The SaaS Love Triangle: 3 Challenges Facing SMB-Focused Resellers

Ray Sidney-Smith

By Ray Sidney-Smith, W3 Consulting

SaaS presents a number of opportunities for resellers; however, consultants trying to resell SaaS to their small-business clients, and vendors looking to capitalize on the power of consultancies as digital services resellers, are seemingly faced with two unpalatable options: Relinquish ownership of end customers or risk losing them altogether.

It’s what Sunir Shah, CEO of the Cloud Software Association, calls the “SaaS love triangle” — and it’s stalling growth of the SaaS distribution channel.

According to Shah, “for SaaS to scale, we have to get to a place where vendors can leverage distribution networks.” While focusing on direct sales works for a period of time, Shah goes on to explain that the strategy is ultimately shortsighted: “No company can phone every potential customer in North America, no matter how big their sales team is.”

As someone who provides technology consulting and training, as well as a reseller of GoDaddy, Hootsuite, Google G Suite and Evernote, I’ve experienced the SaaS love triangle firsthand. Based on my experience – combined with an understanding of how cloud software is sold, resold, promoted and managed on a daily basis – here are the top challenges currently affecting SMB-focused SaaS resellers. Think of them as the three sides of the SaaS love-triangle problem.

Challenge: Taxing vendor relationships with low returns. I spend my days setting up and managing cloud-software subscriptions on my customers’ behalf, which means that I live inside the push-pull relationship between a SaaS manufacturer and reseller. While I frequently receive calls from vendors wanting to add me to their referral/reseller programs, I rarely take on new vendors unless a customer demands that service. Why? Because between managing billing and subscriptions and providing in-depth training on each platform, the time needed to manage the vendor relationship is simply too taxing.

High overhead costs required to manage each SaaS subscription, the relatively low cost of SaaS itself and poor commission structures mean that new reseller relationships are rarely worthwhile.

Challenge: Struggles over who owns the customer relationship. As you might expect in any relationship defined using a triangle, everyone wants to own the customer relationship, and that causes tension between vendors and resellers. From the customer’s perspective, they have chosen to work with a consultant for one of two reasons: Either they find the administrative overhead of setting up and managing SaaS accounts to be too heavy a burden, or they don’t have the experience or knowledge to deal with SaaS vendors. The latter cadre, often baby boomers, frequently require a higher level of service and training than SaaS vendors typically provide. In these cases, customer frustrations can cause interactions between the vendor and end user to sour.

When SaaS companies don’t want to deal with a lack of tech experience among end users, consultants who not only act as resellers, but also provide training, can help both customers and vendors by filling that gap. It’s a position that underscores the importance of retaining the customer relationship. Right now, there just isn’t a seamless way to integrate both the SaaS vendor and the reseller into a unified customer experience.

Challenge: Vendors control the reseller experience — for better or worse. Not all SaaS companies have figured out which …

… reseller experience works best for them.

Experiences vary across vendors, and not all are ideal for resellers. Some vendors, like GoDaddy, allow for white-labeling and customization. Others, like Hootsuite, offer more straightforward referral programs — although as previously mentioned, the idea of handing off a client to a vendor seems odd, and doesn’t always prove fruitful.

Some SaaS vendors get it. I like Infusionsoft, which made a drastic change to focus on partner success. New customers are on-boarded through partners, full stop. They don’t do it on their own anymore. That sort of process shows that a SaaS supplier is aware of where its services should begin and end with regard to providing a great experience for end users. Having an intermediary place where partners like I can interact and engage with end users means that tech support receives less inquiries, and end users get the guidance they need. Win-win.

Most of these issues could be improved with better channels of communication. More back and forth with resellers is the No. 1 thing SaaS vendors could do to improve the reseller experience — and subsequently customer experience. As a partner, if I want to contact a vendor about a customer issue, I usually have to reach out to an impersonal corporate email address, cross my fingers, and hope that someone responds.

Improved or additional ways for resellers to interact with vendors not only helps to make their partnership more efficient, but will always benefit the end user, which is in the vendor’s best interest.

Triangles are one of the more complicated forms for a relationship to take; however, there’s nothing that says three parties can’t make for a successful team. By addressing compensation models, identifying the best party to own the client relationship and improving the reseller experience, we can help customers — and in the long run increase profitability for SaaS suppliers. This relationship is worth the investment.

Ray Sidney-Smith is the president of W3 Consulting, a consultancy that brings web, social, search and mobile commerce training to small business at an affordable price. He is also the author of SoLoMo Success.