Mixed Models

Can a value added reseller (VAR) ever be a provider of software as a service? Or are the business models of the VAR and the SaaS mutually exclusive? If you’re thinking of having an SaaS change then Sage has some constructive advice.

The concept of a VAR dates back to days when their expertise added value to technology. They sold systems and were paid to integrate and fine-tune the IT for customers. Granted, they were offering a service, but it was a short-term commitment. Having lovingly shaped the technology around the client’s working patterns and trained the staff to use the system it was job done – apart from a few support calls. It’s different, as we shall see, for the SaaS provider.

The VAR would issue an invoice and be paid in full in 90 days (terms and conditions applying). The hallmark of a good VAR was that they were rarely seen again, unless the customer was expanding and needed them for a new project.

A good SaaS provider, by contrast, never loses contact with the client. They’re always on the client’s mind as they’re in daily contact, one way or the other, whether by phone support or electronic conversations. The cloud, by creating the conditions for instant delivery of software has also created a different business model for IT, based on service. Keep your friends close and your customers closer, as we say in the IT business. Well, you don’t get much closer than a service provider.

So for that reason alone, it’s worth the effort for VARs to change the way they work and ‘channel the cloud’. Obviously, there will be some reconfigurations needed to the VAR’s own business model. However, making business processes dovetail with technology is what VARs do. Physician, heal thyself! So switching from the old model of one off transactions to the new model of regular monthly payments is a test of the mettle of a good VAR.
Only the better VARs can handle the journey to the software as a service (SaaS) model. Are you one? If you do have enough SaaS to rise to the challenge here are five easy steps to help you make the change. Later, we will outline the Five Pitfalls you might want to avoid.

To get the ball rolling here’s five constructive actions you can take:

  1. Adapt your business model and set up a growth plan: The cloud involves no big, up-front transactions – it’s about building relationships and adding recurring revenue. VARs will have to make fundamental changes internally to fit.
  2. Look for new opportunities with your existing client base: You may have been working with your existing customers for some time, so make sure you fully understand their plans and how they might want to incorporate the cloud.
  3. Support customers that want to shift to the cloud: Adding value to customer relationships has never been more important. Customers want the best value for what they are spending, and resellers should be there as trusted supporters and partners.
  4. Get help from your vendor partner: If help is available, then it would be sensible to take whatever is offered. This could be in the form of marketing support, funding and training, all very valuable in growing a business in the way needed.
  5. Search for new customers: The days of up-front transactions are gone and you can no longer rely on word-of-mouth recommendations to build your market in this new, competitive, cloud world. So be ready to go that extra mile to find and attract new business opportunities.

Here are five understandable mistakes we can all make:

  1. Lack of Planning: Many customers may well have warmed to the idea of moving to the cloud, but others won’t be so enthusiastic. It’s vital to understand your customers and work out how they can fit into your future growth plans.
  2. Choosing the Wrong Services: You can’t manage services without investing on hardware, software and resources. But which ones? Make sure that you can provide the new services you’re offering effectively.
  3. Lacking the Skills: A change in business model calls for new skills and ways of working. Neglecting this side of the business could cost you contracts, good margins, people and profit.
  4. Failing to keep up to date: You will need to manage your demand generation and sales conversion with ruthless efficiency. Investment in a good CRM system or the latest marketing automation tools will be well worth it.
  5. Offering Service Level Aggrievance, instead of Service Level Agreement: The managed service provider that can’t honour its service-level agreements (SLAs) will soon be struggling for business. Live up to your promises. Failure is not an option.

Your sales force may not think this new model is a good game. They may prefer the instant gratification of the old ‘Push and Run’ style. But nobody plays that way any more. Today’s service – to use a football analogy – involves a patient build up, subtle movements and everyone taking lots of touches as the team gradually shapes the play and gets things moving in the right direction. It is much more rewarding to keep hold of the customer.

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David Dungay

Editor - Comms Business Magazine