Cloud channels in the ERP SaaS world

February 5, 2010
By manchester

Dennis Howell in his ZDnet post NetSuite to crack the cloud channel? described some positive things that both NetSuite and Intacct were doing to build a sales channel. In the process, he made the point that:

Most [SaaS companies] are going it alone rather than investing in traditional channel activities. However, it seems to me that if they are to safeguard their future, then capturing the hearts and minds of the many thousands of channel VARs is going to be critical.

Many value added resellers (VARs) read our blog, so we wanted to publically thank Dennis for the insight.

Varying VAR roles in different market sizes

  • Enterprise customers: Nearly 100% of all enterprise sales are accomplished through VARs or with the help of a VAR. Software complexities, legal requirements, unique process flows, tax requirements, and much more require expertise.
  • Upper-mid market and mid-market customers: VARs are particularly important for clients who need customized workflows, customized reports, and integration with other systems. VARs with a detailed knowledge of accounting and business processes can provide ERP setup and configuration advice which saves clients a lot of money down the road.
  • Lower-mid market customers: Generic workflows and non-integrated SaaS solutions might work for companies which do not require extensive automation. But, we would caution that even smaller companies need the accounting and reporting advice that VARs provide and that we chronicled in an earlier post describing an implementation.
  • Low end markets: Clients with sub-$1,000 budgets for software and implementation will not be able to afford a VAR, even though they may benefit from a VAR’s services.

Direct sales versus channel focused

Vendors select different channel strategies depending on the customers they target. Customers who use QuickBooks can purchase directly from Intuit, while high end customers rely on consulting services and reseller advice when buying an Oracle or SAP solution.

Few vendors are able to create a VAR program which can co-exist with direct sales. Most attempts to do so result in channel conflict and non-strategic channel programs. It will be interesting to see if NetSuite can overcome a statement that is highlighted in their financial reports: “we generate sales directly through our sales team and, to a lesser extent, indirectly through channel partners”.

In our opinion, the partner models proposed by Microsoft, Acumatica, and Sage seems to be more in line with upper tier markets.

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One Response to “ Cloud channels in the ERP SaaS world ”

  1. Graham Perry on February 6, 2010 at 7:29 am

    I think VARs will always be needed in the SME space primarily for their expertise.

    What will change is the nature of that expertise – particularly as more SMEs are attracted to the cost-benefits of SaaS. The right SaaS platform needs to be selected and implemented to the SMEs needs, and this is where a VAR will add value.

    Cloud computing and SaaS should be embraced as an opportunity not a threat.

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