The Software as a Service (SaaS) model is a tremendous model for the Independent Software Vendor (ISV) to reach new target markets without cannibalizing existing revenue streams. Many ISVs have created perpetual licensing models that are targeted at large enterprise software vendors who are willing to purchase software goods at high prices and renew these license terms on an annual basis. Although this has proven to an extremely profitable model for many ISVs, this model often neglects or excludes the SMB market.
Enter Software as a Service!
Migrating or extending existing software appications to the SaaS model often opens up new market opportunities, due to the subscription based nature of SaaS. Where the price point for entry may have previously been above the 50K mark, SaaS based offerings can reduce the barrier to entry by providing services to many thousands of subscribers rather than hundreds of enterprise class companies. Rather than creating a situation where the existing revenue stream of perpetually licensed products is cannibalized by the new SaaS offering, it is often possible to target the small to medium vendor segment, generate additional revenue opportunities, and develop a profitable migration path for existing enterprise customers to also take advantage of the SaaS offering.
ISVs considering entering the SaaS market should consider that SaaS revenues are increasing rapidly. According to IDC, by 2010, subscription based revenues will account for 8% of all software revenue. ISVs can take advantage of this trend by rapidly developing SaaS applications to enter new markets, expand existing market share, and migrate existing customers to a more cost effective delivery platform.
In considering entering the SaaS space, ISVs should consider the operational benefits associated with supporting a single version of a hosted platform, as well as potential revenue from professional services engagements to migrate existing customers from perpetually licensed models to the subscription based SaaS model. If planned properly, the migration from the perpetual license model to the SaaS model can increase professional services revenue, provide short-term diversification to revenue streams, and provide long-term predictability for SaaS based revenues.
Friday, February 15, 2008
Friday, February 1, 2008
Utilizing SaaS to Address the Channel
For many companies creating a SaaS application, often times one of the last considerations is how to support channel partners in the SaaS model. As many business models rely on channel relationships for growth and stability, overlooking support for channel partners can be a costly mistake.
There are a number of items to consider in creating a SaaS application that supports the channel model.
First, will the look and feel of the application need to specific to each channel partner or VAR? Depending on the relationships with your channel vendors, it may be necessary to co-brand or display your SaaS offering in the channel partner look and feel. This requirement should be factored into the design of your SaaS application because your SaaS application may need to be both multi-tenant and multi-channel. There are eloquent strategies to solving this problem but they are difficult implement retroactively.
Second, how will you share the data in your SaaS application with your channel partners? Depending on the type of relationships you have with your channel partners, you may need to support many different types of sharing relationships. A couple examples of these sharing relationships are the single-blind and double-blind models. In a single-blind model, the Original SaaS Manufacturer (OSM) will be able to see all or some of the data accessible to the channel partner but the channel partner can see none of the OSM data. Depending on contractual relationships, this model can also be reversed to ensure the OSM does not see portions of a channel partners data. In a double-blind model, neither the OSM nor the channel partner is allowed to view or utlize the data of the other party. The need to support these models often arises from sensitivity to sharing customer or order information. Ensuring that these complex sharing relationships are incorporated into your SaaS application will be key to successfully implementing a SaaS based channel strategy.
Lastly, SaaS applications successfully supporting the channel will need to build on complex data sharing relationships to provide appropriate reporting frameworks. Considering how your channel partners will need to leverage the data in your SaaS applictation will go a long way towards enticing additional channel streams to utilize your offering. It is important to consider how the channel partner’s needs will differ from a direct customer with regard to reporting. It is highly likely that items such of Point of Sale reports for the channel will need to include additional attributes that go beyond the needs of the direct customer.
Leverging the channel in a SaaS based application can help to drive revenue streams and deepen partner relationships. Taking the time and care to address channel needs as part of the upfront SaaS design process will be time well spent.
There are a number of items to consider in creating a SaaS application that supports the channel model.
First, will the look and feel of the application need to specific to each channel partner or VAR? Depending on the relationships with your channel vendors, it may be necessary to co-brand or display your SaaS offering in the channel partner look and feel. This requirement should be factored into the design of your SaaS application because your SaaS application may need to be both multi-tenant and multi-channel. There are eloquent strategies to solving this problem but they are difficult implement retroactively.
Second, how will you share the data in your SaaS application with your channel partners? Depending on the type of relationships you have with your channel partners, you may need to support many different types of sharing relationships. A couple examples of these sharing relationships are the single-blind and double-blind models. In a single-blind model, the Original SaaS Manufacturer (OSM) will be able to see all or some of the data accessible to the channel partner but the channel partner can see none of the OSM data. Depending on contractual relationships, this model can also be reversed to ensure the OSM does not see portions of a channel partners data. In a double-blind model, neither the OSM nor the channel partner is allowed to view or utlize the data of the other party. The need to support these models often arises from sensitivity to sharing customer or order information. Ensuring that these complex sharing relationships are incorporated into your SaaS application will be key to successfully implementing a SaaS based channel strategy.
Lastly, SaaS applications successfully supporting the channel will need to build on complex data sharing relationships to provide appropriate reporting frameworks. Considering how your channel partners will need to leverage the data in your SaaS applictation will go a long way towards enticing additional channel streams to utilize your offering. It is important to consider how the channel partner’s needs will differ from a direct customer with regard to reporting. It is highly likely that items such of Point of Sale reports for the channel will need to include additional attributes that go beyond the needs of the direct customer.
Leverging the channel in a SaaS based application can help to drive revenue streams and deepen partner relationships. Taking the time and care to address channel needs as part of the upfront SaaS design process will be time well spent.
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