This is forcing radical change throughout the IT community, with impacts on technology providers as well as VAR's and Channel companies. How will this dramatic shift in technology impact on this area of consulting activity?
A map of the internet published by Technology ReviewUnder the old-technology architecture of SAP and Oracle value added resellers were a viable part of the distribution landscape. Their income streams were largely generated from margins on hardware and technology sales, and the high yield consulting rates due to their particular specialty.
SaaS is emerging as a large scale disrupter in this area. While the large E.R.P vendors are playing it down and trying desperately to relegate it to the Small and medium Enterprise level, there is growing evidence that globally, industries of all sizes are tapping into the benefits that SaaS offers.
And why wouldn't they? Reduced cost of ownership, infrastructure as a browser, access throughout the world, commodity pricing and increasingly functional platforms is a very enticing proposition. Particularly where data security and transactional speed can also be guaranteed.
And the big players are sitting to attention, on one hand talking down the technology as something for Mid market companies, while on the other hand making sure they have a position on the playing field.
Oracle chief Larry Ellison is currently having a bet each-way with his investment in NetSuite, the company that launched its IPO recently. SAP has also launched into the space with its Business ByDesign offering, but has stopped short of driving this product into its existing Enterprise Software marketplace.
Channel distributorship will continue to exist, and maybe become even more profitable. The Enterprise market is still strong and it will take some years for this change to become universal one would assume.
However, as always it will be the first-movers that benefit the most, while those trying to hang onto recognizable business models will see their sectors becoming increasingly threatened by improving online offerings.
So how can VAR's adapt? Experts seem to be divided on this, and even divided over whether they will all need to change their business models.
Jim Collins, CEO of Affinity Internet Inc, sees this as a positive for VAR's "By removing the more mundane aspects of application installation, the alternative delivery models allow the VAR to focus on what will most please the client, and that is the successful implementation of applications that clarify, secure and simplify business processes."
In his view those VARs who have focused on building the resources for implementation, adaptation and training will be well positioned for renewed growth.
This is an interesting point and one worth considering further. When the technology has become a commodity in terms of price, other perspectives also change. A client could easily decide to switch between (say) Salesforce.com to Microsoft Dynamics based solely on the ongoing price of ownership.
Why wouldn't consultants look at representing several SaaS applications? There are more and more springing into this space everyday, and there are even platforms for generating online applications.
Joe Bevk, a Partner at ServiceVantage Corporation sees it this way "In the transition, partners will have to protect current "resale" revenues and grow new revenues throught a combination of referral fees (the new resale revenue base) and changing the service model to business process re-engineering (BPR)."
But what about new business opportunities? And if everybody is focusing on services then who will be able to tell the difference? Jim Holt actually saw things a little differently, with a belief that those companies who "get it" will will "create unique bolt-on application adders and and use the application exchanges that are becoming popular with the leading SaaS and HaaS players. (Such as Appexchange)
Their are changes on the horizon. No doubt about it. The extent of these changes is yet to be fully understood. Will they do to SAP-style architecture models what Google did to Yahoo? Or will it ultimately be more of what Skype failed to do to landlines and mobile phones (Despite the early promise)
regardless of the scale of change, there is definitely an opportunity within this space. Emerging service delivery options within this redefined landscape will definitely include sharper and more developed focus on pre and post implementation services, business process engineering and providing a one-stop shop for add ons, additional packages and extent ions.
It will also force a dramatic change in the way that VAR's and vendors form agreements. Finders fees, ongoing revenue sharing and other (as yet) undefined models could point the way for technology companies and their consulting partners in this scenario. Models that will provide incentive for both parties to stay loyal and to specialize, rather than offering a bit of everything depending on their mood.
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