SmoothSpan Blog

Phil Wainewright is blogging again about the impact of SaaS on the partner world, in this case SI’s.  I’ve written about this subject before in my article “Is SaaS Toxic for Partners”.  Basically, he is writing about the experiences of some SI’s who’ve taken the SaaS bull by the horns and tried to differentiate themselves as SaaS specialists.  The firms in question are Appirio and Bluewolf.

It’s an interesting strategy on the part of those firms, and a good one at this early adopter stage.  While their competition is imitating a deer in the SaaS headlights, they’re getting a head start in the brave new world. 

Unfortunately, their comments on what they’re able to do to differentiate themselves in the SaaS World don’t change my opinion that in the long run, SaaS is toxic to partners.  Some of the differences they note SaaS brings about:

–         Much shorter implementation cycles.  We’re talking 30-60 days instead of a year of consulting.

–         Because cycles are so short, users want iterative agile development engagements that are much more collaborative than they had been in the past.

–         Because there is so much less to do, the personnel at the SI are involved in many more projects—5 at a time instead of 1 at a time.

–         There is much less requirement for the arms and legs: the actual hardware, database, and app server expertise.

Those all sound like fundamentally bad things for the SI’s business, because they mean there are a lot fewer services to be sold on a SaaS project.  As the service dollars to license dollars ratio falls from 12:1 in perpetual markets to 4:1 in SaaS markets, there will be a glut of SI capacity.  Further, the ease of system integration for SaaS solutions will tend to commoditize what little business is left making matters even worse.  As Narinder Singh, co-founder of Appirio puts it, “The whole ecosystem will get disrupted.”

The one ray of hope being sounded is that there is an enhanced opportunity to create IP in the SaaS world.  This is true because customers are interested in Best Practices, and because it is so easy to implement a solution the vendors are finding the implementations are more reusable.

Creating distinctive IP will be the defining difference for the partner ecosystem.  Those partners that can create IP and leverage it will be much more successful than the others who are likely to be commoditized out of existence. 

The corollary to this is those SaaS companies who facilitate their partners creating valuable IT will find a much more supportive partner ecosystem building up around their solution.