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Is the channel under threat from SaaS?

5 min read By October 27, 2022 No Comments

And will referrals save the day?

Is the channel under threat from SaaS? Traditionally, channel has been a hardware facilitation strategy. And now that software is making hardware facilitation easier, we’re seeing vendors go directly to end-users more often.

So is the channel under threat from SaaS or are partnerships going to help?

If you asked this question a few years ago, we would have said “Yes, it’s under threat!” When we first explained that Channext was working for SaaS vendors, many people didn’t understand. SaaS was seen as something you could buy by simply entering your credit card number. And while that is true for some, many SaaS products require a full DMU, months of research, integration conversations, not to mention big budgets to purchase.

The big shift: from transactional to influencer  

In the past, channel partnerships were completely transactional – think resellers, value added resellers, managed service providers, retailers, and B2C. Partners would buy product to sell on to end-user. In the past couple of years there has been a big shift towards a new type of channel partnerships.

What we’ve seen rising in SaaS at an incredible speed is what we call the influencer channel – affiliates, referrals, master agents. In these examples, the SaaS company maintains the direct relationship with the end-user. Partners play a big role in making sure that end-users get to know the vendor. Partners facilitate the actual transaction, and often receive a lifetime referral fee.

Herein lies a massive opportunity for channel.

The rise of agency programs  

Lots of unified communication and collaboration vendors in the U.S. have set up agency programs. What that means is that partners are responsible for introductions, for creating deal registrations, for introducing the vendor’s end-user sales team to end-users.

Have a cross-stack network? Use it!

Say you’re targeting Coca-Cola. Well, maybe one of your partners that has been selling other types of technology has a really good introduction into the CTO of Coca-Cola. Fantastic.

Your partner doesn’t want to have to get upskilled on all different product sets, but they have the valuable network, they have the introduction, they have a good relationship. These people are finding that while they may be a specialist in one area, they can now monetize the relationship they have with other end-users very effectively across a different stack.

Another example. HubSpot. Say you have the introduction into that person. HubSpot may not be your specialization, but you might be able to work with HubSpot, who will pay you a very significant referral fee for that introduction.

Lifetime referral fees

We’re seeing these lean, mean sales organizations that don’t want to be slowed down by installation, management, or product delivery. They just want to be a sales organization. So they build a sales and marketing strategy to target high-value end-users. They don’t have to worry about the cost base because they’re just getting referral fees.

Those referral fees are typically for the lifetime of the contract.  And they can be extraordinarily high. There are stories of people retiring by closing one deal or because they’re going to get paid $20,000 a month for the next ten years. Off to the Bahamas. Congratulations!

So channel isn’t dying, but it certainly is changing.

Account mapping as integration partners

Another very big trend in tech partnerships: going to market together to each other’s customers. If your tech integrates with each other – and you know that that integration drives value for the end user and a lot of end-users are already using it – you can map accounts together and see each other’s customer base.

Say you both know the CMO at Adobe. Maybe you can do a combined proposal or a joint value proposition. It’s the perfect entrance into a company, but also a much higher value proposition because you’re in it together and you can actually bring that value to end-users in the best way possible.

It’s why you see companies like Reveal or Crossbeam grow so rapidly. They make it easier for separate ISVs (independent software vendors) to map accounts together and see where the opportunities lie. It’s like the ultimate introduction.

You’ll see much higher closure rates, you’ll see much higher average deal sizes and that’s all down to tech partnerships.

Own the master agents and referral partners

Split your channel into alliance, agent, and then proper partner reseller wholesale flow, because then you can structure your sales and marketing efforts and recruitment efforts to hit each segment effectively.

The trifurcated channel

Two years ago Jay McBain literally split up the channel in three types of channels.

  • The influencer channel: which is affiliates, master agents and referrals.
  • The transactional channel: which is resellers, value added resellers, and managed service providers
  • The retention channel: which is consultancies, agencies, independents, and system integrators.

This is an ideal way to structure your entire partner organization. Because then you can really bring the most value to each type of channel.

So is the channel under threat from SaaS? Most definitely not. But it has truly changed the way channel operates. Where we once relied on partners solely for transactional purposes, now partnerships are facilitating introductions, referrals,  and integrations.

Want to know more about this topic? In this episode, we discuss tech partnerships and channel partnerships, whether the channel is under threat from SaaS, and the importance of segmentation Listen through our player or head over to our podcast page, Partnerships Unraveled.

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