The True Value of SaaS for VARs

By Julie Ritzer Ross — January 22, 2013

The term Software-as-a-Service (SaaS) has been so twisted and bastardized in the past few years that it’s no surprise that solution providers have had a tough time determining how to adapt a SaaS solution into their business models. However, as the market for managed services—often sold on a recurring monthly plan—has become more accepted by SMB clients, it’s becoming clear that software can no longer be ignored by the hardware-driven channel.  

Among notable trends, there has been a rapid increase in business’ overall use of SaaS. A whopping 71 percent of business participants in a study conducted by Gartner ( said they have embraced SaaS in some form or another since 2009.  Individual businesses are making greater use of SaaS, Gartner reports. Study results signal a shift in adoption patterns from migrating to SaaS as a means of extending on-premise applications, to doing so as a vehicle for replacing traditional legacy applications with cloud-based alternatives. Supply chain management, web conferencing and social software suites led the roster of services most commonly chosen by study participants replacing on-premise systems with SaaS applications. Customer relationship management (CRM) and enterprise content management systems, respectively, ranked as the number one and number two SaaS options in new deployments.

Meanwhile, a report by market research and consulting firm TechAisle pegs the average number of cloud business applications used by SMBs as having more than doubled since 2010. That year, SMBs utilized an average of two such applications. In 2011, this figure rose to an average of four applications; at press time, the average for 2012 was projected to be seven applications.
“In terms of demand, our studies show that demand is now greatest for SaaS, as opposed to infrastructure-as-a-service (IaaS),” affirms Carolyn April, director, industry analysis, CompTIA.

Additionally, the pool of potential SaaS customers has become deepest at the SMB end, where opportunities for VARs are most plentiful. Companies with up to 1,000 users form the crux of the market, says Allen Falcon, CEO of Cumulus Global (, a Westborough, Mass.-based reseller of cloud services to SMBs, non-profits, local governments, and educational institutions. Falcon deems customers with one to 500 users the SaaS sweet spot, as they are the least likely to possess the IT resources to support other usage models.

Just as SaaS adoption is growing exponentially, so too is the cadre of SaaS solutions themselves. Sources point to a marked trend toward the development of highly specialized solutions geared for narrowly defined vertical and sub-vertical markets. For example, on the retail and hospitality side, there are now applications which, instead of addressing the requirements of stores or restaurants in general, tout features and capabilities that suit the specific needs of—and functions performed solely at—independent and small restaurant chains, liquor stores, specialty apparel stores, and the like, observes Dina Moskowitz, CEO, SaaSMAX ( SaaSMAX electronically facilitates the distribution of SaaS applications through VARs, solution providers and other channels.

Similarly, Falcon notes, many solutions available through Cumulus Global suit one particular vertical market (e.g., SMBs in a single profession). For clients on the education end, the VAR’s toolkit contains solutions for K-12 schools and others for colleges and universities.

For its part, solutions provider Barcoding Inc. ( is experiencing demand for, and faring well with, solutions geared toward the distribution and logistics vertical.

“Specialized distribution and logistics, field service, mobile merchandising and direct store delivery applications are all emerging,” affirms Don Grust, CEO of Apacheta ( Many are being integrated with CRM or ERP systems via secure VPN connections.

At the same time, the breadth of horizontal applications continues to widen. “Diversity is the big buzzword,” says Will Atkinson, president, CAP Software ( “Whereas not all that long ago, SaaS did not extend horizontally much beyond CRM, it is now all over the place.”

Moskowitz concurs, noting that horizontal SaaS opportunities for solution providers have mushroomed to span five major categories: communications infrastructure, business communications, human resources/operations management, sales/marketing tools and documents. The communications infrastructure category includes wireless access point management, wireless security, broadband aggregation, web security/DDoS and asset management; the business communications category encompasses e-mail, unified communications, meetings/webinars, presentation/document collaboration and calendars/scheduling. Workforce management, shift planning/management, recruitment management, employee award programs/benefits management and call center management have come to fall under the human resources/operations management umbrella, while the sales/marketing tools classification has spread out beyond CRM to incorporate e-mail campaigns, promotions, analytics/business analytics/surveys and social media/reputation management. The emerging documents category includes document management, document policy compliance, ISO compliance and managed print (assessment and services/equipment optimization).

