Corporate Partnering in a SaaS business
What type of partnerships suit a Software-as-a-Service (SaaS) business?
End-users would always love to pay on a drip-feed-as-value-gained basis. It eliminates risk and spreads much of the costs over the value period. SaaS preaches this message. There are many advantages to SaaS businesses, but years on we’re still learning to balance the business’ cash requirements and customer charge models. There are many variant hybrid models floating between monthly subscription and a full upfront perpetual licence fee.
How do you get a reseller channel working on a SaaS model?
SaaS businesses are different in how they sell? If your business model is purely monthly subscription based and no setup fee then how to you incentify your sales people? ‘Traditionally’ you would pay your sales person’s commission on new business once the cash had been received. Sales people operate best in an instant gratification model. They win, they get rewarded, they get happy, then go sell more. They are ‘coin-operated’ sales people.
Many resellers, system integrators and independent software vendors still operate on full licence fees paid upfront basis to incentify their sales engine. SaaS businesses don’t generate cash to enabled paying lump-sum commissions on a cash-received based.
Consider a Sales Person’s Choice: When a sales person has an option of selling a product with full commission upfront and or one with a drip-feed commission over 3 years, which is he going to choose?
What should you consider when selling your SaaS software through resellers?
Assume they are a suitable partner with access to your target market and have the necessary skills to resell your offering)
1) Business Model Differences
Does the reseller currently sell or has sold SaaS offerings?
2) Sales People Incentives
Are their sales people currently incentified in lump sums on a cash receipts basis? How will your product sell in this mix? What do the sales people think?
3) Agility / Pace of Change
SaaS model is associated with highly scalable growth, will your partner still be suitable to work with you through many iterations of change. How fast can they educate their sales people? How fast can they respond to the market?
4) Culture / Customer Focus
When you’re concerned about keeping or losing customers of your SaaS system on a monthly basis, you are deliberately highly responsive to customer needs. How will this work through a reseller?
5) Legacy, History and Tradition
It’s hard to change mindsets. When people and businesses are used to operating in a particular way, don’t expect instant change. When a reseller or a sales person is starting to sell their first SaaS offering, the differences will take time to get used to.
So how do people made it work?
I know of one company who changed the charge model to include a setup fee, just so they could incentify their sales channel?
Another, their offering added value and helped sell another product with an initial licence fee and thus gave the sales person an added bonus drip feed commission over many months into the future?
How do you incentify your sales people in your SaaS business?
How do you overcome the channel effectiveness challenges in partnering your SaaS business?
Great post for an increasingly relevant issue. VAR’s have the opportunity of adding services (i.e. premium support packages, training, etc.) but are still challenged with the drip-feed incentive. Finding partners who embrace this trend, rather than fight it, is the first step toward establishing a motivated channel.