Converting the SaaS skeptics

Not that long ago, it seemed all we heard about was software as a service. SaaS this, SaaS that. Everyone and their dog were coming up with an on-demand business strategy. And disties were getting in on the action, helping their channel partners sell managed services and on-demand offerings to their customers.

Microsoft (NASDAQ: MSFT), for example, has partnered with Ingram Micro to offer a usage-based licensing program for channel partners, called the Service Provider Licensing Agreement (SPLA). This SaaS offering allows channel partners to license a range of Microsoft products and platforms through Ingram Micro on a monthly basis through a dedicated or shared hosting environment. Partners can also sell Trend Micro security products in an on-demand model through the distie.

Tech Data, Synnex, Arrow and Avnet have all been making major MSP moves.

But SaaS may be starting to slow down. At least according to a new report from Forrester Research that says the early adoption phase is nearly over – and now those selling SaaS will have to convert the skeptics.

We could blame this slowing trend on the economy. But more likely it is just part of a regular hype cycle. Last year, SaaS grew rapidly, especially in the SMB space (58 per cent, says Forrester). But that strong growth might not last much longer, as the hype has died down and reality has set in.

According to Forrester, 62 per cent of SMBs said they had no interest in SaaS because of integration issues and 57 cited the inability to customize software as a concern. Interestingly, the survey found that SMBs were not keen on the lack of SaaS distribution channels targeted at them.

Some customers are concerned about total cost of ownership, security and application performance. While some of these issues are more warranted than others, there’s still a fair bit of misinformation floating around.

Some concerns, however, are valid, and they should be addressed by VARs – and by the vendors and distributors providing them with SaaS solutions.

Integration and total cost of ownership are real concerns, says Forrester. It’s like leasing a car. You keep making payments, month after month, but you will never own that car. Over time, those payments add up. For many, the decision to lease a car is based on other factors than the total cost of ownership – and that’s what makes it worthwhile.

A lot of people worry about security issues around SaaS. In this case, there are often a lot of misperceptions. But it doesn’t matter whether those concerns are valid or based on misperceptions – it means that those customers will be harder to win over.

Distributors who offer these types of solutions to VARs should consider this, and offer ways that VARs can market around these concerns.

This is not to say SaaS is dead – not even close. It’s a great option for many businesses, particularly SMBs. And it’s also a great opportunity for VARs to garner a recurring revenue stream. But SaaS is past the early adoption phase, and it can’t ride the hype wave much longer.

Convincing customers to move away from on-premises deployments is going to require a stronger emphasis on SaaS’s selling points.

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Jim Love, Chief Content Officer, IT World Canada

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Vawn Himmelsbach
Vawn Himmelsbach
Is a Toronto-based journalist and regular contributor to IT World Canada's publications.

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