“Large technology firms have the repeatable frameworks and the industry domain knowledge to more tightly align technology to requisite, transformative outcomes the mid-market needs,” Woollacott said. “The mid-market needs the technology, yet few midmarket enterprises will possess the necessary people skills.
“Both large vendors and the mid-market need a new business model similar to that of the midmarket enterprise for this transformation engagement.
“For example, very small boutique firms boast a mix of process knowledge experts across the entire operational stack of the mid-market industry domain, along with technology experts in application software configuration tools. Large vendor repeatable frameworks become the ‘white label’ reseller opportunity to simplify the technical challenges and accelerate adoption,” he said.
According to the analyst, the upfront engagement on a mid-market IT project can become a reasonable revenue opportunity for emerging boutique services firms.
At the same time, participation in the subscription revenue stream by handling user training and simple support calls provides the recurring revenue stream to create a body of boutique systems integrators built around the same monetisation models as the software-as-a-service (SaaS) vendors they partner with.
For Woollacott, smaller value-added resellers are nothing short of essential to the combined goals of both vendors and mid-market customers.
“Large enterprise technology vendors and the underserved mid-market need this intermediate value-added business service to develop quickly — for both of their sakes,” he said.
Reinforcing his argument for the importance of channel players, Woollacott notes that consumer‐oriented firms targeting the mid-market are increasingly giving away advisory services to set up the longer‐term subscription.
“This suggests competitive advantage for smaller technology firms able to sell SaaS applications to the mid-market with low‐cost or free technical support to establish the midmarket POC test,” he said.
“Larger services and application vendors that have shifted to cloud delivery models, meanwhile, such as Oracle and SAP, will have to rethink their overall go‐to‐market strategy in terms of what they deliver as free sales support versus fee‐based advisory services at the front of engagements while also considering the subscription fee structures.”
Woollacott goes on to warn that if vendors turn parts of the advisory services previously conceived as a revenue opportunity into a cost of sales function, subscription fees will need to stabilise or increase slightly to recoup the sales expense within the long tail of the recurring revenue stream.
“Messaging will have to shift, monetisation strategies will have to shift, and the nature of the partner business models will have to shift,” he said.