That’s exactly my point. Conventional wisdom says that new SaaS companies have little reason to partner with the channel. However, if you are the new SaaS company that DOES build the channel into your model, you instantly have a leg up on your competition.

SugarCRM may not be the best example, because of two important factors – their hybrid approach and their commercial open source model. It’s really a killer model, which has afforded them great strategic advantages and allowed them to grow their business at an impressive rate.

SugarCRM may or may not have actively tried to build a channel when they first started. I don’t think they really had to. It grew organically for them because of their business model. As interest and usage picked up, customizations did as well. Niche customized versions of SugarCRM began popping up, and firms began making money supporting, installing, customizing and hosting SugarCRM. SugarCRM just did a phenomenal job nurturing that community.

A pure play SaaS ISV would have a hard time scaling their business the same way, because they would need to build their application as an extremely flexible platform from the start. They would also need to find a way to get people engaged in using their platform, support those users, and build a strong community without simply providing the entire application source code.

I’m about to say something that goes against the channel in some ways, so I expect some flames: New SaaS companies often have little reason to partner with the channel. Look at companies like Salesforce.com. There’s little reason, initially, to work with resellers and integrators because the fastest way to the customer is direct through the web browser.

I’m not suggesting that all SaaS companies should have a pure direct model. An example of a good hybrid approach involves SugarCRM, the open source app company. Customers can deploy SugarCRM on-premise, or they can turn to a hosted model.

In the hosted model, customers can choose between SugarCRM’s own data centers or service providers that host SugarCRM on their own. That’s right: SugarCRM is competing with its own hosting partners. And that’s healthy, since it leads to better solutions for customers. The hosting provider typically has some specific vertical market expertise that allows it to differentiate from SugarCRM’s own hosting efforts.

So, the go-to-market model depends on the company. But on a few cases, SaaS software providers won’t necessarily work with MSPs and integrators. Microsoft and Symantec, however, are more inclined to work with partners because they don’t want to burn bridges with existing partners.

I wrote a post close to a year ago now that outlines some of the ways I see SaaS ISV’s and IT Service Providers working together:

http://www.metricz.com/2007/08/saas-and-the-channel-what-now-what-next/

I’d love to hear what you and your readers think.

One key thought: I think there are great opportunities for new SaaS ISVs to leverage the incredible force that is the IT Channel, by keeping the IT Channel at the forefront of their business strategy, not an after thought.

I don’t in anyway mean to imply that other incumbent ISVs have made the IT Channel an afterthought in thier strategies. I can’t speak to that. However, I do believe that the opportunities for new entrants to form strong bonds with the IT Channel by coming up with creative ways to engage them and involve them in their businesses right from the start are huge. It’s more than just margins. It’s let’s create a brand new way to partner and serve our customers better.