A channel play for SaaS in 2006

VARs delivering software as services could be good news for SMBs and enterprises alike

Microsoft’s competitors are ridiculing what they claim is Redmond’s half-hearted entry into the world of SaaS (software as a service) with CRM 3.0. In numerous conversations I’ve been told, “It shouldn’t even be called SaaS. They’re not even hosting it. They are just reselling their solution to VARs.”

As if “VARs” was a dirty word.

Well, I have news for those competitors. For the SMB market, Microsoft has the right idea.

The SMB market has always been about value-added resellers, says Josh Greenbaum, principal at Enterprise Applications Consulting. “Not one of the big players has figured out how to crack it other than through VARs.”

SMBs use VARs because VARs understand businesses such as plumbing and heating, bakeries, and restaurants -- both large and small -- and are able to use their domain knowledge to package a set of services into a one-stop-shop solution. That’s why in 2006 SaaS will morph from a technology play into a channel play, used by VARs and BPO (business process outsourcing) vendors as well, to capture this and larger markets.

Two high-profile players took the first step in 2005: Salesforce.com offered AppExchange, and IBM formed its SaaS Partner Council. These are SaaS bazaars that allow users to pick and choose among various solutions. AppExchange allows third parties to integrate only with Salesforce, but IBM is building a standard model for the integration of hundreds of different SaaS solutions with one another. Neither offers SSO (single sign-on) or billing, however, which account for a good part of the VAR appeal. But others are offering them.

The trouble is, if the SaaS model goes to the channel, then the VAR becomes the trusted adviser. It owns the customer and it gets to decide which solutions to offer. That won’t sit well with the big guys.

Meanwhile, new companies such as Jamcracker  are selling VARs the tools to offer their customers an SaaS one-stop shop. The Jamcracker Service Delivery Network provides an array of IT and business services. If a VAR wants to offer Intacct as an SaaS ERP solution and use SalesNet for CRM, Jamcracker can supply it with everything from SSO to provisioning, billing, and support.

This is operational integration. Working with the individual SaaS providers, the VARs deliver process integration and domain expertise as their value add.

Hewitt Associates , a major human resources BPO company, is rolling up contingent workforce software from IQNavigator with permanent labor software from Deploy Solutions to offer both as a one-stop SaaS solution for the hospitality industry.

Accenture is also building an SaaS practice. A “VAR on steroids,” Accenture will aggregate and integrate best-of-breed SaaS solutions, and it has the wherewithal to extend this model into the enterprise.

Until now the only one-stop shop for a CTO was an Oracle or an SAP. But for SMBs, working with them is a daunting task, says Robert Jurkowski, CEO of Intacct. Intacct works with industry-specific market-makers, such as Achieve Healthcare Technologies in managed health care and RealPage in property management, to offer packaged SaaS solutions.

Companies such as Intacct, IQNavigator, and Jamcracker will help the VARs create packages they can “just slam through their channel,” Brent Arslaner, vice president of marketing at Jamcracker, says with great relish. If anyone thought Oracle and SAP were going to dominate the kingdom of business software, they had better guess again. The coming SaaS channel will redraw the map.

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