SaaS Channel Margin: All Over the Map

Novell’s announcement of a beta program for Novell Vibe Cloud and Vibe OnPrem (November 9) marked its foray into enterprise social networking.  Along with this beta, Novell introduced an incentive program for resellers labeled as “discounts” and “rebates”.  For both cloud-based and on-premise versions, partners receive a small discount (single digit) at the time of customer purchase, and a larger rebate (double digit) for Year 1 billings.  For Year 2 and 3, partners would also enjoy the same rebate percentage as Year 1.  It is not clear whether partners will automatically be given the rebate, or will have to earn it in Years 2 and 3 through additional value add to customers.  Being a new kid on the social networking block, coupled with its pending acquisition by Attachmate Corporation, only time will tell how well this program tracts with partners.

By contrast Jive Software, the granddaddy of enterprise social networking, negotiates individual deals with each partner for reselling its on-premise and SaaS versions of software.  Partners receive a discount, allowing them to make whatever margin is feasible.  As for Year 2 and 3, partners need to stay engaged to earn additional revenue.  No free lunch here.

Major vendors such as IBM and Microsoft have programmatic guidelines for reselling SaaS offerings such as Lotus Live and Microsoft Business Productivity Office Suite (BPOS).  Up and coming players including Socialtext and Yammer have minimal to zero channel play in their go-to-market mix.  Others such as Workday have a more OEM-like relationship with partners such as OneSource VHR, an HR business process outsourcer.  See Tis’ the Season for Revenue-Sharing in this blog for more on OEM arrangements.

One of the more innovative approaches was NetSuite’s  SP 100 program targeted at ramping up reseller recruitment.  In March NetSuite embarked on a time-limited offer (through April) for partners to receive 100% margin of Year 1 subscription revenue, plus a 10% margin of annual renewals.  (Its standard program offers channel partners a 50% margin of Year 1 subscriptions, and 30% of subsequent renewals).  NetSuite acknowledged that SP 100 was a proactive measure to  significantly grow channel sales beyond 20% of its revenue.  In a recent interview with CRN in November, NetSuite CEO Zach Nelson indicated that this program has resulted in some “well-qualified partners” including VARs, systems integrators and accounting consultants.  CRN also reported that NetSuite is now “turning more service opportunities to solution providers”.   It is unknown as to whether NetSuite achieved its goal of increasing net new resellers or channel sales.  The outcome however suggests that SP 100 may have helped NetSuite to better determine who and how it needs to partner.

3 responses to “SaaS Channel Margin: All Over the Map

  1. Great post and informs us about the range of approaches and insight into each company’s partner strategy. Channel marketing textbooks are being rewritten as we speak…thank you for your comments.

  2. Thanks for including the NetSuite numbers. Curious to see a followup report on their success (or lack of) and analysis of why. Where I see strong channel plays, modern or classical, I see simplicity & clarity. Simple to consume, understand, sell, and clear revenue and mutual benefit. Would like to see more data in the analyses you offer. Good start. Thanks Su.

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