SaaS has quickly and rather stealthily become one of the strongest sales plays for channel firms. In the latest CompTIA survey, 74% of the respondents said some or all of their cloud sales revenue came from SaaS-related activities. Considering how some shun the term and how little MSPs talk about it, our Why Software as a Service? Benefits & Advantages of SAAS report illustrates how much the channel has adopted it over the past few years.
Many started out using these solutions to fill gaps in their portfolio or to enhance a specific vertical play, but that position pivoted ‒ many now lead off with SaaS as a core part of their offerings. SaaS’ benefits to channel organizations are myriad, including solid recurring revenue streams, faster deployment options, and an inroad to the vertical markets that many MSPs crave.
Flexibility is a major advantage for the channel. In many respects, SaaS is that “plug and play” solution that reduces their installation time and costs, which benefits MSPs as well as the businesses they serve. Many of these virtual applications are also customizable. That allows providers to offer higher margin value-added services such as customization and integration ‒ activities that often strengthen the customer-provider relationship.
Another advantage of SaaS is it can fit the needs of most any business, from the SMB to the Fortune 500. This versatility factor contributes to the high channel adoption rate and strong customer demand. Consider that Gartner predicts SaaS sales will increase 20.1% in 2017, pushing the market segment to an astounding $46.3 billion. That presents a tremendous opportunity for the MSP community.
Ease Entry into New Markets, Strengthen Profits
Many providers are leveraging SaaS to differentiate their managed services businesses and build out higher-margin specialty practices. Suppliers help by offering technical and market-specific resources and training that reduces barriers to entry for providers. Minimal investment requirements ease the financial risks and other burdens for MSPs, although there remains some debate over the best economic models.
Among other perks? Two-thirds (62%) of the respondents in our survey say offering SaaS solutions has opened doors into new vertical markets.
These solutions allow MSPs to improve margins in other parts of their businesses, too. They can leverage suppliers’ technical expertise and support services to manage low profit activities, letting them focus on more lucrative business opportunities such as consulting, compliance and security assessments.
Demand and Competition Driving the Transformation
Another major driver behind the channel’s shift with SaaS is business adoption. Organizations and end users continue to increase their comfort level with cloud-based solutions. In fact, channel respondents cited customer demand as the No. 1 factor behind their decision to enter the SaaS space.
And its ease of implementation often brings MSPs in after the fact. Many business owners experiment and attempt to self-provision SaaS solutions before realizing they need help with customization, integration, security and other post-sale services. In other words, they may not think they need channel support at first, then come to realize the value providers bring to the table when their projects get bogged down or fail.
That’s another reason why SaaS is now an MSP standard. Channel firms that don’t offer these solutions and all their related support services risk losing customers and revenue streams to the competition or even to their clients’ in-house tech teams. The low cost of entry, ease of implementation, and growing list of suppliers give businesses many options to choose from. And if their MSP can’t support their vision or fails to see the value of SaaS, those companies may look elsewhere or try handling it themselves.
SaaS is a strategic part of the channel’s future. Those who don’t take part may get left behind.
Carolyn April is Senior Director of Industry Analysis at CompTIA