20 Sep 2010

SaaS is dead – VARs for SaaS don’t exist

Posted by Axel Schultze

So let me share with you my experience from the past 10 years in the “SaaS industry”.

Summary:

1) If something is 10 years old and hasn’t taken off – it’s better to leave it off
2) Cloud computing is the newer more sexy term for SaaS
3) People who sell SaaS sell the wrong thing.

PROBLEM #1 Definition

In 2001 I founded BlueRoads, a channel management solution that has been pretty successful despite Internet bubble burst and subsequent low funding. Yes we were a “SaaS Company” but we sold “Channel management solutions” and never mentioned the term SaaS.

Facebook, LinkedIn, Twitter… are all SaaS applications but they would never mention that term. It doesn’t do anything for the application consumer. With over 600 Million users SaaS is already the dominant application delivery model. But featuring the delivery model versus the application itself is like Dell featuring FedEx instead of the new XYZ 123 notebook.

PROBLEM #2 Product

Too many SaaS products where simply carbon copies of on-premise applications transformed to online. The fortune 1,000 is not so keen on just a transformation. They would only accept new stuff that is not applicable in an on-premise version, like social media. SaaS products need to be net native in every aspect. At Xeesm we build a product called “Flights!”. Its a social media business application. We are near 100,000 users and probably no.2 or 3 behind SalesForce.com – you wouldn’t find the word SaaS or cloud computing anywhere on our website or in any training material. We are selling to application consumers not to IT. And the product need to be a consumer product (a corporate user is a consumer of the application) not a mega complex business application that takes years to setup and implement.

PROBLEM #3 Funding

Venture Capital funded companies are organized to be like a lemming family – doing things that others already did successful. The most remarkable example is search. After Yahoo grew faster than AltaVista and then Google was near dominating the space, over 43 investments with combined $300 Million investment in funding were put into mediocre me too search engine startups Google, Yahoo and AltaVista didn’t get any seed funding from VCs. So watch for innovative – non VC funded companies. You won;t find them calling themselves a SaaS company. If somebody is looking for funding, they call themselves a “cloud computing company” and the game starts all over – do something others did successful before you just a bit better and you get funding…

The SaaS model is certainly not dead – it lives with a staggering 600 million users – but to introduce “SaaS” to a world of business consumer doesn’t make any sense to me. That’s why I said SaaS is dead.

SaaS and Channels

If we sell “SaaS” to VARs they either can’t deal with it because they sell their products to a different audience, the IT people. Or they can’t deal with it because they make money with physically installing drives and operating systems, databases and applications. Or they can’t deal with it because the owner is 50 and want to sell the shop soon and has no interest in the crazy new stuff that is fundamentally different to what he is doing today.

A VAR with a 30 year old hip and upbeat owner who is selling business applications on departmental level, providing some business process expertise would be the only type company that could be successfully converted to a SaaS model – but that company simply is nonexistent.

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One Response to “SaaS is dead – VARs for SaaS don’t exist”

  1. […] and since seller of a SaaS application company and is a renowned channel expert, says in his blog that the traditional VAR is never going to sell cloud services in any scale and that a whole new […]

     

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