2009: The Year of the Channel for SaaS Vendors?

Includes: INTU, N
by: Jeffrey M. Kaplan

If 2008 is remembered as the year that a new generation of on-demand services, including Software-as-a-Service [SaaS] and cloud computing, gained widespread acceptance and accelerated adoption, then I think 2009 will be the time when winning channel partners will become more critical to the on-demand service providers.

Until now, SaaS and cloud computing vendors have been focusing on building reliable and scalable service solutions and demonstrating the viability of their on-demand alternatives to customers.

Now, that they have generally achieved this objective, their next challenge is to build an effective indirect go-to-market strategy and set of strong channel relationships, so they can rapidly and profitably extend their market reach and satisfy the needs of specific market segments.

The need to build a successful channel strategy has become even more essential because of the current economic crisis, which is placing greater financial constraints on many on-demand vendors' direct sales capabilities and making customers even more hesitant to do business with new suppliers. Instead, companies will try to reduce the number of vendors they rely upon and will prefer to turn to their existing suppliers, including their local resellers.

This means SaaS and cloud-computing vendors will need to align themselves with established resellers and other companies who have access to customers, especially IT/business decision-makers.

Until recently, many SaaS and cloud-computing vendors confused third-party ecosystems with effective channel programs. While encouraging third-party developers to design their applications to interoperate with SaaS solutions via application protocol interfaces (APIs) and web services can also enable them to resell the SaaS solutions, it doesn't satisfy all of customers' requirements or all of the business-level concerns of potential partners, such as revenue/profit sharing, joint marketing, etc.

Some SaaS vendors are already making enroutes into various third-party channels:

  • Intacct has built a successful channel program, as has Intuit's (NASDAQ:INTU) QuickBase unit.

  • NetSuite (NYSE:N) has also been pushing vertical market approach that is highly reliant on channel partners for success.

It is for these reasons I believe developing a successful channel-marketing program and creating successful channel relationships will be a key priority for most SaaS vendors in 2009.

Disclosure: None