Channel sales teams have been urged to embrace annuity commission models as research reveals worldwide software-as-a-service (SaaS) revenue is set to soar.

Market watcher Gartner has claimed global SaaS revenue in enterprise application markets is set to top $6.4bn (£4.1bn) this year, a 27 per cent rise on 2007. That figure is projected to reach $14.8bn by 2012 with SaaS and web-based freeware accounting for nine per cent of total software revenue by that time.

Gartner claims the rise will be partly driven by a desire to reduce capital expenditure on IT. Other trends fuelling the increase include increased broadband availability and firms that wish to swiftly deploy software targeted at a specific business requirement.

Mike Morgan, chief operating officer of partner relationship management specialist The Foundation Network, claimed most companies would be happy to buy a product with 10 per less functionality to reduce their cost base.

“In a severe recession it will be much more difficult to sell hardware, software and services unless they can be shown to deliver fairly short-term cost reductions,” he said. “Resellers need to get their head around annuity revenue streams and it will take leaders to see where the market is moving and show the way by revamping their sales model.”

Simon Paton, UK managing director of unified communications vendor Communigate, also encouraged resellers to get on board with SaaS. “Resellers should look at their business model. Companies, particularly SMEs, do not necessarily want a big mail server onsite as every upgrade costs a fortune.”

Neil Robertson, chief executive of e-procurement software vendor Vectra IT, added: “SaaS is an ever-growing proposition. To be able to compete, resellers will need to be able to offer SaaS capability.”

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