One way to grow revenue of a SaaS company is by doing channel sales. It means using parties that are not a part of your organisation, “the channel”, to sell your software.
There are various ways your SaaS company can engage channel partners, each one with its own pros and cons. In this post I will cover the most important ones in order of commitment. Commitment in this context is the mutual dependence and time & money required to make it work.
Agents
Agents sell your products in exchange for a commission.
One of the advantages of selling through agents is that it allows you to get a big reach fast. Moreover, you can get that reach at a fraction of the cost of establishing your own sales force.
There is limited commitment from both sides which has potential negative side effects. Agents have an incentive to do anything for a sale. Think false promises or other practices that do not match your values. Agents are also quick to move on to other products if they cannot make an easy profit with yours.
Working with agents is a great way to add a large number of experienced people on a no-cure no-pay basis. If you go this route it is important to structure the channel program in a way that prevents undesired behavior and rewards commitment as well as success.
Value Added Resellers (VARs)
As the name implies, VARs do not simply resell your software but also add value. They usually do that with their intervention in the sales process, implementation and/or support. VARs, at least the good ones, are known as trusted advisors in the area and domain they operate.
Compared to agents, VARs need more training and support so they can deliver the “Value Added” part and not be mere resellers. Just like with agents, VAR can also damage your reputation if they do not e.g. implement products correctly. The potential damage they can cause to your brand is larger because their projects are bigger as well.
VARs also sell products from multiple vendors, but they have a smaller portfolio than agents because the complexity of what they do is higher. Possible reasons for a VAR to move on are channel conflict and a lack of support from the vendor.
To make working with VARs a success for all involved it is essential that you develop a great partner program. How to do that is a topic for another post.
Independent Software Vendors (ISVs).
ISVs build a solution on top of your SaaS product and will sell and support that independently. For example, if your company develops a generic ERP system an ISV might want to build a vertical for the beer industry on top that. For this reason working with ISVs is only an option if your product can be used as a platform.
Building on top of your software creates a huge dependency for the ISV. They will rely on your company for maintenance, development and support of what will become the core of their products. If you do not provide support, or update your product in a way that breaks their solution, they will have a big problem with their customers. This makes it a big commitment for them so they will not make a decision lightly.
Another factor that makes selling ISVs on using your solution complex is that they usually do not want to be ISVs. Most were started by founders who were planning on becoming the next Microsoft. Building on top of a solution developed by another company means acknowledging that they will not accomplish that dream.
Given this background you can imagine that ISVs will also have very strong views on how products should work. And no matter what the architecture looks like or the language your product is written in, it will never be an exact match with their preferences.
Combine this with the fact that once they have built a vertical solution they will depend on you and you will understand ISVs take a long time to convince. And once they are convinced they still have to develop the vertical. But if you have them on board are in you are guaranteed a solid partner for years to come.
Should you include channel in your SaaS sales strategy?
Whether or not to start channel sales depends on company specific factors, such as your goals, available resources, strategy, timelines and complexity of the product. If you decide to go ahead and recruit partners you should do your homework first and carefully consider the type of collaboration that will work best and design a great partner program for that.
Feel free to reach out if you like to chat about any of this in more detail.
