SaaS Integration Provider
Software as a Service (SaaS) is a tremendous opportunity for
IT consultants to grow and increase the value of their businesses. Recurring revenue services coupled with low
churn is a winning combination. SaaS
gives your customers the opportunity to take advantage of business class
applications without the cost and headaches associated with managing on-premise
software. The challenge for companies is
that they don’t know what they don’t know and need to lean on trusted advisors
to educate them on productivity and cost reduction options.
9 years, but SaaS Integration services are just recently starting to gain
traction. Opportunities exist for first
movers to develop profitable niches before the majority of IT consulting firms
expand their portfolio of services to include SaaS applications. The opportunity is to be an early entrant
providing bundles of SaaS applications to businesses and differentiating your
firm from all the other IT consulting companies in your geography. Today, many IT consulting companies are
offering managed services that, for most companies, involve managing their
customers’ on-site equipment. SaaS
Integration services are the next step for managed service providers to further
Integration Provider do? There are 4
main functions – (1) Requirements Definition, (2) SaaS Evaluation &
Selection, (3) Implementation, and (4) Training and Fine Tuning. Business owners don’t have the time to search
for SaaS applications. They need help
determining which applications are right for them and which providers they
should chose. There is a perception that
SaaS applications do not require any implementation effort from
consultants. For the very small
percentage of small businesses that have strong technical skills this may true,
but for over 90% of businesses this is not the case. They need consultants to configure the SaaS
application so that their company can take full advantage of it. Fine tuning is critical because most of the
questions from businesses arise during the first week following
implementation. Plan for some time
post-implementation to ensure your client is using the application
Virtually every analyst is predicting SaaS will gain
significant market share when compared to sales of on-premise software. The benefits are compelling for end customers
as described above. The benefits are
equally compelling for the software development companies resulting in a higher
percentage of future applications being developed as a SaaS model rather than
on-premise. Significantly lower
development costs, tighter relationships with customers, and predictable
revenue streams with low churn – which
is a big hit on Wall Street.
The following describes the SaaS projections from the key
- Industry analyst firm Gartner predicts that by
2011, software revenue from SaaS will reach $11.5 billion. From 2007-11 the growth rate of SaaS will
double that of enterprise software as a whole
AMR Research shows that 78% of its survey
respondents are either currently using SaaS or plan to in the near future:
A 2008 study
from Saugatuck Research indicates an 84% customer satisfaction rate for SaaS
- Over 50% of VC funded software companies are
building SaaS applications and the percentage is growing.
Opportunities for IT Consulting Firms
While SaaS applications are experiencing explosive growth,
there are still many businesses, especially smaller businesses that are not
aware of SaaS applications. Business
owners are focused on running their business and don’t have time to search for
alternatives to on-premise solutions.
on-site installations, break-fix services, upgrades, and in some cases managing
on-premise equipment for their clients.
While SaaS is not a fit for every client, there are clearly instances
where a SaaS solution makes more financial sense than spending capital for an
on-site solution. With today’s credit
crisis, more businesses are open to low up front and predictable IT costs. If
you don’t propose this option, your competition will.
big question you’re asking – How does my firm generate revenue? Expanding your business to offer SaaS
Integration services has to be a win-win situation and must positively impact
your bottom line as well as your client’s.
It’s clear that your firm will generate billable revenue from selecting
and implementing SaaS applications.
Selling from a value perspective rather than hours will lead to
significantly higher billing rates increasing your gross margin.
majority of IT consulting firms only offer their clients on-premise solutions
which require a significant up front capital expenditure and unknown IT
maintenance costs for hardware and software.
For illustrative purposes, let’s assume a company wants to implement
Exchange for 10 people. Based on
discussions we’ve had with several IT consulting firms, an SBS 2008
installation is $7.5k up front with about 15% going to your bottom line and the
remaining 80 – 85% going to the hardware and software vendor. The installation time frame is about 2 – 3
weeks from the time the customer agrees to order the solution until
installation is complete.
take a look at a Hosted Exchange offering which is fully redundant with daily
backups, includes upgrades, is housed in a tier 1 data center, and managed 24×7
by certified technicians. The customer
does not need to purchase servers, software, or backup devices so capital
expenditure is not required. However,
they do need help configuring the service.
If you charge $1.5 – 2k up front to configure Outlook/Hosted Exchange,
it is 70% less than the on-premise solution and they have a fully redundant
around the clock managed environment.
The on-going fee for Exchange is roughly $140 a month with a portion of
that going to your bottom line. Let’s
assume your firm’s revenue (excluding hardware and software costs) for the on-site
solution is $1 – 1.5k, which is less than the revenue for your firm earned for
the SaaS solution. Furthermore, the time
required to configure SaaS the application is significantly less than an
on-premise solution. As a result, your
hourly rate increases dramatically and you have the added benefit of recurring
revenue and an experienced staff managing the service.
The benefits for IT consulting firms to offer SaaS
Integration Services include:
Stronger customer relationships
Increased billing rates
- Ability to interact with & influence
customers at a business/application decision making level
- Predictable revenue stream not reliant on
billable hours and projects
Greater range of solution offerings to meet
- Options to significantly reduce clients’ up
front expenditures opening up new project opportunities