The AMI-Partners Blog

Despite what could be considered the most challenging economic environment for information technology, one segment of channel partners is thriving in this market. The economic downturn has forced a number of channel partners to reassess their business model and look beyond their current portfolio of IT solutions. This has led to the growth of partners focused on providing Software-as-a-Service based solutions (SaaS partners). SaaS partners continue to drive significant growth by addressing the key challenges faced by their Small and Mid-sized Business (SMB) customers.

As the recession takes a tighter hold on global IT markets, the attitudes and purchasing behaviors of SMB customers have changed dramatically.  Now even the smallest businesses cautiously calculate the practical and financial impact of their IT investments. Given these challenges, the priorities for SMBs have shifted from longer term growth strategies to more immediate needs, specifically:

1. customer retention
2. efficiency optimization
3. cost control

What separates SaaS Partners from other partners?
SaaS partners provide ideas and solutions that speak to each of the above three areas of their clients’ business. Currently IT solutions with the highest mindshare in the SMB space include software applications such as ERP, CRM and Business Intelligence. A growing number of these SMBs favor a SaaS model because it offers them an opportunity to test the value of the application without making a large capital expenditure. In addition to their focus on the services model, SaaS partners differentiate themselves from their competition on two key fronts:

1. They have a more diversified solutions portfolio – SaaS partners recognize the opportunity to deliver complete, targeted solutions in key verticals (e.g., healthcare, government, education) and generate revenues across the spectrum on hardware, software and services.  With vendor consolidation trending the technology space, more vendors compete across multiple product categories where they were once allied. Vendors seek an all-in-one channel partner with the knowledge, ability and resources to offer a scope of solutions.
2. They are business advisors – with business decision makers (BDMs) keeping a keen eye on all expenditures and playing a more prominent role in the IT purchase process, SaaS partners demonstrate a comfort in educating them on how IT can improve top-line and bottom-line business performance.

IT Vendors need to examine their channel partner strategy.
This increase in SaaS application usage among SMBs, and the corresponding growth in the number of high-value channel partners offering them, signals a strong opportunity for IT manufacturers and vendors – there are currently about 14,800 high-value SaaS partners in the U.S., representing a total IT opportunity of $31 billion. But to tap into this market requires long term commitment from the vendors to support and build the relationship with these partners. It is important for vendors to identify, target and invest in partners not only based on sales performance, but also based on their customer focus and commitment to build their services portfolio.  The traditional sales-based partner pyramid tells only half of the story; where IT vendors are increasingly overlooking potential opportunity is with partners that are selling less hardware because they are in the process of building their hosted services business.

One way that vendors can recruit these partners and build a successful long term partnership is by providing the technical training and education in helping channel partners set-up their infrastructure to provide SaaS and other remote services.  A majority of SaaS partners prefer to offer solutions from their own infrastructure, but the lack of training and support from vendors is an impediment to many.

As the market for SaaS-related SMB services burgeons, now is the time for vendors to act and engage partners by providing elevated levels of service and support. This will be an important factor in assessing which vendors get a strong share of the SMB SaaS market.

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Avinash Arun is Director of Channel Partner Insight at AMI-Partners and can be reached at AArun@ami-partners.com.