SAAS is taking a while to really catch fire in the channel, but once it does, it should generate decent profits for solution providers.While solution providers increasingly have identified and embraced the benefits of managed services, they seem more cautious about adopting another emerging model, software as a service.
With managed services, the benefits are more immediately clear—at least at an intellectual, if not execution, level. Providers deliver ongoing remote IT management and monitoring services for a recurring fee, and when the customer needs upgrades, the provider typically profits by selling and installing equipment and applications.
With SAAS, the benefits aren’t immediately apparent. The model calls for remote hosting of software, and as such, the need for on-site installation, configuration and integration theoretically disappears. And I say theoretically because some services are still required for more complex applications.
So trying to figure out how to turn a profit from SAAS seems more daunting than with managed services, even though both models ride on annuity-based fee collections. The problem, as discussed in-depth in our cover story, is that when you take configuration and integration services out of the equation, you considerably diminish the profit potential.
Recurring revenues are desirable, of course, but making a decent amount of money without scaring the customer with price requires volume. And that changes the sales approach, requiring sales and marketing skills the provider may not possess. But the opportunity for profit is there. SAAS may yet take a while to really catch fire in the channel, but once it does, it should generate decent profits.
Pedro Pereira is editor of eWEEK Strategic Partner and a contributing editor for The Channel Insider. He is at pedro.pereira@ziffdavisenterprise.com.
