 per user per month, or $21.60 per user annually.
So, for an MSP with 400 seats equating to approximately 25 customers, each of those MSP customers will be paying at least $10k/year (often closer to $30k+/ year) for your MSP services.
So the revenue from managed services is $250,000-$750,000.
The profits from SaaS is $8640 (per service).
So it seems perfectly clear where your focus needs to be. Build your core business – the SaaS profits are the cream.
SaaS will add profit to your bottom line that will increase reliably as you grow the business to become a “passive income”. Where it really makes money for MSPs and VARs is by providing high-value, low-cost reliable tools to help you achieve your commitments to your customers.
SaaS is particularly well placed as it allows you to scale quickly and with the right selection of tools. A SaaS partner or vendor can provide significant leverage for your business by both simplifying the way you deliver core services while also reducing your capital expenses. SaaS positions your business in the market as both leading, and using, best of breed technology to deliver robust solutions to your customers.
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