An ERP Installation Example

Earlier this week, I participated as an observer during an ERP installation. The conversation between the value added reseller (VAR) and the customer was very typical. The discussion included topics such as why a 13th accounting period is important, the benefits of implementing accounts receivable versus manually using the general ledger, how and when to setup sub-account codes, how taxes need to be implemented, how to customize reports … and on-and-on for a few hours. The VAR also showed the client how to perform these processes using the software.

This installation was very typical, so why am I writing about it? Answer: This was a SaaS ERP implementation on a cloud platform. Note that the conversation didn’t change because the implementation was SaaS, and although the software installation was very different (it was done on Microsoft Azure), the business conversation was identical to an on-premise deployment.

In the case of ERP, the business discussion is much more meaningful and important than the deployment conversation.

More Evidence

Articles from Bob Scott’s Insights cover various aspects of the mid-sized ERP and accounting market. By just reviewing the titles of recent posts, it’s apparent that partner programs are not going away.

• AccountMate signs VARs: “AccountMate doesn’t sign a lot of new resellers and CEO David Dierke says that’s one of the hazards of being a source-code software company. But it enlisted 10 new dealers this year and that’s double the amount for 2008.”
• Intacct Growing Channel Program: “Intacct, which markets Web-based financial software, is beefing up its channel program.”
• SaaS is the Future, But: “Acumatica continues to recruit VARs with the idea that SaaS remains the way of future.”

Why VARs will Continue to be Important

1. VAR Sources of Revenue.
Nelson predicts that most VARs are going to lose a lot of revenue because they will no longer be required to install and maintain systems. The problem with this argument is that VARs get an extremely small percentage of their revenue from managing systems. Most accounting and ERP VARs help businesses build customized workflows, migrate data from legacy systems, build interfaces to existing systems, customize reports, and customize business processes. The cost and need of these services dwarfs the cost of maintaining an operating environment.

2. Subscription Based Billing.
Nelson says that most VARs will have to switch to subscription based billing because that is how cloud-based software is sold. First, most “subscriptions” require a 1 year pre-payment that is equal to over 50% of a traditional license. Second, most businesses will not want to pay a subscription for migration, customization, configuration, and business process services.

New Partnerships

VARs will continue to be relevant in the SaaS world, just as they are in today’s hosted world. Several VARs are working with hosting providers (as well as cloud providers) to outsource server operations. They realize that datacenter operators are experts at buying, powering, and backing-up servers. Partnerships between software vendors and cloud providers have the potential to create a turn-key offering that VARs can offer clients without changing their existing business model.