From The Editor | November 29, 2017

VAR & MSP SaaS Adoption Trends

Abby Sorensen July 2017 Headshot

By Abby Sorensen, Executive Editor

drug delivery trends

SaaSMAX and CompTIA recently teamed up on a webinar to share findings from CompTIA’s state of the SaaS channel report. Carolyn April, Senior Director of Industry Analysis at CompTIA, and Clinton Gatewood, VP of Partner and Reseller Development at SaaSMAX, presented data that any VAR or MSP either currently selling, or considering selling, SaaS products should pay attention to. Here are a few of the most compelling stats and facts the research report that polled VARs and MSPs.

  • The VARs and MSPs surveyed reported hardware is only 15 percent of their overall revenue. Compare that to revenue from consulting services (28 percent), managed services (14 percent), and software sales (43 percent). Hardware will never entirely go away, but it’s certainly not rebounding.
     
  • When it comes to the how resellers are making money off of SaaS, customization and integration account for the biggest sources of revenue. This is no surprise, since the channel has been doing this for decades. Other revenue generators include revenue sharing with ISVs, reselling SaaS apps, and referrals. Being in the SaaS game doesn’t just mean getting a few dollars every month from Office 365 subscriptions – there is a much larger ecosystem that VARs and MSPs should utilize to make money.
     
  • The top reasons solutions providers start selling SaaS applications are customer demand, recurring revenue, and faster time to deployment. Even if you think SaaS is a challenge, or that it doesn’t provide enough margin, your customers are going to make you think again. Of the resellers that do implement SaaS offerings, 85 percent reported they were either very satisfied or satisfied with the decision.
     
  • When asked what steps they took to implement SaaS offerings, VARs and MSPs listed retraining sales staff, retraining technical staff, creating new positions, reorienting marketing strategy, and earning new certifications. Of these, the biggest focus for resellers was around retraining sales and technical staff.
     
  • April points out that old-school resellers pushed vendor relationships as their brand’s calling card. Being a certified, platinum, top-tier dealer of solutions X, Y, and Z doesn’t matter as much to customers anymore. She says, “In the cloud world, much of that is abstracted. Most customers don’t even know who the vendor or cloud provider is on the back end.” Selling SaaS today is really about your brand, not your vendors. This means you can’t continue to rely solely on MDF dollars for marketing, you need to do your own marketing (and pay someone to run a marketing team if you aren’t doing so already). Customers care less and less about the technology itself, and would rather focus on the business outcome of the technology – another reason the list of vendors on your website matters less today.
     
  • I didn’t buy the category of excuses resellers stated for not adopting SaaS (April did note this was a very small sample size). Some of the reasons included, “not a good fit for our business model” (40 percent), “existing business is performing well” (28 percent), “unfamiliar with the SaaS ecosystem” (13 percent), and “unconvinced of ROI” (11 percent), “insufficient cash flow” (9 percent), and “cost of retraining staff” (6 percent).
     
  • For those VARs and MSPs still skeptical of ROI, they need to consider the key metrics related to SaaS profitability. It goes without saying that the “service” part of Software-as-a-Service is the key to making money. Solutions providers credit SaaS profitability from a high volume of customers, front-end demand generation and marketing efforts, leveraging consulting services to boost profits, SaaS-related managed services leading to customer stickiness, and the ability to control customer renewal process.
     
  • Only 12 percent of SaaS users are veteran users, 58 percent are semi-experienced, and 30 percent are first-time users. Generally speaking, this means your customers, and potential customers, are generally not SaaS-savvy. This is a huge opportunity for solutions providers to become trusted advisors on SaaS adoption.
     
  • SaaS adoption is as-expected across different customer sizes. Companies with fewer than 10 employees account for only 13 percent of adoption, and that’s like because those companies aren’t operating at a scale that can benefit from the efficiencies SaaS brings.  On the other end of the spectrum, 66 percent of SaaS adopting companies have more than 100 employees.
     
  • VARs and MSPs are sourcing and selecting SaaS solutions from a variety of places, but distributors and application exchanges are the most common (38 percent and 30 percent, respectively). Outside of that, 9 percent are finding SaaS apps directly through the ISV, 7 percent are from customer requests, and 2 percent are from other partner recommendations. April expects that 9 percent of direct-from-ISV requests to increase as ISVs formalize their channel programs, and she also predicts distributors will continue to play a large role in helping VARs and MSPs source solutions. Gatewood points out that the ecosystem is so huge for some categories of SaaS offerings that VARs and MSPs don’t have the time and resources to rely on their own research, so pre-vetted and pre-bundled solutions from distributors make more sense.