IBM is boosting its backing for software as a service (SAAS), providing more resources for application vendors keen to embrace the pay-by-usage model of distributing their products. The resources for IBM partners announced Thursday include financial incentives and access to SAAS expertise within the company's sales force and its technical staff as well as educational courses.
The aim is to substantially boost the number of ISVs (independent software vendors) using IBM technology to host their SAAS offerings, according to Dave Mitchell, director, software as services strategy at IBM. Whereas SAAS previously occupied a niche area within IBM's PartnerWorks Information Networks, Thursday's moves gives the technology a mainstream position in the company's partner network, he said.
"SAAS is still at the early stages," Mitchell said in a phone interview Thursday, with more and more startups, midsize and large application companies looking to adopt the model to some extent.
Over the past year, IBM has more than doubled the number of application vendors it's working with in the SAAS space to 100 companies. However, that figure represents only a small fraction of the 5,000 ISVs with which the company already has existing relationships, according to Mitchell. He hopes the new incentives will help persuade a further 100-plus ISVs to work with IBM in the SAAS area this year, he added.
As part of Thursday's announcement, IBM is offering a financial incentive around SAAS to partners including systems integrators, VARs (value-added resellers) and sales agents. When such a partner refers a customer to an ISV offering SAAS and the lead results in a sale of the service, the partner will receive a referral fee from IBM. The fee is equivalent to 10 percent of the first-year revenue the ISV will derive from a customer adopting its SAAS offering, according to Mitchell. Providing incentives to salespeople to work with the new SAAS model is one of the business concerns that slows down ISV adoption, he noted.
ISVs are also dealing with financial and technical concerns related to SAAS that IBM hopes to address by providing access to its sales force, technical experts and onsite and online training courses. On the financial side, ISVs worry about how the SAAS model might impact their revenue strategies and whether it might cannibalize their existing licensing businesses.
IBM spends around US$1 billion per year on joint sales and marketing activities through the PartnerWorld Industry Networks program. The company isn't breaking out how much of that amount is now devoted to SAAS. "We say it's like trying to count clouds, it all merges together," Mitchell said. He doesn't expect IBM to create a separate SAAS business unit since the service crosses all IBM divisions, including elements of the company's services, software and hardware operations, he added.
In January, IBM netted a SAAS deal with the world's largest ISV, SAP, to host the enterprise applications vendor's on-demand CRM (customer relationship management) service. IBM is running the service's data centers and providing consulting services to SAP users.