Don’t get stuck in the past, don’t look too far forward

February 12, 2010
By manchester

A recent article by Rick Whiting on CRN ChannelWeb covered a warning that NetSuite CEO Zach Nelson issued to traditional ERP channel partners. Nelson said “If traditional midmarket VARs don’t change to meet the demand for cloud computing solutions, they will go out of business.” This comment prompted a response by a traditional vendor as well as a rebuttal from a NetSuite customer.

Don’t get stuck in the past

We agree with Nelson that cloud computing is the future of ERP (disclosure: ERP Cloud News is the URL of this blog). There are many mid-sized business customers without IT expertise that need to access an ERP solution from different offices and geographies. These customers will be well served by a cloud solution.

Don’t bet too heavily on the future

The Sage reseller also makes many valid points. First, a company with only 20% channel sales does not have a great channel program. This is because NetSuite aims to replace the training and support services that VARs provide with it’s own. In addition he makes the point that many SaaS solutions do not offer the customization capabilities which are critical to the VAR business model.

Just like there are customers that will benefit from SaaS, there are customers who will benefit from a highly-customized on-premise solution.

Focus on the “Value Add” in VAR

As the Sage reseller pointed out, “VARs must add their own special sauce to the mix”. If this special sauce is a add-on module, then find a cloud solution that allows you to use your existing development skills to port your application to the cloud. If the special sauce is customizing the application, then find a cloud solution which supports robust customizations. If your special sauce is customer support and training, then find a cloud solution with a business model that provides customer ownership.

Most importantly, realize that your customers may want to switch to SaaS and back to on-premise depending on their changing business needs. A VAR which understands how to help customers through this transition will be the most valuable of all.

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3 Responses to “ Don’t get stuck in the past, don’t look too far forward ”

  1. All Cloud on February 12, 2010 at 8:48 pm

    I think Mr Nelson is just being his normal arrogant self and needs to be banned from making public statements.

    Facts are: 6000 NetSuite customers worldwide. 80% of which are in the USA. Leaves 4800 customers. 20% of which is sold by their so called “best channel”. Leaving 960 channel sold customers. Divide that by say 150 channel partners (as they claim) means 6 deals per channel member in what ? 10 years. Hardly a well executed channel.

    The facts speak for themselves. NetSuite channel strategy is the worst I have ever seen which is why we never joined their channel. No channel partner could survive on the paltry revenue that this brings in and I feel sorry for the businesses (partners) that have embraced this product. What a waste of time.

    The so called “Netsuite customer” – sounds to me more like a NetSuite partner who is making a futile attempt at backing NetSuite’s channel model.

    If I were the execs at NetSuite I would get rid of the channel (as they probably will) since it clearly is not paying for either NetSuite or the Channel Partner. But I guess they must appear to have a model for wall street.

    Even if you develop a module or add-on using their so called “platform”. You only have 4K worth of potential US customers to appeal to. Divide that by say 5 major verticals – 800 and take 10% (assuming you appeal to one of the major segments – and I am being generous) – thats only 80 potential new customers. Hardly worth developing stuff I would think. I would bet that none of their ISV’s have passed 50 customers. platform, iphone – that is a ISV dream.

    I think SaaS will explode in the next few years. I just do not think it will be NetSuite. You only have to look at the paultry growth in the last year (compared with salesforce and others) and the number of complaints about their product on the web.

  2. Graham Perry on February 13, 2010 at 3:19 am

    Nelson’s comment is true, but this scenario has always been true – a VAR must adapt to changes in technology and customer needs to stay in business.

  3. Gerald Park on February 16, 2010 at 8:53 am

    Recent article (Feb 10, 2010) in CRN magazine “Update: NetSuite ‘pulls back’ channel in Sydney, Melbourne” (link to article) says that NetSuite is going with a direct and a channel strategy in Australia.

    In my experience you either go direct or channel. It’s ludicrous to think you can do both.

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