The SAAS Paradox

Being a solution provider in the dynamic IT channel is tough enough, and it becomes especially so as you try to wrap your mind around new trends such as software as a service.

The fundamental question about this new software delivery model revolves around whether it poses a threat or creates an opportunity for solution providers. Answers seem to differ as much as the direction of a windsock.

Solution providers trying to figure out whether to get involved could be excused if they are confused. Proponents of the model, of course, claim SAAS creates new profit opportunities for the channel.

Others are more cautious, but in their caution start to sound almost paradoxical. Gartner, for instance, tells us that conditions in the software market, including the move toward delivering applications as a service, “are not favorable to the channel.” But then the research firm also tells us the model creates opportunity for solution providers.

The thing is, even if they seem contradictory, both assertions are valid. SAAS requires solution providers to do business differently, and as such, it is a threat because some companies may either miss the necessity to make adjustments, ignore that necessity or, in trying to address the need, lose the game to poor execution.

The model also presents an opportunity because for those providers that make the necessary adjustments, they will be in a position to profit from delivering software as a service.

But even providers who succeed in retooling their business models to accommodate SAAS will face other challenges. They have to achieve a delicate balance in pricing their offerings to avoid overpricing, but, on the other hand, they must not charge so little that they get themselves into financial trouble.

As is true of another, newer trend gaining popularity in the IT channel—managed services—the financial model of delivering technology as a service is one of the toughest challenges for solution providers considering SAAS.

Of course, providers that add SAAS purely as an incremental business will face less of a challenge in that regard. A VAR, for instance, that is adding a Citrix Online application to its offerings should have little trouble making a profit from the service.

However, things get more complicated with applications that solution providers traditionally have delivered as licenses with on-site deployment and all the maintenance and integration that typically accompanies those projects.

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