How SaaS Is Redefining Channel Partnerships and Business Models

SaaS fundamentally changes products, services, and the relationship between SaaS vendors and customers, and it also reshapes the role and value of channel partners, who must now work more strategically and collaboratively to create win‑win ecosystems.

Only 35%‑45% of SaaS revenue comes from channel sales compared with 60%‑70% for on‑premise software. Most B2B SaaS vendors (77%) lack a channel program, while 80% of on‑premise vendors have one. The low adoption is due to four main reasons: basic delivery, installation and upgrades no longer require partners; customers handle basic configuration themselves; many SaaS startups focus on direct sales before building a channel; and most new SaaS firms have limited international sales where channels are more common.

“We see value‑added resellers becoming strategic advisors rather than implementers.” – Hernan Marino, SAP Ecosystem and Channel Marketing SVP

Channels are an under‑utilized element of the SaaS ecosystem. By leveraging value‑added resellers and system integrators, SaaS vendors can accelerate growth, acquire new customers, and deliver services beyond their own capabilities.

SaaS lowers startup and operational costs, shortens implementation time, reduces professional services expenses, and makes advanced IT functions affordable and widely accessible.

“Cloud applications are designed to be simpler, requiring less professional services and democratizing advanced features for SMBs and business units.” – Jeff Kaplan, THINKstrategies GM

These benefits expand the market, especially with mobile and collaborative features, creating new revenue opportunities for channel partners through advanced analytics, BI, and collaboration tools.

In CRM and ERP domains, organizations are shifting budgets toward social, collaborative, mobile, and data‑visualization capabilities, giving partners greater chances to sell high‑value functions.

The key to channel success is becoming a trusted resource that helps customers adopt new SaaS features effectively.

SaaS How It Changes the Software World

Lower upfront and O&M costs than licensed software

Shorter implementation time

Lower professional services cost

Reduced trial‑and‑error cost

Lower application support cost

Easier access to previously unattainable technology solutions

Partners must evolve from low‑value tasks (order processing, installation, upgrades) to high‑value roles such as strategic advisors, business transformation drivers, and complex component integrators.

SaaS Changes the Sales Process

Compresses or eliminates lengthy RFP‑driven purchase cycles

Replaces proof‑of‑concept with free trials

Prevents over‑purchasing beyond growth needs

Accelerates sales cycles

Recognizes that prospects are more informed before first contact

When channel partners introduce customers to SaaS vendors as trusted advisors and integrate multiple products into a single solution, they add real value to the sales process.

Implementation and support also shift: SaaS implementations now take weeks rather than months, reducing billable hours and moving maintenance responsibility to the vendor. Continuous, frequent feature releases (often every 2‑3 months) turn a project‑based model into an ongoing improvement cycle, creating new consulting opportunities for partners.

Impact of Continuous Upgrade Cycles

“Frequent value‑added product enhancements open a very different strategic dialogue with customers.” – Carolle Gearhart

SaaS vendors aim to release new features regularly, allowing partners to sell additional services and maintain high‑value relationships.

Integration Becomes a Core Channel Function

“Integration used to be an internal technical issue; now business units expect value‑added resellers to help with integration.” – Jeff Kaplan

Modern SaaS ecosystems require many systems to work together, and customers expect applications to communicate automatically. Pre‑integrated suites (e.g., NetSuite, Salesforce AppExchange) and open APIs facilitate this integration.

Training and Support Are Reduced

Today’s SaaS applications are intuitive, reducing the need for extensive training and shifting support toward self‑service and streamlined user experiences.

SaaS Channel Challenges

Partners face hurdles such as reluctance to accept lower upfront commissions for subscription revenue, the need to replace low‑value software sales with high‑value consulting, expanding skill sets for new features, and increasing vertical specialization.

Channel Business‑Model Transformation

“Value‑added resellers can build a recurring‑revenue model similar to SaaS companies, but it takes time and high quality.” – Glen Griffin, DocuSign VP of Business Development

Channels must reassess revenue timing, service offerings, and valuation impacts of subscription cash‑flow delays. A strong channel can boost a SaaS vendor’s valuation and attract acquisition interest.

SaaS Vendors’ Action Plan for Channels

Vendors should adopt low‑touch, self‑service sales while engaging partners early to expand sales and services, especially for international markets where local expertise and regulatory knowledge are critical.

Building a partner program typically requires 12‑18 months for setup and another 12‑18 months to generate meaningful revenue.

Now is an opportune time to start constructing a SaaS channel strategy.

Original source: http://cloudstrategies.biz/saas-now-revolutionizes-channel/