SAP Business One: Less Is More

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SAP believes the fewer VARS it has, the better, when it comes to selling its SAP Business One software. "We'd rather have as few partners as possible to cover a broad geography," says Dan Kraus, vice president SAP Business One. "If you look at what is important, it is not the number of partners we have but the number of sales and service outlets we have to sell the product.''

There are approximately 100 sites throughout the United States selling SAP Business One's business management software, and some resellers have more than one site, so there are even fewer VARS. That pales in comparison to the thousands of business partners some other SMB software vendors have covering the same U.S. footprint.

SAP declines to disclose the number of VAR organizations that sell Business One, a product that has front-and back-office capabilities that include accounting and customer relation management. But it is probably less than 30, and Kraus notes there are no dealers that own more than 10 locations.

Partner Insights

Despite the small channel, Kraus is confident SAP has sufficient VARs to cover the U.S. marketplace. He cites the experience of the resellers recruited, along with the support and training SAP provides.

"Today, we can effectively cover the U.S.,'' says Kraus.

Until recently, the reseller program, established in 2003, had been typical for the accounting software business, although fees are higher. While SAP sets no minimum sales requirements, the $10,000 annual fee VARs must pay deters those who want to perform one or two implementations per year.

"This isn't for somebody who does one or two clients a year, but one to two clients per month,'' Kraus says. "If you do one or two clients per year you never really become an expert."

In May, SAP announced that its channel program would be placed on the same footing as other channel programs, including mySAP and All-in-One. The new program, SAP Partner Edge, rewards partners for their training and customer satisfaction, not just for their sales performance.

"We evaluate a partner on their sales," says Kraus, "but also their learning, staff training, and working on development tools to enhance the product. We're trying to round it out beyond how much you sell.''

While measuring partner sales is clear-cut, training is measured through certification that tests the partners' product knowledge and staff development. Partners earn SAP PartnerEdge Value Points that determine whether they are in the associate, silver, or gold tiers. The concept is very similar to one introduced last year by Microsoft Business Solution, which tests dealers for a number of competencies and designates VARs as gold-certified when they achieve required skill levels.

Ease of Use

The package's ease of use is part of the appeal for Brad Nicolaisen, president of Et Alia, a Milwaukee-based Business One reseller.

"What I like about Business One is it is easy to use,'' says Nicolaisen, highlighting its "drag and relate" drill-down reporting feature. The user simply clicks on a customer's name and drags it over to "open invoices report." The user can immediately view all outstanding invoices for that customer. "This allows the system to behave in the way that I (the user) am thinking," Nicolaisen says. "Most SMB organizations are using disparate systems, this [drag and relate] gets into the mindset of where are my integration points."

AmEx Gives VARs an Option

From the moment it launched Business One into the U.S. market three years ago, SAP has been allied with American Express Tax and Business Services.

AmEx develops and markets the Business One American Express Edition and has also developed versions for specialized markets such as distribution, manufacturing, and point-of-sale. The American firm sells and implements these through the American Express Alliance, now represented by firms in about 20 cities.

"We were working very closely with the SAP channel," says Harvey Goss, an AmEx managing director. "The only difference is that the SAP channel cannot implement our additions. They would have to join our alliance."

Most alliance members come out of the SAP environment, implementing either R3 or All-in-One.

VARs who sell the AmEx versions can get margins, but must turn the implementation over to an alliance partner.

AmEx is also going international with its program this month, expecting to launch operations in Australia and New Zealand. In these countries, it will sell through the SAP channel, instead of extending alliance operations. Whether the alliance model is used elsewhere will be determined country by country, says Goss. Entering Great Britain and Norway is under consideration.

Et Alia, whose primary territory is Wisconsin, also has sales offices in Atlanta and Cincinnati. Last year, the firm had sales of $15 million in SAP Business One among SMB businesses in industries as varied as manufacturing, distribution, and janitorial.

Another important SAP pitch is that Business One has an edge over other products because its single code base includes the back-office and front-office, that distinguishes it from other applications that often rely on add-on products from third parties.

"The benefit is it has more functionality for the user,'' says Kraus. "You get it all."

Business One costs $3,750 per user and includes accounting, CRM, sales, and inventory, and is designed for companies that employ from 10 to 250 people in a variety of industries, including retail, light manufacturing, and not-for-profit.

"The typical customer spends between $65,000 and $100,000 for initial purchase and installation,'' says Kraus. The ratio of license fees to services is roughly one-to-one. Although SAP does not disclose margins, VARs say they run from 40 percent to 50 percent.

SAP provides a variety of training opportunities. Twice a year, VARs are invited to attend national training sessions, with regional training sessions throughout the U.S. in the second and fourth quarters geared specifically to SAP Business One partners.

Although they learn about technology, that is not what resellers need to know in the current market, says Kraus. He continues that today, the value-add for VARs is how to use the software to help the customer improve their processes.

To Be Loyal?

Although many resellers who carry Business One previously handled other packages, Kraus says the most successful dealers sell the SAP package exclusively.

ISGI president Ralph Hess estimated that 75 percent of his firm's $2 million in revenues last year was from sales of SAP Business One. The Westfield, Mass.-based VAR also represents Epicor.

"We still have a relationship with Epicor, but the focus of our relationship is on SAP Business One," Hess says. The company has also handled many other packages, including Great Plains.

"SAP Business One has taken the best of what those had to offer and expanded on the high-touch philosophy that is extended at the beginning of the others' channel programs, but carries it out throughout the entire relationship cycle," says Hess. Despite the $10,000 annual fee, he considers his relationship with SAP a good investment.

"We are getting a very high return on that investment as compared with the other vendor's programs," says Hess.

Other benefits include continuing education classes that incorporate Internet-based courses. SAP is moving away from classroom training to Web-based courses that include sales training.

Riccardo A. Davis is Associate Editor of Accounting Technology and can be reached at Riccardo.Davis@sourcemedia.com.

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