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3 minutes reading time (559 words)

Channel Partners and SaaS Vendors should Verticalize their Applications

SMB SaaS is of high interest to the Vendors and the Channels as well as the SMBs themselves. This high interest has been fed by the promise of lower cost of ownership, avoiding software upgrade cycles and licensing fee and its ability to scale with the business. Our research shows that Global SMB SaaS market is expected to be US$5.3 Billion in 2011 and growing to US$8.9 Billion in 2015. This represents about 50 Percent of Global SMB Cloud spend, but is also showing the lowest growth rate behind IaaS/PaaS. While CRM and ERP seem to be the obvious choice for SMBs to begin their SaaS journey, supported by numerous small and global SaaS vendors, SMBs are looking for industry verticals or line of business applications more than generic SaaS applications. In our recent Channel studies, we have found that 40.3 percent of Channel Partners are currently offering SaaS based CRM solutions which is a little over 10,200 SMB Channel Partners in the US alone.

In the US, there are 2.3 million SMBs that are using some sort of SaaS solution. However, only about 1 million are using CRM. This represents approximately 98 CRM customers for each CRM SMB Channel Partner. With an average number of seats per SMB being not too high, one can easily guess as to how the Channel Partners can effectively make money in providing just CRM based SaaS solutions. This is with the assumption that all SMBs using CRM SaaS are going through Channel Partners. The only logical progression for both the Channel Partners and SaaS Vendors is to verticalize their applications, and that is where the actual demand is as both SBs and MBs are exhibiting high adoption levels for industry specific applications.

Top tier SaaS vendors such as salesforce.com initiated the No Hardware/No Software model and SMBs were quick to jump onto that messaging. However, salesforce.com should be in a state of dilemma in terms of addressing the needs of the SMBs as the market becomes increasingly saturated with generic CRM applications. SaaS vendors such as salesforce.com and Sugar CRM, besides enabling their applications for Mobile Solutions and Social Interaction, have to increasingly move towards offering applications which pertain to an SMBs line of business.

Vendors such as Intuit or Intacct have not been written about much but they have successfully gravitated towards offering solutions that are integral to an SMB operation. It is not surprising that Channel Partners are constantly asking each other as to how and where money can be made. Even with the roll out of Microsoft Office 365, where 5 out of every 6 Channels is a Microsoft Partner, not everyone wants to resell Office 365. It seems that the time is right for the Vendor and the Channel Community to once again come together to not only revamp the SaaS Business Model but also for the vendors to enable their Channel Partners for vertical solutions.

SAP is on a growth path with the SMBs as they have successfully transitioned their SaaS offerings to specific industry verticals as well as solution requirements of SMBs. This also strengthens the commitment and confidence of the Channel Partners to resell SAP. Agreed that SAP solutions are still used more by the mid-market businesses than the small businesses but the path defined by SAP is clearer than the rest.

Tavishi Agrawal
Techaisle
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Wednesday, 26 February 2020

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