In terms of commandments, personally we think this one is one of the biggies for a SaaS provider. Why? Well if you look at the truly successful software companies, they all have one thing in common. A really good channel.

Physically that channel might be their own or via a third party. It might be segregated into distinct industry verticals, across geographic lines or dependent on ARPU but either a good channel is a requirement for success for a software company.

Generally in software, but especially in a SaaS world, the actual channel covers a wide range of delivery mechanisms, whatever that mechanism - channel can be defined as “The bit that sells your software”.

For SaaS accounting vendor Xero, the channel appears to be the combination of fantastic design and partnering with the trusted advisors of their end users. For iPayroll - it's their face to face sales people that matter as this post explains. For Google it's viral uptake while for Microsoft a combination of clout, pervasiveness, marketing and third party sales channels does the trick.

For Salesforce and other more complex SaaS products it is building out a integrator channel. The reasons for this are fairly straight forward;

1. Sales channel Reach
2. Complexity of implementation (it's not just turn it on with these guys)
3. Cost of marketing globally
4. Regionalisation and local support
5. Effectively you Outsource a professional services arm and don’t have to fill in all the knowledge gaps
6. They can target specific verticals that a generic SaaS provider can’t

Given this, it came as a shock to learn of Netsuite's recent severing of ties with their largest reseller. This seems on the face of it a really large step backwards. Not only that but Netsuite is also building its own professional services business.

How does this leave enough on the table for an integrator channel to survive? How will Netsuite make up the lost sales coverage and technical expertise? What message does this deliver to the remaining partners? In my view, SaaS providers need to pick where they play in the value chain and stick to it, religiously. At the moment the industry as a whole is still in its infancy, that means there are plenty of on premises software companies to beat yet. Arguable the time to build your own professional services business isn't now. Rather it's when the market is flattening out and you need additional revenue streams...

We've seen similar historical moves from SaP - one minute embracing their third party channel partners and the next setting up their own professional services team - it's an incredibly hard balancing act and one that requires the utmost of sensitivity.

Of course the other perspective is that if your channel partner isn't doing the job for you - there is no option but to either find a new partner or run the channel yourself.

So what happened in this case? Was Skyytek not providing the customer numbers, the support or the services that Netsuite needed? Or has Netsuite gambled hugely on their own channel play?...watch this space for more

A collaborative post by the editor and unreasonablemen.net