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Three Ways Belgium is… Like The Channel…

SaaS: Why the Channel Does (and Doesn't) Buy It

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A presentation for Channel Focus conference that explains why the Channel is slow to adopt SaaS...An explanation of the channel mentality and how vendors might build a faster bridge to SaaS with channels. Opens with 3 points about Belgium where conference was held.

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Page 1: SaaS: Why the Channel Does (and Doesn't) Buy It

Three Ways Belgium is… Like The Channel…

Page 2: SaaS: Why the Channel Does (and Doesn't) Buy It

400 Beers, 400 Glasses

Page 3: SaaS: Why the Channel Does (and Doesn't) Buy It

Certification is Important

Page 4: SaaS: Why the Channel Does (and Doesn't) Buy It

TASTE VARIES…

Page 5: SaaS: Why the Channel Does (and Doesn't) Buy It

Why The Why The Channel Channel Does (and Does (and doesn’t) doesn’t)

Buy Buy SaaSSaaS

Bob SnyderEditor-in-ChiefThe Distribution Channel Ltd.

Page 6: SaaS: Why the Channel Does (and Doesn't) Buy It

Oracle will release a suite of 43 Web-based software modules in 2010 to help corporations manage tasks from accounting and human resources to sales and procurement.

What’s A Nice Guy Like You Doing in A SaaS-y Place Like This?

Page 7: SaaS: Why the Channel Does (and Doesn't) Buy It

Gartner Research expects 2009 SaaS sales to surge 22%

to a record $8 billion. They

expect average annual rates of

19% through 2013 vs. 5% growth in

business management

software market.

Page 8: SaaS: Why the Channel Does (and Doesn't) Buy It

The Opportunity• SaaS Growth 33% PA

• Emaill, Sharepoint , CRM lead the way

• 1/3 of the world population on web by 2011

• 4 Billion Mobile Subscribers by end of 2008

• 15 PB of data generated everyday (more than all the books in all the US libraries

• 64 Billion credit card transactions per annum

• 52% of Europe’s IT Spend is in-direct i.e vendors are not trusted advisors to 52%

Page 9: SaaS: Why the Channel Does (and Doesn't) Buy It

Software-as-a-Service moving to the mainstream

• Zealots want us to believe that on-premise enterprise software will be as extinct as the dinosaurs in 10 years

• Detractors call it “fad”’ and point to the minuscule market share of SaaS in the enterprise.

Page 10: SaaS: Why the Channel Does (and Doesn't) Buy It

The Disparity• ..there is enormous

disparity in the performance of SaaS businesses - from rapidly growing startups to embarrassingly unprofitable public companies

• Only a handful of true success stories like Salesforce.com and Taleo where growth, profitability and ROI have gone hand-in-hand.

Page 11: SaaS: Why the Channel Does (and Doesn't) Buy It

If SaaS is to exceed in a mainstream way, it must win the hearts and minds of channel partners.

Page 12: SaaS: Why the Channel Does (and Doesn't) Buy It

Why We Need Channel• To specialize in the deployment,

management and billing of enterprise services for the SME

• Vendors will provide vast cost savings to the SME by using the multi-tenanted architecture approach and will deliver profitable partnerships

• Vendors business will NOT scale without the channel

• Flexibility and responsiveness to assist with adoption of SaaS within business in terms of consulting and migration from on-premise – the channel will need to drive this for vendors

Page 13: SaaS: Why the Channel Does (and Doesn't) Buy It

SaaS – Shifts in ResponsibilityModel Package Applications Model Software as a Service Model

Delivery Customer pays on delivery of software and responsible for deployment

Customer pays for delivery of business function

Performance Customer responsible for software performance

Provider responsible for software performance

Business Requirements

Customer responsible to customize software to business requirements

Customer responsible to configure software to business requirements

Maintenance Customer pays for maintenance to fix software

Provider fixes software (or pays penalty) and delivers to all

Currency Customer buys upgrades to keep current

Provider ensures currency of solution

Page 14: SaaS: Why the Channel Does (and Doesn't) Buy It

Channel Partners are Mugwumps

To SaaS or Not?“You first.”“No, you first!”

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Yes, We Like SaaS• It sounds like another

Gold Rush…• It helps us to sell more

solutions to our clients• It compensates for lower

hardware margins• It offers steady income• It can give partners new

name brands that add to reputation and line card impact

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No, We Don’t Like SaaS…• Re-training staff – new skills and

knowledge will be required• Re-purposing staff – customer services

will be pro-active account management

• Changing compensation plans to drive the new required behaviours

• Investing in new technology to bill customers

• Risking revenues today for revenues tomorrow

• Changing role in vendor sales cycle

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No, We Don’t…

• False promise that Big Companies Make to Smaller Ones…

• We’ve seen this before…

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No, We Don’t…

• Lack of clear compensation agreements…

• How can we make some money, too?

