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Summer 2010
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The Real Strength of SaaS

Software-as-a-Service can be a glue that bonds customers to you.

by Tom Farre

When Software-as-a-Service (SaaS) arrived, bringing ultra-low-cost hosted services such as e-mail and eliminating the need for on-premise servers and applications to manage it, many solution providers pointed out that the only way to make money with SaaS was to be a huge volume dealer of the service.

"How can you make money on commodity SaaS solutions without selling huge numbers of subscriptions?" these solution providers asked.

Garrett Brucker, president of Solve IT in Colorado, endorses SaaS despite the tight margins. And what SaaS gives back in return, he says, is an increased "stickiness" with customers because network systems are literally tied to the outside SaaS service. "If they've got a problem, they're going to call me," he says.

Why SaaS Solutions?
  • PROS: Recurring revenue, customer stickiness
  • CONS: Margins can be tight
  • BOTTOM LINE: Adds value if done correctly

Even commodity SaaS solutions such as e-mail, collaboration and managed security can enhance a solution provider's status as a valuable, one-stop resource. "I always try to layer in our managed services with Hosted Exchange," says Brucker. "Customers need help with Exchange to manage moves, adds, changes and data conversion, so we add value that way."

Brucker provides hosting for customers' SharePoint sites that tend to be highly complex. But for sites of average complexity, hosted SharePoint, as offered by Ingram Micro Seismic and other service providers, can ably deliver basic collaboration, resource sharing and workflow.

Value-added SaaS solutions such as CRM and ERP also can be profitable.

"CRM solutions like Salesforce.com and Microsoft Dynamics are complex enough to require consulting for installation," says Jason Beal, director of services sales at Ingram Micro. Beal cites the example of Acumen Solutions, a Virginia-based solution provider with a consulting practice to help government agencies adopt customized SaaS solutions. Although the agencies could source CRM directly, they benefit from Acumen's integration and professional services.

Beal also notes that SaaS providers such as Salesforce.com offer a multitude of ISV applications that run on their cloud platforms. Solution providers who understand customers' exact requirements can create custom suites by adding complementary applications. This adds value and can raise margins considerably.

Appirio, a California-based "cloud sourcing" firm, has built a growing business by helping companies integrate SaaS from multiple cloud providers. "Cloud platforms are flexible enough to address many customer requirements," says Balakrishna Narasimhan, senior director of marketing and strategy at Appirio. "If a solution provider has expertise in a particular vertical market or business process, cloud platforms could serve as a basis for targeted SaaS applications." Appirio leveraged its expertise in customer service and custom application development into cloud-based SaaS and professional services.

Solution providers looking to add a SaaS practice can leverage the service offerings available from Ingram Micro. In addition to providing the building blocks for a managed services business, Ingram Micro's Seismic solution offers SaaS in security and e-mail archiving; backup and business continuity; and Microsoft software including Exchange, SharePoint, Office Communications Server, Business Productivity Suite and Dynamics.

 

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