The SaaS Explosion of 2013: Part V – VARs and System Integrators get on board

The computer industry goes through a cycle of “Creative Destruction” most every decade whereby a new paradigm replace the old.  SaaS ushers in the next wave of “Creative Destruction;  VARs and System Integrators who embrace SaaS before their peers will have a competitive advantage during the transition.

VARs and System Integrators can win new deals where they have unique skill sets, providing new offerings as IT organizations consolidate their service providers around a smaller set of VARs providing a broader set of SaaS offerings.

Top 5 reasons why VARs and System Integrators are getting on board


1)  There is a huge opportunity for new business

SaaS sales are growing much more rapidly than on-premise software.  SaaS implementations require fewer resources to install and almost no resources to upgrade, however the implementation, business process re-engineering, and integration efforts are similar to on-premise costs with SaaS projects.  SaaS frees IT resources from the mundane tasks to focus on those initiatives with higher business value.

Many VARs are reluctant to move to SaaS since they believe that it will reduce their revenue for a specific project and have an inferior cash flow to an on-premise sale.  They may also lose the profits from on-premise hardware they may sell in some markets.  This may be true; however, if the market is being driven by customers to SaaS, the opportunity is to embrace this disruptive change.  Aggressive VARS will win new SaaS business where they previously have not had a compelling offering to displace an incumbent VAR.

2)  SaaS vendors are accelerating their sales through VARS and System Integrators

While SaaS have had a greater tendency to be sold through the internet or direct sales, the large SaaS pure-plays such as Salesforce and NetSuite are expanding their sales through VARS much faster than their overall business.  NetSuite has over 200 implementation partners and VARs.  VARs and System Integrators that partner with SaaS vendors will see higher growth opportunities from these relationships.  Large System Integrators such as Accenture have aggressively entered the SaaS services market having formed a strategic relationship with NetSuite.  SAP Business by Demand (SaaS application) provided VARs the ability to provide services to their customer  without billing the VAR  for the first several months of the implementation to incentivise new business.

Smart VARS and SIs are leveraging the software vendors incentive to ramp up their Cloud business.

3) SaaS helps enable Mobile and Big Data projects

VARs also have the opportunity to expand their offering into other emerging markets, particularly mobile and Big Data.  SaaS inherently enables mobile computing with its “access anywhere” and its ability to provide a data platform for mobile applications.

Big data analysis requires periodic large amounts of computing resources which can often be performed at dramatically cheaper rates during off-peak times.  SaaS initiatives can be combined with Big Data projects in the Cloud to provide more revenue opportunities for VARs and System Integrators.

4)  SaaS provides high value, higher margin business opportunities

SaaS eliminates 90% to 100% of the upgrade efforts for companies, and often provides more “self-service” by users of the software.  The VAR and System Integrator  tasks that are still crucial for companies include business process implementation and re-engineering, data conversion, integration with third party systems, and training — these are high value, higher margin businesses with more sustainable value.

5) Avoiding death is a good thing

SaaS is changing the landscape of services provided to IT organizations for VARs and SIs even more than for software vendors. As large new projects increasingly move to SaaS, revenue opportunities from on-premise deployments will decline.  It is essential for the health of the VAR and System Integrator to establish a leadership position in embracing SaaS proactively rather than reactively.

According to Renée BergeronVP Managed Services & Cloud Computing at Ingram Micro, VARS need to take both an “offensive and defensive position” in the Cloud. The opportunity is to embrace the cloud and specifically SaaS products completely, take business away from the laggards, and expand into new markets as part of a SaaS deployment.

For example, Microsoft VARs moving to Office 365 services are entering the VOIP market once owned by companies such as Avaya and Nortel as Microsoft offers new voice services.  The Microsoft VARs expand their offerings at the expensive of the incumbent PBX VARs.  This expansion into the cloud by the forward thinking VARs and System Integrators will open up new markets fro them through additional product offering at the expense of their competitors with an on-premise focus will play out in many arenas.

Moving to providing SaaS services VARs and System Integrators have more offerings to sell to growing their businesses.  Customers would rather have fewer vendors supporting a broader set of products — SaaS facilitates this opportunity.

Coming Next – Part VI, “Investors and Boards drive companies to SaaS”