As SaaS grows, partner portfolios pay off

Software-as-a-service (SaaS) has become one of the fastest growing segments of the broader utility computing movement. This pay-as-you-go approach to acquiring business applications is gaining market acceptance because it alleviates many of the hassles associated with traditional shrink-wrapped software.

Escalating demand for SaaS is also generating greater competition among a rapidly expanding array of application providers and technology suppliers. For instance, in January THINKstrategies launched an online directory, called the Software-as-a-Service Showplace (www.saas-showplace.com), which now includes over 150 company listings across 33 application and industry categories.

As the number of SaaS applications and enabling technologies grows, the ability of SaaS suppliers to differentiate themselves purely on the technical capabilities of their solutions is declining.

While the most compelling measure of a supplier's competitive advantage is the number of customers it boasts, another important metric is the breadth of its partnerships. As a result, many SaaS players are aggressively expanding their partner portfolios in order to strengthen their competitive position and win a greater share of the market.

In the IT industry, solution providers like to refer to their partner portfolios as an 'ecosystem.' Partners serve a vital role for most companies either by supplying important ingredients that go into a final product or service, or by providing a channel to market to a broader audience.

Partners also play an important symbolic role by endorsing the value of a supplier's products or services. The more partners a solution provider can enlist, the more attractive their products or services become.

The increasing importance of ecosystems in the SaaS market can be clearly seen by looking at the number of industry events that have focused their agendas on this topic. Last week it was the OpSource SaaS Summit (www.opsource.net); in April it will be Software 2000 (http://sandhill.com/conferences/sw2006.php); and in May the Software & Information Industry Association (SIIA) Software Strategies conference (http://www.siia.net/s3/2006/default.asp).

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