Software-as-a-Service (SaaS) is nothing new, but a greater penetration of broadband access and mobile computing -- combined with economic pressures -- has raised demand. It's been around long enough for IT managers to not complain too much about giving up control, and now, with the software giants like Microsoft and Google throwing their hats into the ring, SaaS is about to become as common as hot air on election day.

The market has huge potential. According to market analytics research firm Compass Intelligence, growth rates will hit double digits annually, with SaaS being an especially attractive solution for small businesses looking to achieve cost savings while still having the same technological capabilities as a larger enterprise.

Switch or perish

Dave Kubick, Vice President Worldwide of Channels and Alliances at Iron Mountain Digital, a vendor of SaaS and storage-as-a-service data backup and archival solutions, observes that "the age of the traditional classic VAR is quickly coming to an end." It's no longer about selling "point products and services," says Kubick, but about who is in a position to offer comprehensive solutions that provide the greatest flexibility in terms of use, and how people pay for the service.

We won't be re-playing "Death of a Salesman" to the tune of SaaS any time soon, but traditional VARs that refuse to accept the SaaS model are in for a hard time. This is a game-changer, and will alter the very nature of what it means to be a reseller. The "sweet spot" for VARs will be the small and midsize business market, although if it is marketed right, there could even be growth potential in the Small Office/Home Office market—especially with standard productivity applications from Google and Microsoft hitting the SaaS world.

Every VAR loves a fat contract with a big client though, and SaaS will offer these opportunities as well—but the VARs will have to rethink everything they have ever known, approaching sales and marketing to the enterprise in a whole new light. Stephanie Atkinson, principal analyst at Compass Intelligence, notes, "In some cases, this will compete with some of the strongest software applications that VARs and SIs are offering today. The difference is, these applications reside on the Internet through secure login. Companies will want a customized look and feel, so customer portals will be important."

Vendors who rely heavily on their sales partners are already renovating their channel programs to accommodate the switch. Microsoft's "Software Plus Service" is a major play for the Redmond company, and thousands of Microsoft partners are expected to play along. On their end, Microsoft has developed a pay plan for solution providers selling hosted services, offering a 12 percent cut for the first year and six percent for renewals.

The concept of SaaS has been around for a long time, so why is it so big now? According to Kubick, "companies have become increasingly fiscally conservative." Having to buy perpetual licenses, make large capital investments in hardware, and hire more staff to take care of it all "are problems that companies suffer less easily than they have in the past." Selling SaaS solutions, in an environment where capital budgets are tight, is just going to be an easier sell, but it calls for a change of thinking. Eivind Sukkestad, Principal of Langtech Systems Consulting, a reseller of Iron Mountain's LiveVault, says the best thing a VAR can do to prepare for selling SaaS is to "spend some time educating themselves on what the various SaaS solutions are actually capable of providing when compared to more traditional on-premise solutions."