Learn the Laws of SaaSonomics

Exclusive Group COO Barrie Desmond explains SaaSonomics – the art of adapting your business for the ‘as-a-service’ based annuity business model, without damaging your wealth!

The economics of IT consumption is evolving and it will impact the IT supply chain as we know it. This is the era of SaaSonomics and resellers that don’t think about adapting their businesses for this disruption risk becoming the Kodaks or HMVs of the IT channel. Look at the facts and it’s obvious that today’s technology market will not get you from here to eternity.

Consumer IT typically offers complete transparency of price, limited contractual tie-ins and instant fulfilment. By contrast, enterprise IT providers are still the complete opposite of this, despite Forrester and other research houses predicting global SaaS revenues will hit $87bn by the end of 2015; more than doubling the figure for 2012. Even stronger growth on the back of more flexible IT provision is inevitable.

Meanwhile, disruptive new services-based business models are undoubtedly emerging as an alternative to the traditional capital expenditure approach. According to Ovum, over 80% of enterprises globally will be using Infrastructure as a Service (IaaS) by 2016. That’s a significant change over a short period. By the same year, IDC predicts there will be an 11% shift of IT budget away from traditional in-house delivery, toward various versions of cloud computing as a new delivery model. 11% of the global market is $385bn!

And finally, analysts are projecting a fall in enterprise demand for solutions that fail to deliver the benefits of virtualised, cloud-driven and software defined technology. According to a ComputerWorld survey, 52% of organisations over 1,000 employees have increased spending on cloud computing this year. The only standout decrease planned was on hardware, with 24% agreeing they would cut budget in this area.

It is clear that the entire IT channel needs to transform in order to prosper. Disruptive approaches are needed. Buyers are changing how they evaluate and deploy technology, and are considering purchasing it on an OPEX rather than a CAPEX basis. Soon customers will be asking you a monthly or quarterly price for 1,000 VM’s (and I ain’t talking ‘voice mails’).

But whilst the facts and mega trends illustrate this, many resellers are ignoring these indicators and failing to prepare for the impact that reduced or delayed cash flows will have on their business. They are not skilling up for the big change to cloud based consumption, are in denial over the impact on sales plans and commissions, and burying their heads in the sand over the displacement of revenues from one-off lump sums to regular annuities.

No one really knows where the rest of the IT channel will be by the end of the SaaSonomics decade, but the story is not all doom and gloom. Most resellers are in the same shape so now is the time to act.

If you aren’t already planning a business transformation project around SaaSonomics, you need to start now. If you aren’t building out lower cost sales models, you need to begin that modelling immediately. And if you aren’t working internally with your FD/CFO to gradually change financial structures, you have to distract her attention away from the abacus today.

The last time I bought a car, it wasn’t really the colour or performance or consumption figures that caught my eye – it was the sales guy’s approach about how quickly and cheaply per month he could get me into that car, with a promise to upgrade me before the end of the term to a better model for a smaller monthly fee. That’s the thinking our channel needs to embrace.

One of the ways to enable this is to get serious about services, and payment models delivered by IT asset financing and leasing. We may not be there yet in terms of a global offering, but facing the reality and embracing the change is half the battle. Sit on your hands and market disruption will disrupt you out of existence. Take up the challenge and prepare your way from here to annuity.

Barrie Desmond, Chief Operating Officer
Exclusive Networks Group is the only international ‘SuperVAD’; focused upon growing the businesses of innovative security, networking and infrastructure technology companies.