I firmly believe that the emerging hosted services distribution channel will be broadly analogous to the distribution models found in established retail supermarket businesses. This model is highly attractive due to an ever-increasing number of small to mid-size (SME) enterprises who want to reap the benefits of enterprise-class software without being burdened by their associated hardware, software, and maintenance costs.

This new model offers huge market potential for resellers of hosted services. To continue with the supermarket analogy, it is the technology and software vendors (the “farmer”) who deliver the production elements (“raw milk”) to hosting service providers (white label service providers), who in turn build services (“cheese”) and also act as wholesalers to distribute the “cheese” for SME customers to use in their businesses. Resellers provide the “supermarket” where their customers can choose among the array of services (“cheeses”) that the reseller offers. The only difference is that hosted services don’t have to be physically delivered through the reseller, whereas cheese must be delivered to the supermarket. The end customer’s perception is the same in either case: the reseller provides both cheese and hosted services.

Of course, delivering hosted services is far more complex than selling cheese, but the successful distribution of hosted services needs more than a “wholesale distributor” (the hosting service provider or white label service provider); it needs a supermarket to make all the service offerings available to customers, packaged and priced just the way that works best for the reseller’s shoppers. The role of the reseller as trusted advisor to the end customer should thus make them one of the key players in this new hosted services distribution model.

As René Speelman, a project leader at Sogeti Group, a $1.5 billion division of Cap Gemini says in relation to SaaS: “It’s all about trusting the partner you’re working with.”

And as the trusted advisor to their customers, resellers need to help them understand the benefits of the new Cloud Delivery model and SaaS business model and how combining the Cloud with on-premise systems can improve running their business and reduce costs. By helping customers see the benefits of hosted services, resellers should be able to ensure their share of the growing Cloud market.

However, hesitating to embrace this new way of doing business will give reseller’s competitors the opportunity to get their foot in the door and build trust with their customers. And these competitors won’t necessarily be other resellers—they may be other trusted business advisors. In the world of SaaS and Cloud, resellers may find themselves competing with an accountant rather than an IT salesman.

In summary, traditional IT resellers and ISVs should see the emerging Cloud market as a huge opportunity. However, completely new skill sets will be required as well as a change of mindset from selling technology solutions to genuine business solutions.

However, it will require a change of mindset. There is much to learn from other industries. Major Fast Moving Consumer Goods (FMCG) businesses such as Coca-Cola have long recognized the importance of a stable, streamlined sales and distribution system to bring their products from factory to consumer with a variety of channel players, each accepting and getting paid for their value-added role in the system. In a similar way, success in SaaS will not be about trying to play every role in the chain, but on focusing on developing a uniquely differentiated value added part in the overall ecosystem. At the end of the day, the genie is out of the bottle and the customer is king once more.

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Anders Trolle-Schultz, Managing Partner, SaaS-it Consult

An experienced sales, marketing, and business development executive, Anders is accountable for leading the strategy, execution, and management of results-oriented, business-transformation campaigns for cloud and the channel. Skillfully navigating the industry ecosystem, he leverages key relationships to establish mutually beneficial partnerships resulting in strengthened marketplace positioning and accelerated sales funnels. Anders is an internationally recognized SaaS, cloud, and channel industry leader, as well as a speaker and moderator.