When asked in the VARBusiness 2007 State of Technology Survey: Business
Software about the biggest obstacles they encountered selling
Software-as-a-Service applications, solution providers that sell
on-demand apps pointed to worries among their customers: 55.8 percent
of respondents said customers have concerns about trust and security,
53.4 percent cited client resistance to outsourcingsoftware and 47.9 percent said clients have some resistance to the SaaS pricing model.
But some obstacles to adopting a SaaS business model may be a little
closer to home, and these are likely to create internal tension
throughout solution provider organizations. Adopting SaaS will mean big
changes in how solution providers operate, from the types of
value-added services they will be expected to provide, to the kinds of
skills they will need, to how the cash flows in. "It becomes a very
tough strategic decision, which I'm convinced many [solution providers]
don't know how to make," says Forrester Research analyst Michael
Speyer.
Nearly half of the surveyed solution providers are already involved
with SaaS, hosted either by themselves or a third party, while 26.8
percent plan to offer SaaS within 12 months. Sixty percent of all
respondents already involved in SaaS think that it will force them to
evolve their businesses. Of those, 56.1 percent expect to add
professional services and support, 49.3 percent say they will be forced
to change their business model and 45.5 percent say they will offer
hosted/managed software services.
Spinnaker Network Solutions, an Irvine, Calif., reseller of Microsoft Dynamics CRM apps, plans to offer the CRM
Live on-demand version when it's available next year, says President
Mitchell Cannady. And the changes he expects that to require for his
business are major.
Cannady said he plans to create a separate division to manage that
business, given that customers will likely be smaller and won't require
the kind of integration and customization work that users of on-premise
apps need. Cannady, in fact, sees the new division as an "incubator"
for new customers that could migrate to on-premise software as they
grow, and for sales and technical employees who can start out with
simpler on-demand customer engagements before graduating to more
complex customer deals.
But not all solution providers are as enthusiastic about
Microsoft offering on-demand products. The survey found that 35.4
percent think Microsoft is the vendor most likely to take away from
their businesses by offering SaaS products.
