Telecoms providers are looking beyond traditional voice and data offerings and tapping into the growing (and lucrative) Software as a Service (SaaS) market. The shift in strategy is a good one, analysts say. Small to medium-sized businesses (SMBs) that have been hesitant to adopt the Web-based software delivery model may be more likely to embrace it if offered by their current telecom provider.
XO Communications, a Reston, Va.-based telecom, recently announced a new partnership with Jamcracker Inc., a Santa Clara, Calif.-based company that offers a unique 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.
Erin TenWolde, a senior analyst at Framingham, Mass.-based IDC, said many SMBs prefer to work with trusted advisors when making technology decisions. The SaaS market is flooded with young companies unfamiliar to SMBs, but those SMBs have long-established relationships with their telecom providers.
"I do think when it comes to technology adoption, those companies will go towards trusted advisors and established relationships to help navigate those purchases," TenWolde said. "I think a lot of the telecom companies are maybe looking at SaaS and SaaS-related opportunities."
Jeff Kaplan, managing director of consultancy ThinkStrategies Inc. in Wellesley, Mass., said, " I think we're going to see more of this." Internet service providers and other telecoms are seeking ways to differentiate themselves by offering a "fuller suite of services that can enhance their position and better serve their customers," he said.
Jamcracker is essentially a wholesaler of SaaS products. It aggregates applications from independent software vendors (ISVs) and SaaS providers and offers them on a single platform for channel partners such as XO to deliver to SMBs.
"[Jamcracker is] an aggregator of SaaS providers and they enable them through a platform that provides provisioning and billing and all of that, all the essential stuff that a lot of ISVs need in order to convert their products to SaaS," said Mike West, vice president of Westport, Conn.-based research firm Saugatuck Technology Inc. "If you're going into SaaS, it's a considerable investment in processes and infrastructure that you as an ISV might not have."
Recent research from Saugatuck revealed robust growth in SaaS adoption by SMBs. The firm reported that the adoption rate rose from 9% of SMBs in 2006 to 27% in 2007.
Kaplan said a platform like Jamcracker is important to SaaS vendors that have struggled with direct sales approaches to the SMB market.
"They've all been trying to better understand how to use the channel to expand their market penetration," Kaplan said. "It comes down to ease of use. What a lot of end users are trying to do, as well as channel partners, is leverage software in the most efficient way possible. For the channel partners, this represents a strategic sourcing decision. It makes it a lot easier to pick a single platform like this rather than having to aggregate all these SaaS products individually."
XO will initially offer a suite of SaaS products that provide communication, collaboration and data protection services. It will include SaaS versions of Microsoft Exchange and SharePoint, antivirus and antispam technology, mobility services, online backup services and an IP-based virtual private network for remote workers. SMBs will pay $2-$15 per user to subscribe to the SaaS products with XO. Charlie Cary, vice president of small business services at XO Communications, said his company will offer additional SaaS products via Jamcracker as time goes on.
"The services we're offering now are closest to the telecom services we already provide," he said. "I think it's an easy segue to talk about other applications they need. I do think this is where the market is going."
Let us know what you think about the story; email: Shamus McGillicuddy, News Writer