Such extensive vertical and horizontal expansion continues to render offering SaaS in almost every vertical segment a sensible proposition. The sole exception to the rule, sources concede, occurs when a prospective end-user does not possess a viable network infrastructure and reliable, fast Internet connections. “It has to be something beyond a basic DSL line,” Atkinson advises. The upside: potential customers may decide that the benefits of SaaS are worth an investment in improving their network configuration and the Internet speed at their facilities in order to jump on the bandwagon. Smart VARs are capitalizing on this and broadening their portfolios accordingly, opening the door for additional profits, Atkinson observes.

As with any technology, VARs are discovering that SaaS is best promoted by ensuring that solutions specified mitigate customers’ pain points and improve their particular businesses. Falcon cites real estate concerns as one example. There, Cumulus builds solutions and services around secure document site agents can use to share sensitive documents without e-mailing them back and forth, as well as around online agent productivity/policies and procedures tracking. For franchisees, the VAR is concentrating on secure portals for ordering merchandise and the like.

“The more customization we can provide, and the more we show how horizontal solutions can be integrated with vertical ones, the better,” Falcon states. Many real estate clients, as well as some franchisors, have been “sold” on SaaS because the reseller was able to integrate their solutions with Google Apps.
Falcon adds that Cumulus, like many of its fellow resellers, is finding itself
compelled to become very creative in matching the capabilities of cloud-based solutions to pain points. Not long ago, one of its SMB clients was seeking a way to better determine whether its marketing collateral (quarterly white papers) were being read by visitors to its website, or if these individuals—whom it also could not identify—were merely clicking a link to an introduction. “We configured a solution with a link to a form to fill out prior to download, not only so that download rates could be tracked, but to capture the names of ‘readers’ for use in a cloud-based sales application,” Falcon explains.

The practice of “tying in” solutions delivered in SaaS mode with on-premise applications as a means of selling customers on migrating to SaaS is also on an upswing, according to April. “It’s really not unlike taking shrink-wrapped software and doing the same thing,” she says.

Another emerging trend on the sales side involves the resale, by VARs, of software they themselves consume in SaaS fashion, states David Bellini, president and CEO, ConnectWise ( ConnectWise has a 35-year-old VAR division to which myriad cloud-based Microsoft solutions are delivered; these are then bundled with other cloud-based options and resold to SMBs. The vendor’s VAR practice sees a margin of 36 percent on SaaS, Bellini says.

“Many small business owners just don’t want to deal with Microsoft, in any fashion, so we have this kind of structure,” Bellini adds. Data security suites are among the most popular SaaS value-adds bundled with the software.
Bob DelPonte, director of product management at Kronos (, says many of his company’s reseller partners have been extremely successful in this regard. “Integrating solutions for conducting background checks into other human resource applications in the cloud is a very attractive proposition that under the traditional model, would have been too costly a move for the average SMB to make,” notes the executive, whose company recently acquired SaaShr.

Dovetailing with the evolution of SaaS is the emergence of hardware-as-a-service (HaaS), which VARs are leveraging in order to more easily integrate SaaS into their existing business models. HaaS appears to come in several different guises. For some VARs, it means managing hardware in the cloud. “As the adoption of cloud computing becomes widespread, we are going to be seeing many more devices—notably POS equipment—managed using HaaS,” predicts April.

For other players, HaaS involves not only managing hardware through the cloud, but leasing it as well. “Here, 65 percent of the hardware that goes out our door with bundled SaaS is now rented, versus purchased,” DelPonte says. “The ‘as-a-service’ structure is constantly changing; down the road, we will see more SaaS and HaaS going hand-in-hand.”

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