NetSuite Refocuses Channel

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In 2005, NetSuite passed on having its annual reseller conference, a get-together it has had every spring for three years. This year, the online software company is working to regain momentum with its VAR program. One of the reasons for having something of a hiatus last year is that the company had a vacancy in its channel program leadership, following the resignation of Susan Gallagher as director of channel marketing early in 2005.

In August, the company filled the spot with Kimberly Graham, who spent six years as senior manager of channel marketing at Sage Software. It had also hired Adam Ross as vice president of channel sales in March. Graham sees work to be done.

"One of the things I see as an opportunity is creating a program from one that isn't mature," says Graham, "I'm empowered to make changes for the good of the program.''

Partner Insights

Those changes include increasing the visibility of the channel, which contributes about 20 percent of the San Mateo, Calif.-based company's annual revenue. NetSuite would like to achieve 200 percent annual growth in its channel revenue and that means more than doubling the numbers of VARs to 300 by next year, says Ross.

Among the steps the company is taking to aid its channel is the planned launch of a marketing development and business development kit this year.

"These will help partners see how to further develop and grow their businesses internally,'' says Graham. "It will also show them how to work best with NetSuite."

To forge a better relationship with its VARs, NetSuite has produced a sales development kit, the kind of tools that Graham says are being made available under the new direction. Reseller Dan Edwards, owner of Atlanta-based Ncompass Business Solutions, commends NetSuite for developing a SDK, which he says produces significant cost-and-timesavings.

"The timesaving is invaluable," says Edwards. "Our most valuable asset is time, if I am spending it on a marketing piece I am not billing someone $150 per hour."

The basic difference between NetSuite and most other vendors of financial and CRM software is that all of its applications are online.

For its reselling fans, that difference offers several advantages over packaged software.

Having a single package eliminates the costly and time-consuming task of integrating third-party applications, says Edwards, whose firm generated 100 percent of its 2004 revenue of $1 million from sales and services of NetSuite's Web-based systems.

Because it is a single unit, not a package of applications from various vendors, NetSuite's cost is three to five times cheaper than one that is cobbled together, says Edward.

"It's easier to sell because of its lower cost," says Edwards. "What we look at as the benefit to the customer is that the total cost of ownership is significantly less. And since it is a hosted systems the customer can focus on growing their business rather than dealing with technology issues."

NetSuite resellers don't need to integrate their products with those from other vendors. Having a single database and single interface appeals to SMBs, says David Tinjum, owner of Customer FX, a St. Paul-based NetSuite reseller. For example, if a customer spent $10,000 on third-party applications and integrating them with the financial software, it doesn't face that problem with NetSuite.

"The advantage of a NetSuite deployment is that $10,000 goes away, and for small to midsized businesses that is a big deal."

The Options

NetSuite offers potential resellers two levels of participation in the channel program: Premier and Associate membership.

To qualify as a Premier partner, an applicant must have sold accounting or CRM products for at least five years, and must have annual revenue of at $1 million. It also must have at least 10 full-time employees, including at least two dedicated to sales and implementation. In order to stay in the program, a reseller must generate a minimum of $100,000 in product sales.

Premier resellers pay an $8,000 one-time fee; Associates must ante up $3,000. Premier members also receive 5 percent in co-op dollars, for an average of between $5,000 and $7,500 for marketing, advertising, and lead generation.

Having dedicated personnel is an important part of the formula, according to Graham.

"We are looking for partners who share our vision, are willing to invest in dedicated resources to sell NetSuite, and commit to a minimum sales goal," she says.

Premier resellers receive margins starting at 30 percent on all new revenue, and rising through a series of steps to 50 percent, depending on annual purchases from NetSuite. Where NetSuite is different is that when firms sell packaged software, they only get margin on the initial sale. NetSuite VARs get 30 percent for annual renewals for the life of the customer installation, along with receiving 15 percent on services and support fees. That latter business is important to dealers.

"The margins are lucrative because you're collecting an additional 30 percent for every year a client remains a NetSuite customer," says Tinjum.

Ncompass' Edwards agrees that his margins, which are approaching 40 percent, are exceptional after the recurring revenue from clients who renew with NetSuite is included. The average reseller sale approaches $30,000 in product revenue, and that figure can double with consulting fees and services, says Ross.

Margins for associate resellers start at 20 percent, and while they also get co-op dollars, that is also a smaller percentage than is received by the premier members. They receive a smaller discount on internally used programs, but they do qualify for the same 15 percent margin on service and support revenue.

"The main difference is the margin," says Graham. In many cases, those interested in participating as Associate resellers are new to the market, or perhaps have a focus on other applications.

NetSuite's program also differs significantly in the way firms receive margin. Most software vendors sell product to their channel members at a discount from list price. Since NetSuite doesn't ship software, it collects payments from end users and cuts checks for resellers monthly. Graham says one advantage of this system is that VARs aren't fronting the money to purchase software.

The online applications also have advantages when it comes to training, says Tinjum. The weeklong process is confined to two tracks, consulting and technical, since the product does not require installation.

"More time was spent on the technical aspect of understanding the product and how to configure it with the scenarios that they throw at us," Tinjum says, "The end result was spending more time molding the products to meet the customer's objectives and none spent on installation and set-up."

The company also offers the NetSuite Alliance Partner Referral Program, which enrolls professionals such as accountants and small business consultants. The program, which is free to join, currently has more than 100 participants, according to John Palladino, senior director of, business development and alliances.

As to that hiatus with the reseller conference? "We are looking at mid-year," says Graham. "We pushed it out because we have a larger number of partners signing on."

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

NETSUITE SNAPSHOT

HQ: San Mateo, Calif.

Phone: (877) NETSUITE

Web: www.netsuite.com

Revenue: $70 million (2005).

Employees 500

Founded: 1998

Products: NetSuite, NetSuite Small Business, NetSuite CRM, NetSuite CRM+

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