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No, We Don’t…

• The multiple year revenue stream increases Risk of Exposure

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No, We Don’t…

• The vendors will keep all the Big Deals, even if we initiate the sales

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The Vendor Says….

• “’I can’t trust anyone that’s not my direct sales force…”

+ Actual quote from vendor to reseller at this year’s IT CHANNEL VISION…

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The Channel Response…

Just because you don’t own your wife, doesn’t mean you can’t trust her…

“We thought this was supposed to be like a marriage?”

Page 23: SaaS: Why the Channel Does (and Doesn't) Buy It

No, We Don’t…

• The vendors will SUCK US IN, and then cut better deals with other channel…

• Microsoft BPOS in Holland: “A miscommunication. We were just

trying to open the market up for all of us…”

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No, We Don’t…

• It brings up all the old arguments but center on the core issue of yore:

• WHO REALLY OWNS THE CUSTOMER?

Page 25: SaaS: Why the Channel Does (and Doesn't) Buy It

No, We Don’t…

• Weapon of SaaS Destruction: The Security Issue

Page 26: SaaS: Why the Channel Does (and Doesn't) Buy It

No, We Don’t…

• But even beyond “The Security Issue”…

• The channel still questions the current RELIABILITY for Software as Utility… and IT as Utility

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Recent High Profile Cases

• Sidekick data disruptions, T-Mobile dropped this bomb: "Regrettably, based on Microsoft/Danger's latest recovery assessment of their systems, we must now inform you that personal information stored on your device — such as contacts, calendar entries, to-do lists or photos — that is no longer on your Sidekick almost certainly has been lost as a result of a server failure at Microsoft/Danger. …”

Page 28: SaaS: Why the Channel Does (and Doesn't) Buy It

The Reliability of Utility• A power outage Sunday morning at an IBM data

center took down the mainframe equipment handling Air New Zealand's check-in services, online booking system and call center, affecting more than 10,000 passengers…the passenger backlog didn't start to let up until the self check-in kiosks came back online 6 hours after the crash.

• IBM expressed its regrets and said the likely cause was a failed oil pressure sensor on a backup generator during a scheduled maintenance session.

Page 29: SaaS: Why the Channel Does (and Doesn't) Buy It

And, says the client…• Air New Zealand CEO Rob Fyfe • "In my 30-year working career, I am struggling to

recall a time where I have seen a supplier so slow to react to a catastrophic system failure such as this and so unwilling to accept responsibility and apologize to its client and its client's customers."

• "We were left high and dry and this is simply unacceptable. My expectations of IBM were far higher than the amateur results that were delivered yesterday, and I have been left with no option but to ask the IT team to review the full range of options available to us …"

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“Vendor: We Are As Safe As A Bank…

Channel: Yes, that’s exactly what we are afraid of…

Page 31: SaaS: Why the Channel Does (and Doesn't) Buy It

Rainbow of Solutions

Ways to Win over

The Channel

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Channel Challenges• Understanding the monthly cash flow and

working capital requirements of your channel business. How will moving to an annuity model impact these?

• Should the reseller invest in your own billing and management platform or use that of the distributor or vendor? Which can provide flexibility and granularity in customer reports?

• Best practise SaaS or annuity resellers will have two types of sales people active in the account: "hunters" to acquire the customer and "farmers" to ensure the customer keeps billing or renewing. Churn is the enemy of annuity models

Page 33: SaaS: Why the Channel Does (and Doesn't) Buy It

Channel Challenges• Review and/or redesign the appropriate sales

compensation scheme to encourage annuity sales and customer longevity

• Work to a plan and gradually start to build an annuity base. It will generally take approximately 12-18 months of steady work to build a customer base to a sufficient level

• Recognize the reseller’s risk and try to add balance (and fairness!)

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Get the Channel Using SaaS

• Familiarity makes better sales people

• You sell best what you know best

Page 35: SaaS: Why the Channel Does (and Doesn't) Buy It

Solve the Sales Compensation

Plan

• Get an advisory group before pricing

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Make Partners, Not Channel Slaves

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TRUST YOUR CHANNEL TO FIND THE WAY

•One way or another…

Channel Mentality

Hey, if you can’t make money selling VISTA,

just sell the uninstalling of VISTA…

Page 38: SaaS: Why the Channel Does (and Doesn't) Buy It

OUR CHANNEL E-NEWSLETTERS in EMEAesP– for IT Solution Providers in EuropeConsumer IT– for retail and etail channelsrAVe Europe– for Pro Video integratorsDSNE– for digital signage integratorsOn CE– for consumer electronics channelsECI– for home networking channels

www.it-sp.eu