SaaS Providers Becoming 'Wholesalers'

Shamus McGillicuddy writes in this article posted in Computer Weekly, "XO Communications recently announced a new partnership with Jamcracker, a Santa Clara company that offers a delivery platform for third-party SaaS providers. Via Jamcracker's platform, XO will offer a suite of SaaS business applications to SMBs in the 75 metropolitan areas it services." The concept is that smaller SaaS providers are lining up behind larger telecom players, in this case XO, to better penetrate markets that are underserved.

Jamcracker is an aggregator of SaaS providers, enabling them through a platform that provides provisioning and billing and all of the essentials that a lot of ISVs need in order to convert their products to SaaS. To further its SaaS offerings, Jamcracker is taking its wares to existing network players that have better connections with smaller businesses that are the more likely users of SaaS.Indeed, many smaller SaaS players, which are the majority of SaaS players out there, are not known to the lucrative SMB marketplace since they typically can't afford the market penetration costs. Thus, it makes sense to become part of a SaaS "front-end" such as Jamcracker, as well as a part of larger companies that are able to both introduce the company to SaaS and sell a SaaS offering - in this case through Jamcracker and further through the telecom XO.

For the smaller SaaS player there is the benefit of market penetration and increased sales, and for the large telecom it's another profit center. Indeed, the larger telecom players can offer a menu of SaaS providers, all delivered over their networks, and all providing a new means of increasing that ever-important monthly bill.

"Erin TenWolde, a senior analyst at IDC, said many SMBs prefer to work with trusted advisors when making technology decisions. The SaaS market is flooded with young companies that are unfamiliar to SMBs, but those SMBs have long-established relationships with their telecom providers."

We are entering a world in which SaaS will become part of the network offering to small businesses. One can foresee a SaaS-based small-business accounting service delivered to a business as a part of the monthly bandwidth bill, or perhaps a suite of SaaS services that provide the small business with access to applications once only available to the big boys.

It's easy to see downsides to this sort of model, but the upsides are more plentiful. First, the smaller SaaS providers finally able to get around the noise of the larger players. Second, through aggregator's, small businesses have one-stop shopping for SaaS and are perhaps able to try several for one low price. Finally, market forces will work here; those that don't provide the SaaS value will quickly be voted off the island while those that do will grow rapidly in popularity, and thus profits.

Application integration and service oriented architecture expert David Linthicum heads the product development, implementation and strategy consulting firm The Linthicum Group. Write him at [email protected].In a recent development, smaller SaaS providers are lining up behind larger telecom players to better penetrate markets that are underserved. Jamcracker is an aggregator of SaaS providers that offers provisioning, billing and all of the essentials that a lot of ISVs need in order to convert their products to SaaS. Jamcracker is taking this platform to existing network players that have better connections with smaller businesses - the likely users of SaaS.