The Doyle Report: SaaS Insights: New Research and Observations Shed Light on Market Evolution

I don’t know about you, but it sure doesn’t feel like the ‘ole dog days of summer to me. Instead, it feels like business is running full steam ahead. Take the SaaS market, for example.

Today, 74 percent of channel companies say they are doing at least some SaaS business on a regular basis. That’s according to CompTIA, which will release a new study on the SaaS market later this month if not in early September. The report is still being compiled as I write, but the trade association was kind enough to give the media a preview. Here’s what you need to know.

Of the nearly three-quarters of the channel that has built a SaaS portfolio of services today, roughly one-quarter are newcomers to the channel; the rest, obviously are traditional channel companies that have expanded their businesses. I found it somewhat surprisingly that only half of traditional channel companies have embraced SaaS because it represents some of the fastest growing opportunities in tech today.

What is more, customers, not channel companies, are the No. 1 reason why channel companies are getting involved with SaaS. Customers are literally dragging their partners into SaaS opportunities in many instances, not the other way around as with most innovations. In fact, channel companies report that 52 percent of their customers consider themselves to be “semi-experienced SaaS users” while another 12 percent believe they are “veteran SaaS users.”

One reason why SaaS adoption among channel companies isn’t more is because of the economics of SaaS selling. Make that economics and program consistency. Today, the remuneration for selling or recommending SaaS services isn’t what it needs to be and the vendor programs that reward SaaS partners are inconsistent and confusing.

CompTIA found that of those selling SaaS today, 44 percent are unaffiliated referral partners, 25 percent are affiliated referral partners and 31 percent are strategic partners.

When SaaS Companies Should Move Upmarket

Speaking of program economics and consistency, I’m a big fan of one of the partners at Redpoint Ventures, Tomasz Tungz. He writes a regular blog that is well worth reading if you’re getting into the SaaS market. Previously, he’s written how many SaaS vendors will eventually turn to channel partners after exhausting the opportunities they find immediately at their feet.

In one blog, he summarizes some of the economics of SaaS Vendor programs (below.)

In his latest post, which is entitled, “How To Decide When To Move Upmarket,” he poses an interesting question to SaaS companies: “At some point in the life of most SaaS companies, the business will be faced with the question, ‘when should we move up market?’”

In the piece, he dissects the economics of selling to both enterprise and small business customers. In particular he probes whether a single marketing message will work for both segments. “Some companies eschew the idea of selling into two different segments, preferring to treat most customers similarly. Is the management team ready to respond to increasing demands from sales teams on product management, customer success and marketing?”

They are questions worth mulling, especially as more SaaS companies mature. As they do, they typically progress from offering to “freemium” services to direct sales and then to channel-led sales.

Not all companies follow the same path, obviously. But a growing number wind up at the same destination.