ERP VARs in the age of SaaS

September 10, 2009
By djohnson

Clients demand web-based solutions, but can value added resellers (VARs) make money with SaaS models?

SaaS provides have declared war on value added resellers (VARs) that specialize in accounting, ERP, and CRM solutions. There is no official declaration, but here are some manifestations of the war:

  • Direct selling versus partnerships. Application providers that sell SaaS do not see their VAR programs as strategic. Direct sales usually compete with the VAR channel so hot leads that come in to the vendor/manufacturer are rarely forwarded to the channel for fear of losing margin.  Evidence of this is provided by the legal dispute between Skyytek and NetSuite. In addition, leads that may be uncovered by the VAR may go to the vendor’s website and enter the sales process without the VAR.
  • Customizing SaaS Platforms. A key source of revenue for VARs comes from customizing software. But, many SaaS platforms are proprietary and require specialized development skills. Developing these specialized skills can be time consuming and development projects are always at the risk of being replaced by the efforts of the vendor in a new software release which can be instantly rolled out to everybody with a subscription.
  • Installing SaaS Platforms. This additional source of revenue for VARs has been eliminated through SaaS. There are opportunities to configure charts of accounts, workflows, reports, and business policies, but the purchase and installation of hardware has been absorbed by the SaaS vendor.
  • Business Model. SaaS business models provide less up-front revenue and more revenue over time.  Many times this is not consistent with cash flow patterns of established VARs.

So when clients demand web-based ERP solutions, VARs need options.  Several vendors have responded by developing ‘channel-friendly’ solutions which can be deployed on-premise or hosted, customized according to client needs using familiar technologies, and delivered according to popular VAR distribution models.  Here is one example of a VAR partner program.

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One Response to “ ERP VARs in the age of SaaS ”

  1. [...] September 10, we noted the tensions between SaaS vendors and traditional VARs (value added resellers). Today, we discover that the SaaS vendors are still on the offensive. This [...]

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