Three Solutions for the Broken Software Reseller Model

Ryan Neu, Jul 18, 2019

We’ve all experienced those email subject lines that catch us off-guard:

• Final reminder that your subscription is set to renew.
• Your subscription payment is overdue.
• Your subscription renews in 4 days.

As a company scales, the number of software services we’re plugging into forever grows, while our ability to keep track of each of those services … not so much.

Traditional Hardware Resellers

Traditionally, these deals are managed by major providers who serve as hardware and software resellers. Most of these companies, such as CDW, SHI, and Insight, were founded in the 1980s with a focus on hardware products (SaaS wasn’t a thing yet). While these companies defined the way businesses purchased hardware products, using them for SaaS products can lead to an expensive route for your business. These companies are trying to figure out how to help SaaS companies, but are falling short for a number of reasons.

Problem 1: Traditional resellers are catalog-based.

In their business model, these resellers can only help you buy products if they have an existing relationship with the vendor.

With hardware, they have most of the partnerships needed to offer a comprehensive catalog. But for SaaS, they don’t.

Why? There are tens of thousands of SaaS products, and some don’t even have a partner program. That means a company like CDW can help you buy GSuite and Zoom, since they have a relationship there, but they can’t help you buy all of the hundreds of SaaS products that power your business.

Problem 2: Traditional resellers have a knowledge-gap.

Large resellers claim that their value is created by being a buying expert by helping you make better buying decisions with their domain expertise. While this may be true with hardware, it doesn’t translate well to SaaS. Hardware businesses emerge far less often, allowing a reseller to develop expertise and a relationship with them. With SaaS, there are so many products popping up daily that it’s impossible to truly be an expert in the constantly evolving landscape.

Problem 3: Traditional resellers are handicapped to a conflict-of-interest.

These resellers work for the vendor; their job is to resell products. In a way, they are an extension of a company’s sales team which means they’re motivated to maximize the price of goods sold.

For the buyer, this means that there is a good chance that you’re paying a premium. In SaaS, this is a big problem in a world where lots of SaaS companies price their products differently based on when you buy, who you buy from, and the questions you ask (or don’t ask) in the sales process.

A New Age of SaaS Resellers

So what do solutions look like for efficiently and affordably purchasing SaaS services? We think it’s quite simple:

Solution 1: Keep buyers external.

There are thousands of SaaS products. Naturally, it’s impossible for an internal IT or procurement team to become intimately familiar with a vendors’ process. External buyers have already worked with your vendors and can navigate the process with ease.

Pro Tip: Make sure you figure out how much ‘SaaS overlap’ your buyer encounters. For example, at Vendr, our customers have a 70%+ overlap with the SaaS that they use. That means that our customers are using the same products, resulting in deep experience we’re building with those vendors.

Solution 2: Match the price for SaaS.

In order to be certain that you are paying the right price, you need to work with a buyer who is intimately familiar with SaaS. This ensure whoever you’re working with will have greater knowledge with how your vendors sales processes work, what your vendors care about, and so on. All this translates into maximizing every opportunity to save money for your business.

Solution 3: Remove the conflict-of-interest.

In order to accomplish what you need to (absent of any bias), the buyer should work for you versus the vendor.

To keep things simple, keep your buyer on a flat retainer model instead of a gainshare model. This keeps your interest aligned.  Also, it creates the dynamic between the buyer and the vendor focused on value vs. haggling over price. 

A retainer model will also save you a bunch of time while a gainshare model is difficult to benchmark.  For example, just because a buyer saved you $10K off the list price, doesn’t mean you should now owe them 20% off of that. Maybe you could have gotten that deal on your own.. This now requires you to exert energy figuring out how they got to their baseline benchmark in the first place to understand what deal you’ve truly been given.

Summary: Hardware vs SaaS Resellers

Overall, operating in the new age of SaaS means working with companies who are optimized for such. Here’s a summary of the problems and solutions so you don’t fall prone to the easy mistake of employing a hardware reseller for your software needs.

Hardware Resellers Software Resellers
Problem Solution
Traditional resellers are catalog-based. Keep buyers external.
Traditional resellers have a knowledge-gap. Match the price for SaaS.
Traditional resellers are handicapped by a conflict-of-interest. Remove the conflict-of-interest. 

 

At Vendr, we buy software for the world's fastest growing companies. If you are experiencing SaaS overload, I'd love to chat: ryan@vendr.com.