Stand By Your Vendor?

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Less filling or great taste? A breath mint or a candy mint? To sell one product line or handle more? Accounting software resellers may not worry about the first two faux controversies. But that last question is very important to their businesses and to the vendors who market the applications they resell.

On both sides of that critical question, VARs say that their decision to take a stand with one vendor or to handle multiple lines stems from the same motivation-profits.

Most vendors would like their resellers not to sell competing products. While not all companies have programs to formally reward loyalty, Sage Software does. The Sage Select program, introduced last year, rewards resellers that handle only Sage software.

Partner Insights

Extra margin is one of most important benefits. "We get an extra 2 percent," says Jeannie Huckstep, owner of Huckstep & Associates. "That's a small percentage, but if you are doing a large volume it makes a difference."

The Springfield, Mo.-based firm had gross sales of $500,000 in 2005. Huckstep attributes part of the firm's 15 percent increase in sales last year to its focus on Sage's MIP Fund Accounting software.

Huckstep says MIP fits well with its clientele which primarily consists of small to midsized nonprofits, such as community action groups and Christian churches that have from 10 to 15 employees. An average sale ranges between $15,000 and $20,000.

With Sage's roster of products, Huckstep says, "We're able to bring anything we need to the nonprofit and governmental markets."

However, resellers with multiple lines say carrying two or more vendors' products increases the chances that they will be able to offer the right software to prospects.

Moreover, a large Sage reseller, Clifton Gunderson Technology Solutions, doesn't think exclusivity is in its best interests.

"The value of the long-term relationship with the customers is greater than the extra margins from the vendor's loyalty program on the front-end," says chief technology officer Jeff Hapeman. "Ultimately, we're in the business of servicing our clients and not the vendor. Profitability will come from that."

Last year, Clifton Gunderson had sales of $14.3 million from products including Sage's MAS 90/200, MAS 500, Timberline, and Platinum, Microsoft's Dynamics GP (formerly Great Plains) and NAV (formerly Navision), and Open System's Traverse and Open Systems Accounting Software.

"Of course," says Hapeman, "the challenge is that each vendor would like for you to carry only their product."

Many resellers that offer lines from competing vendors take the view that they can't put their eggs in one software basket. That attitude helped SAP with its initial recruitment for its Business One software. Some resellers also remember the Year 2000, when Epicor told its VARs to be loyal or leave. Many left, and the Epicor channel shrank.

According to Taylor Macdonald, executive vice president, channel and sales operations for Sage Software's mid-market division, resellers who handle multiple products are hedging against a slow period and problem product launches. But the move can prove counterproductive, he notes. "To pick up another vendor's product and just dabble in it is clearly a distraction," Macdonald says.

Andersen: Fewer Products Equals More Hours

Handling software products from more than one vendor reduces the amount of time a VAR has to devote to any one product, says Bruce Andersen, owner of BTA Consulting and Training.

And in a business where firms are selling time, that can reduce the number of billable hours. It was that former that Andersen says had led him to concentrate his firm's resources on selling QuickBooks Enterprise Solutions, Intuit's mid-market accounting product.

In its first year as an exclusive QuickBooks Enterprise reseller, Andersen says, he and his seven employees have more billable time with Intuit handling the majority of the promotions, proposals, and seminar coordination.

"Across the board, there is 15 percent to 20 percent more billable time," says Andersen. "With QuickBooks, I can take an hour or two to identify the client's needs and immediately go on the clock for billable work."

Until 2002, BTA handled Sage's BusinessVision and QuickBooks, which it had been reselling since 2001. A year ago, Andersen says his BusinessVision sales crumbled and he stepped up to QES.

With QuickBooks name recognition, not to mention the impact of Intuit's promotions and advertising, Andersen says, "There is always business coming in."

The monetary rewards being offered to Sage Select resellers are integral to the company's recruiting efforts.

"It's important to reward our partners with additional margins who sell only our product,'' says Sage's Macdonald. "They've made an investment in us and we're reciprocating."

There are more than 6,000 Select members who can receive sales lead priority, free products, and training, in exchange for their loyalty. To encourage partners to offer additional products including Abra, MIP, and SalesLogix, Sage extends renewal discounts to those organizations that sell more than three Sage products.

Macdonald acknowledges that some of Sage's top resellers carry multiple products, but says the company has engaged in a full-court press to get them to become Sage Select Partners. "Occasionally, we've sweetened the pot," says Macdonald, referring to wining and dining executives of firms that he wants to bring into the fold.

Sage aggressively pursues firms that generate the lion's share of the firm's revenues from sales of its products. The rationale, according to Macdonald, is if these resellers derive 80 percent from the Sage product line, they probably aren't very good at selling the other 20 percent.

A Small Club

According to Macdonald, there are less than a dozen successful resellers handling multiple products. It only makes sense to carry multiple products, he says, if the revenues are split between the two vendors.

Among the successful multiple resellers Macdonald cites is L. Kianoff & Associates, whose sales mix its president, Lisa Kianoff, characterized as "fairly balanced."

The Birmingham, Ala.-based firm, which also carries Microsoft's Dynamics GP, was approached to become a Sage Select Partner, according to Kianoff. She notes that her response was, "We're too entrenched in both product lines."

Kianoff attributes some of the success handling two product lines back to the year in which the firm began. That was a time when it was common for VARs to partner with more than one vendor. "Software was so much simpler then," says Kianoff. "Now," she says, "it's more work and due diligence for us. You've got to know more stuff about more products."

There are some tips for resellers that want to carry products from more multiple vendors.

Bob Ostrowski, president of Spectrum Technology, says to handle multiple lines, "I would suggest someone select two products with some commonalities."

His four-person firm, based in Murieta, Calif., handles both AccountMate and Red Wing accounting software, and had $500,000 in sales last year. Ostrowski attributes his ability to carry the two lines to the fact they serve clients with similar needs, but with different size budgets.

But carrying additional brands carries additional requirements.

"The more products you need to support, the more you have to keep abreast of," he says. "Two is manageable, but when you get into three and four that changes everything."

Those who do well with more than one product attribute their success to having the staff with the knowledge to support each product. Kianoff says that explains her firm's track record in selling both Microsoft and Sage products. One-third of its 18 employees have a good working knowledge of both vendors' products. Another third specialize in Microsoft products and the remainder in Sage Software applications.

Vabulas:

Sometimes, You Can't Win
With $10 million a year in revenue, I.B.I.S. is one of Microsoft's top accounting software VARs. It was a finalist for Microsoft's Global ERP and CRM awards for 2003 and was the MBS Outstanding Partner of the Year for 2001 and 2003.

It got there by sticking with Microsoft products-Dynamics AX (formerly Axapta), Dynamics GP (formerly Great Plains) and Dynamics CRM (formerly Microsoft CRM)

But in spite of that track record, there are prospects that simply don't like Microsoft. I.B.I.S. CEO Andy Vabulas says resellers must realize there are times when they simply can't win, no matter how much the reseller believes in the product.

"Walk away from the deals that you're not going to win and play to your strengths," says Vabulas.

But while walking away may be distasteful, Vabulas warns that the costs of carrying multiple product lines can also be harmful.

And, Vabulas cautions, the higher margins dangled by other publishers can end up being cancelled out by the start-up costs.

"It's the cost of investment to get you up to speed," Vabulas says, referring to the training of the sales and marketing staff and consultants and implementers to get trained on the new product line.

The costs aren't just quantifiable expenses. They also included the need to split mindshare among multiple products.

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