The COVID-19 pandemic is driving revolutionary changes in the IT services marketplace. To excel in this changing environment, IT Management SaaS providers will need to offload operations to their channel in order to meet demand.
IT Decision Makers
A new survey by Aruba, of 2400 IT Decision Makers, illustrates some surprising changes brought on by the COVID Pandemic. IT decision-makers see the need to adjust their investment plans to accommodate new realities in the post-pandemic workplace including more home office environments and distributed workforces.
In light of these changes, many IT leaders are shifting to consumption or subscription models. For SaaS companies, the most important prediction in the Aruba survey is for 41% growth of SaaS subscriptions by IT leaders in the next 12 to 24 months in response to business challenges driven by COVID-19.
The Aruba report, entitled Preparing for the post pandemic workplace: How IT decision-makers are responding to COVID-19 has some surprising findings, including:
- Only 8% of IT Decision Makers said they would continue IT Capex investments
- 55% said they would explore “as-a-service” solutions for either hardware or software.
- 53% say they will explore a managed service for a turnkey hardware/software solution.
It concludes that: “After months in which the nature of how we work has fundamentally altered, it is unlikely that the workplace will ever be the same again.”
The Impact For SaaS Businesses
This data suggests that financial flexibility will be an important buying criterion for IT infrastructure in the next 12 to 24 months and beyond. There will be a shift away from Capex investments and toward more predictable spending that can be closely controlled as business operations expand or contract.
Overall, this will lead to a reduction in upfront capital investments, in favor of “as a service” models that carry lower adoption and usage risks over time.
Today, 24% of IT Decision Makers consume half of the IT solutions ‘as-a-service’. After the pandemic, the growth of hybrid workplaces will drive the consumption of ‘as-a-service’ solutions to 72% over the next 12 to 24 months, according to the survey.
Boon or Bust?
For IT ‘as-a-service’ companies, the market opportunity could be great, but many Software/Hardware as-a-service providers simply are not prepared to manage this level of business acceleration. There are two primary constraints, where I see critical capabilities are missing:
- The ability to dynamically adapt product and pricing plans to align with market demand and leverage the value added capabilities of a channel.
- An advanced reseller sales channel, where partners take on more of the operational burden for support, quoting, order management, and billing.
Agents vs Resellers.
The common approach to leveraging “as-a-service” channels for SaaS has been a standard agent partner approach. Companies simply leverage the channel for sales opportunities and pay a commission to agents for selling the deal.
The agent model has worked for solution providers because a large part of their customer experience, including overhead tasks like managing upgrades, configuring and provisioning new services, and reporting, are managed in the solution provider portal.
Some companies have attempted to sell SaaS using a reseller model instead, by enabling their partners to manage upgrades and other tasks. But the complexity and difficulty of replicating the solution provider portal experience, while maintaining some level integration is difficult for resellers. It requires significant investments in time and resources for what ends up as an inferior customer experience.
A New Reseller Model
In light of today’s quickly changing workplace, solution providers must be able to push more management to the channel to meet demand. While solution providers’ early attempts to use a reseller model have ultimately failed, there is a next-generation approach beginning to gain traction among partners and distributors of SaaS.
Although partner communities will never be able to adequately replicate the solution provider’s portal experience, some providers are finding that they can hand off the billing and collections responsibility to their partners. This is a win/win for everyone. The solution provider off-loads processes that are expensive to manage, while the partner gains top-line revenue and more customer ownership.
Benefits for Providers and Resellers
In this new model, the partner can manage their own service catalog and package the solution provider’s products and services with their own products and services to simplify the customer’s sales experience. This also enables resellers to deliver more value to the customer and differentiate against competitors.
This next-generation partner-reseller model will also drive more sales for solution providers by leveraging the channel to differentiate products and services with new, partner-enabled value. Resellers will be empowered to expand their reach into local markets with direct sellers. This will enable them to decrease churn and increase upgrade opportunities leveraging local partner relationships.
In this model, the solution provider continues to deliver their own customer experience as customers interact directly with the solution provider portal to manage and maintain their subscriptions to solution provider products and services.
Enabling Technologies
B2B Subscription Billing platforms can help solution providers and resellers manage their shared responsibilities for billing and collections. A subscription billing platform enables companies to build a system of record they can share through integrations between their CRM and ERP systems.
These platforms can be configured to work with most mainstream business software, and platforms like BluLogix have “out of the box” integrations with CRM solutions like Salesforce, which will enable cross platform integrations across the entire Salesforce ecosystem.
