Putting the "Value Add" back into VAR in the SaaS Industry

I’m just going to jump right in here and get my feet wet on some hot topics.  If you’re a Value Added Reseller (VAR) or a Service Partner with particular software company this post is for you.  You see, I think I have found a real flaw in the emerging SaaS (Software as a Service) model.  Over the next couple of weeks I will write a series of posts breaking down this topic. Part one: I’m going to explain the issue for VAR’s and Services Partners in the SaaS world. Part two: I will discuss what is going on in the Industry today. Part three: I will discuss what VAR’s and Service Partners should do to protect and grow their business and in the fourth and last installment, I will discuss and make recommendations to the software makers on what they should do to build a healthy infrastructure of partners that will grow the opportunity for everyone. 

Part One:

Ten years ago being a VAR and or service partner with a software company was relatively straight forward. You signed up for a program, fulfilled the qualification criteria, including paying a fee for the privilege of the relationship, then you went to market selling products and service. If you were big enough or good enough you might even get assigned a specific geography, industry or market segment that could be more or less your turf. Those were the simple days...

The main reasons this model worked is that the VARS and Service Partners were increasing the sales, service and support reach of the software maker. There are still examples of the traditional model working for companies like Cisco who have hardware and software solutions that are installed on customer premises. However, this does not really exist in the SaaS world for companies like SFDC and other SaaS pure plays. Why do you think SFDC has never had a VAR program to begin with?  Then why do so many SaaS companies still try to emulate the old model with disastrous results?

With SaaS the software maker can reach, sell, deliver and support their solution to all of their prospects and customers all on-line and therefore, the need for physical presence is minimized.  The more simple and stand-alone the SaaS application is, the greater the opportunity for virtual presence vs. physical.  In turn, a lot of the value of local sales and support is gone. So what are VAR and Service Partner’s supposed to do to sustain and grow their business? I will outline these strategies in part three of this series but it has a lot to do with creating new business models and SaaS ecosystems to put the “Value Add” back in VAR.   

Today it is both extremely challenging and frustrating working with SaaS providers as a VAR or a Service Partner.  The opportunity as a VAR is significantly diminished. Most of the programs I’m familiar with have a major flaw and that is the customer could have been sourced by the VAR somewhere in the buying cycle, but end up contracting directly with the Software maker when they are ready to buy. Since all of the software capability comes from the same source, the end customer finds very little value in transacting for that piece of the service, the SaaS piece, thru the VAR.  In this model, the concept of value added reseller is null and void because of not being able to resell in a traditional sense (i.e. taking the contract on VAR’s own paper). However, that is not the end of this story. Maybe what should exist in place of the traditional VAR model is a network of Value Added Influencers because that is exactly what the channel is doing. You see, for most industries and most businesses they turn to trusted sources for information, strategy and guidance during their buying journey. In almost every case the highest value influencer in their decision process are not the software makers themselves. Therein lays the opportunity to redefine the VAR and Service Partner relationships from one about channel “transaction” value to one about channel “market value” and influence revenue. 

Stay Tuned:

Next time I will discuss what is going on in the SaaS industry today that makes it so challenging for VAR’s and Service Partners and why things need to change.  

Bruce Culbert is the Chief Services Officer of the Pedowitz Group and Managing Director of BPT partners. He is a globally recognized expert on IT Services and CRM. With 25 years of experience and over 5,000 projects under his belt, Bruce has seen it all. The Chief Service Officer Blog is a contemporary dialogue around the issues and opportunities in IT Software and Services.