SaaS/cloud adoption was very strong in 2017, reaching $46.3 billion by year’s end, Gartner predicts. As adoption increased, the IT services channel has been forced to move quicker in its own adoption, service creation and sales of SaaS/cloud products. I expect to see an even faster rise of SaaS/cloud adoption next year as channel companies continue to tool their business models to SaaS/cloud, which will drive adoption in the SMB space to new heights.
As in any industry, there are always going to be naysayers touting SaaS/cloud as the last nail in the coffin for the IT services channel. I believe it will be just the opposite; we are seeing the evolution of the IT services channel into the SaaS/cloud world, as well as the rise of a new channel.
SaaS’ impact on the IT channel
Despite a fair number of IT service providers who’ve been resistant to change, the channel as a whole still comprises many engaged, growth-minded entrepreneurs who thrive on meeting their customers’ ever-changing demands. Remember the death knell predictions of break-fix companies? I do. Many of them didn’t just throw in the towel and walk away. They evolved and flourished by changing their business model and structure to adapt to new technologies and changing customer needs. We are now seeing the same thing happening today as IT applications and infrastructure moves to the cloud.
SaaS is enabling a new service provider business, whether it’s via the evolving traditional IT services channel (e.g., retail VARs, managed cloud services providers) or from nontraditional companies such as PR firms, CPAs, marketing/SEO consultants, and business consultants. All of these firms are enjoying additional revenue from SaaS applications and will have a great impact on sales growth for ISVs who know how to cater to them.
Where SaaS is taking us in 2018
In a recent study conducted by Carolyn April, Senior Director of Industry Analysis at CompTIA, titled, “Software-as-a-Service in Today’s Channel,” April reveals several insights on the future of SaaS. “Three quarters of the channel respondents in the CompTIA study say their cloud-based sales included SaaS-related activities,” she says, “and the number one reason channel partners say they have added SaaS to their portfolio is customer demand. Partners report most of their SaaS-related revenue is coming from customization and integration services.”
Correlating these statements, we have an idea of where SaaS is headed in 2018 — up! Add in the services opportunities for the channel, and a perfect storm, where SaaS is the eye, is created. Considering the channel is the place SMB customers get their services and products and considering CompTIA’s finding, SaaS in the channel is going to be explosive. If 2017 is the year of SaaS, then 2018 will be: “The Year of SaaS in the Channel!”
SaaS-related trends and predictions for 2018
When it comes to SaaS in the channel, the biggest trend and threat for 2018 and beyond is verticalization. Many SaaS applications are verticalized around broader vertical categories like retail, medical, or financial. However, most SaaS vendors are specialized within a subset of the vertical. So, the SaaS app may be a fit for the whole vertical (e.g., healthcare), but it is especially good at a particular subset of that vertical (e.g., long-term care facilities).
Many service providers who’ve been used to selling managed/break-fix services across a number of markets in the past, struggle with honing their services and marketing messaging to the sub-verticals where SaaS really differentiates itself.
The biggest opportunities for ISVs in 2018
Every day new SaaS products are being introduced to the market making the ISV market more competitive. Can an ISV afford to go head-to-head with each competitor simply by growing its in-house sales team? Many ISVs may not have the cash to grow their teams. So, how can they reduce their attrition rates?
An ISV might think it has the best product on the market. Even if it does, it really doesn’t matter. What matters is how an ISV can scale and how fast it can capture a sufficient revenue stream to grow to the next stage and outpace the competition.
ISVs utilizing the channel properly will have a competitive advantage and, eventually, a lower acquisition cost than those that do not.
Here are a few points to consider:
- ISVs utilizing a channel and keeping a channel involved in the renewal process have a 60-70% higher client retention rate.
- The channel is where SMB clients go to get their products and services. Even if you acquire clients, the channel will see your product and will find a competitor they can sell, install/integrate and manage. So, if you lack a channel or aren’t keeping them in the renewal process, channel companies will work against you, so they can make money, too.
- The channel can be your competitive advantage. It will make your SaaS offering more appealing to clients. Remember, many of your channel partners will want to bundle your SaaS application with other SaaS applications to provide customers with more comprehensive solutions. They are very good at this, and this activity should be encouraged.
What ISVs can expect to see from SaaSMAX in 2018
As the trend toward verticalization continues, our platform is adding more SaaS apps within a diverse mix of verticals every week to satisfy this need for our channel community. We are much more than just a marketplace listing of apps; think of SaaSMAX as a go-to distributor of SaaS products that provides customers with all of the resources and tools they need to be successful. We check in regularly with our clients via our matchmaking team, which is specifically focused on helping ISVs find the right VARs and MSPs (and vice-versa) to sell their software. Our vendor accounts managers strive to ensure our vendor and reseller customers are on track with their goals and expectations.
Further, because we want to always provide resources and tools to help our customers, we are furthering our commitment to education and professional development through our many assets such as our blogs, newsletters, best practice case studies and our cybersecurity roadshow, which we will be announcing in the New Year.