Now that Microsoft’s made its hosted online services broadly available, it’s time for VARs to take stock of what this new software delivery vehicle means to them.
Google, Salesforce.com, other vendors have driven this Sofware as a Service train for some time, but Microsoft, unlike those SaaS powers, built its business with partners so those partners can no longer ignore the shift, even if they are so inclined. The smart ones will figure out how to parlay the delivery model for their own gain. The others risk a lot by letting it pass them by.
For those VARs who continue to rely heavily on shrink-wrap software (is there such a thing anymore?) sales, SaaS is a threat. But in reality, very few VARs do a lot of that anymore. Most still welcome margin on product/license sales—it’s gravy that many would prefer to keep. But the bulk of their money is made on services and customization. And one thing SaaS or cloud-based services, need is customization and additional services.
Sanjeev Aggarwal, analyst at Judith Hurwitz & Associates, sees this move to software services as disruptive but in a good way. Sure, Microsoft, Google and Amazon are hosting services, but the trick in providing real value is local coverage and vertical expertise. That is especially true in the hundreds of thousands of small businesses—those with ten employees or less. They need all the security and flexibility software can provide but don’t typically have any IT professionals of their own to build out or support those capabilities and features.
Such small businesses really do need “middle men” to put those cloud-based services together and to work for customers. Maybe even to brand them for the businesses themselves, making them customer-facing e-commerce sites for example. Smart VARs will take vendor-hosted services and make them applicable to their own customers. Aggarwal doesn’t see many customers putting their data center capabilities totally in the hands of a VAR, but he does see them trying out services hosted by Amazon or others with VARs adding value.
In that way, the all-important customer relationship can be preserved. Because the real angst created by these vendor-hosted services is the fear that the vendors will try to wrest the customer relationship from the solution provider, and that is something no solution provider can afford.