Salesforce, SAP Execs: Solution Providers Can Make More Money In SaaS By Building Their Own IP

Channel partners can exponentially boost their gross margins by building business applications that sit on top of CRM or ERP platforms, according to executives from SAP and Salesforce.

SAP has told its solution providers for 18 to 24 months that they can improve gross margins from 15 percent to 70 percent by moving from product resale to the creation of technical or services-focused intellectual property (IP), according to John Scola, global vice president of cloud channels and transformation. The margins for IP also exceed those associated with implementation-related services.

"Partners might have their own IP and not even know it," Scola said during a panel conversation Monday at CompTIA ChannelCon in Austin, Texas. "We just need to show them there is a way."  

[Related: CompTIA CEO: Solution Providers Should Explore Cloud-Based Offerings And Double Down On Security]

Salesforce has worked closely with systems integration giants like Accenture and Deloitte, who have built offerings focused on insurance, health care and patient relationship management on top of the customer relationship management platform, according to Sherrick Murdoff, vice president of partner investments.

The arrangement is repeatable and maintainable for Accenture and Deloitte, Murdoff said, since Salesforce is responsible for upkeep of all of the technology below the business application.

"It's a much bigger market for them," Murdoff said during the panel. "It allows them to provide that IP, that industry-specific know-how to the market. It's a very good value."

In the SAP ecosystem, Scola said South African solution provider Allos has built a technical engine and business consulting services capability that plugs into the Walldorf, Germany-based vendor's Human Resources platform. SAP's platform and Allos's solution are combined into a single package, Scola said, and can be procured by customers under a fixed per-user, per-month financial model.

Solution providers looking to get into IP creation should move away from looking at each customer project as its own individual, discrete set of tasks, Scola said. Instead, Scola said channel partners should look for ways to bundle implementations or others components of their business as repeatable tasks without a long scoping exercise, and then sell it as a package.    

Digital marketing firm Connective Agency continuously evaluates its processes to access what components can be scaled across multiple verticals or geographies, according to founder and partner Manuel Valencia.

"All the time, we're saying, 'how can we productize and make it into something that has a 'good, better, best' type of option?" Valencia said during the panel. 

Lots of white-space exists for solution providers capable of developing IP around marketing-oriented software such as Magento or HubSpot, according to Sunir Shah, president of The Small Business Web, a trade organization for small ISVs.

Shah said small businesses are often in for a rude awakening after purchasing HubSpot since they have no idea what to do with the inbound marketing and sales platform. These businesses typically need both the software as well as a marketing agency to effectively set up a blog or run a newsletter, according to Shah.  

"If you live in internet marketing land, this stuff is so basic," Shah said. "But a yoga studio or a cheese factory doesn't know how to do any of that stuff."   

Likewise, Shah said many solution providers have the IP needed to set up deployment and build up e-commerce stores for customers around Magento. Having access to an online e-commerce store takes away a lot of the documentation-oriented risk end users associate with the open source platform, Shah said.

"That's all IP for a smaller reseller, because you know slightly more than your small business customers," Shah said. "It you build a reputation around that, you can sell it." 

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