SaaS & Cloud Computing and the Channel

One of our core business strategies at Intacct is to work closely with the channel to deliver our applications. Our partners- Value Added Resellers, CPA firms and Systems Integrators bring tremendous experience and talent to the Intacct family – which is very important to CFOs that are looking to implement new financial systems.

As I have written here before, amongst the cloud computing intelligentsia, there is a widespread preconceived notion that SaaS and the channel don’t mix.

I understand why this is – most of the large cloud computing and SaaS companies started out before the channel was ready for SaaS – and as such they focused exclusively on direct sales. Because the early firms grew up without channels, the natural conclusion is that SaaS and channels are not compatible.

But I think this is much more due to timing than some fundamental characteristic of SaaS and the channel. My experience is that channels fulfill demand, they don't create it. In the early days of SaaS and cloud computing, the vendors had to directly sell to clients - customers were not clamoring for cloud computing-based solutions. But in 2010, clients are clearly asking for SaaS and cloud applications - and the channel is responding to this demand.

Early SaaS and cloud companies grew without reselling channels by developing a direct sales culture, and several of these firms hired their sales executives from Oracle, which also has a direct sales culture. Once you’ve got a large direct sales organization and an entrenched direct sales culture it’s very difficult to become channel friendly – there is simply too much channel conflict to manage between a large direct sales team and the indirect channel. Note that I'm talking about reselling channels here - Salesforce in particular has a large and extremely successful ecosystem of systems integrators and consultants.

In the B2C world, consumer focused software companies are actively disintermediating the retail channel by offering SaaS and cloud computing services directly on their corporate websites. While I think this will work for inexpensive consumer products that are purchased, it's clear to me that the "come buy it on our website" approach will not work for more expensive, more considered purchases in B2B world. There is a big diference in my mind between B2C products which are purchased, and B2B products which much be sold.

So all this said, It should be clear that I very much disagree with the premise that SaaS and Channels don’t mix. At Postini, now a part of Google, we had 1,800 resellers and the channel was the key to our success. At Intacct we have more than 100 channel partners and growing.

The nature of the financial applications business is that CFOs only change out their financial systems once every 7 to 10 years – having local, expert partners that make this transition all the time is enormously important – and the VARs, CPA firms and integrators are all great at assisting CFOs in doing this. The channel reduces the cost and risk for the CFO and helps deploy best practices, which increase ROI.

The convergence of SaaS and channels is a win win win – for Intacct, for our channel partners and for our clients. We gain broad, cost-effective distribution, our channel partners gain significant new revenue streams and our customers gain from successful, high value and low risk implementations.

So that’s the perspective from the cloud computing and SaaS industry side – in my next post I’ll look at what I’m hearing about SaaS and cloud computing from the army of existing mid-market ERP channel partners.