Movies about dinosaurs sometimes show smaller animals frantically trying to avoid the footsteps of the massive saurians. It's not hard to start applying that analogy to the accounting software channel.
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With Tectura grabbing Aston Business Solutions and ePartners buying EYT, we have our mammoth animals. Tectura suddenly becomes the largest reseller of mid-market accounting software, shooting up to an annual run rate of $160 million that CEO Terry Petrzelka says is a conservative figure. EPartners gets up to about $74 million.
The Accounting Technology list of the Top 100 VARs for 2003 had total sales of just over $653 million. That doesn't include overseas operations, which account for probably half the Tectura total and a much smaller portion of ePartners' revenue. But you get the picture, and these facts will have immediate implications for smaller resellers.
Vendors often give much more attention, under the 80/20 rule, to the top 20 percent of VARs. How do vendors-in this case Microsoft-allocate resources if a handful of partners generate a disproportionate amount of sales? How does Best Software respond when it does not have a reseller anywhere near the size of the large Microsoft resellers?
Some observers think Microsoft wants fewer, larger VARs, although Petrzelka says that Microsoft has not encouraged or discouraged the emergence of Tectura and ePartners. Meanwhile, Microsoft has steadfastly held that there is a role for smaller partners, including two- and three-person shops, and continues to authorize those kinds of resellers.
Previously, the thinking has been that the larger vendors will have to go after the larger deals and won't be able to compete with the local VARs, whose advantage was knowing their local markets. When ePartners was the only large entry, many thought it showed that a large reseller could not keep the entrepreneurial spirit that many believe is needed to be effective in delivering software and consulting services.
This is not the view of Petrzelka, who believes his company can achieve efficiencies and can bring resources to bear in markets in which smaller resources compete. It's clear that Tectura, at least, will be going head on the smaller operations. It's less clear with ePartners, which has tended to focus on the larger accounts. It's not certain that the giants will succeed. It is clear that many smaller resellers feel they need to bulk up, probably above the $3 million-a year-sales level, to be truly effective.
But why should roll-ups, not notably successful earlier, have a chance this time? The earlier ventures started before Microsoft ended up with Great Plains, Solomon, and Navision. That may be all the difference this round.