Share The Risk, Share The Reward

Roughly two weeks ago, I blogged about software as a service (SaaS) and the role VARs and systems integrators will play in this unfolding business model. Although plenty of vendors have an opinion about this, which they were happy to share with me, it's no secret that SaaS' place in the channel is still largely undefined.

I suggested in that self-same blog that VARs were largely being left out of the dialogue and planning process, which I considered a serious oversight. I am still of that opinion, but I wanted to share a couple of things I've learned since that last commentary.

HEATHER CLANCY Can be reached via e-mail at hclancy@cmp.com.

It should come as little surprise that the very first person to reach out to me to comment on that blog was none other than Salesforce.com CEO Marc Benioff, SaaS' most vocal mouthpiece. What I've learned since then is that Salesforce.com is working with approximately 25 to 30 VARs on how to create a repeatable business model for this channel, with the expectation that it will build a network of vertical solution providers starting later this year.

This is a bit of a flip-flop from its past position and ties into the strategy for AppStore, Salesforce.com's forthcoming platform for supporting on-demand software test-drives, provisioning and purchases. AppStore won't go live until later this year. Indeed, the SaaS model will take years to define itself, but at least Salesforce.com is more willing to listen than in the past.

I am also intrigued by the work being driven by Progress Software, which has teamed up with about 200 ISVs to help them provide their applications as a service. (About 85 percent of these companies were Progress partners who decided to flip their model; the rest are new.)

Progress takes a unique approach: It gives away its tools stack and provides advice on how to structure pricing and hosting in exchange for a cut of the action, according to Colleen Smith, Progress' director of Software as a Service. This is definitely the right approach for incubation and one Salesforce.com also is embracing.

In the case of Progress, one company has created an online reservation service that charges its own customers per reservation. Progress, in turn, takes a cut of that. Smith said ISVs that have graduated from the program are able to reach entirely new markets. Since it turned its software into a service, one educational VAR from Wisconsin that had exhausted its local market has been able to expand into 12 additional states.

Ken Rudin, CEO of LucidEra, a hosted business intelligence service that exited its beta test phase and flipped the on switch early last month, said he has learned from the past mistakes of SaaS vendors that thought they could make a go of things without talking to the channel.

"This is a symbiotic relationship," he said, "so they need to work together to find the right business model for both of them so they have tight alignment on their business models." He is already reaching out.

So the question remains: What SaaS dialogues are you having? CRN Editor Heather Clancy welcomes letters at hclancy@cmp.com.