NetSuite Breaks for Vertical Expertise

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Sometimes a break is for the best. After skipping its reseller conference in early 2005, NetSuite returned with a vengeance this October, looking to take charge of countless vertical industries through its channel program.

It's a new vision the company dubbed Revolution 2006 at its optimistic reseller event held in San Francisco in which the company hopes to stimulate its resellers to offer service as software.

The reversal of the typical software-as-a-service term accompanies a change in leadership that many of the company's roughly 150 active resellers are applauding.

Partner Insights

Kristen Brown, NetSuite's vice president of alliances and channel sales, came to the company in January from Oracle, where she served as vice president of channel sales and increased the annual revenue growth rate from independent software vendors and original equipment manufacturers from 5 percent to more than 100 percent.

Her new seat has been a hot one. NetSuite's director of channel marketing spot was filled in August 2005 by Kimberly Graham following the resignation of Susan Gallagher in early 2005. The vacancy and a desire for new direction caused the company to bow out of the conference last year.

Leap Of Faith

One longtime channel partner, Brenda Brinkley, stuck through the rough period and is happier than ever before with the support she receives for her company, Epiphany. Under the new leadership, she says her NetSuite sales have grown by roughly 30 percent.

"I felt like I was (lost) in the desert from June 2005 to March. I've had channel managers who didn't understand the channel. Deals just evaporated away," Brinkley recalls. "Sometimes if I don't make that sale, maybe I can't make that college tuition payment. You need people that understand how important that is.

"These people get that. This is a partner program they care about," she says. "Now, I'm willing to give more."

Brinkley's Houston-based company built two vertical tools as part of the SuiteFlex application development platform: FlorNet, for the floor care industry and dNet, for the Audio/Visual space. The latter won NetSuite's Best Industry Solution award at the conference.

NetSuite licenses account for about 30 percent of Epiphany's revenue, another 60 percent comes from NetSuite services.

But success didn't start overnight. It took about one year before the company saw a real return on investment.

"We started the NetSuite program in its infancy when NetSuite was still trying to figure out what a partner was. We started off with a product we couldn't sell for the first six months because it was (only) almost there" in terms of functionality, Brinkley says.

Then, NetSuite released so many new features that Epiphany lost deals while figuring out all the functionality.

"Once we were able to swim out of it, we knew we really had a product and then we could really sell it," she continues. "We can create a special market for our customers. We can lower cost of implementation and provide better service. "It's smarter to redo than to reinvent every time. That's why we focused on verticals."

If You Can't Beat 'Em, Join 'Em

This concept of repeatable tasks for people with knowledge of a particular market is what Brown and her team are trying to convey to existing and potential resellers. It's a page out of the book of joining the people who you can't beat.

"We're up against no-name competitors who develop solutions very specific to some microvertical. They'd never rise to the top as a competitor, but taken together they would," Brown says. "People want to buy from someone who understands their business, and you are buying these industry expertise. It's the final mile of verticalization."

At the October conference, resellers introduced about a dozen new vertical applications using SuiteFlex technologies that span a spectrum of markets, from windows and door distribution to specialty retail.

NetSuite announced several benefits for such vertical resellers, and made all of the services 100 percent co-op reimbursable through April 30. They include template accounts for developers to create and test their customizations, applications, and integrations; "Built on NetSuite" branding to differentiate their products; marketing materials; online product training; ability to apply for inclusion in the SuiteFlex Solutions Directory, which promotes third-party applications; inclusion in a local directory search; and eligibility to join the NetSuite Referral Program, which benefits customer referrals with revenue sharing and other rewards. A certified training program also is in the works for the first quarter of 2007.

Pushing Sales Up

Providing these services to help resellers succeed should drive more sales toward the channel, Brown hopes. Currently, channel revenue accounts for roughly 20 to 25 percent of total license sales, but Brown would like to turn that around to more than 50 percent channel sales.

For the first half of 2006, NetSuite earned roughly $25 million in new business, of which about $6 million came from the channel. Channel sales are predicted to top $9 million by year's end.

In general, companies interested in joining the reseller program must pay $4,800, dedicate one salesperson for a $500, three-day training session, and one consultant for a five-day implementation program that currently costs $1,800. That program likely will be extended to 10 days and the price will change early next year, however.

These costs also are 100 percent co-op reimbursable through April.

Resellers receive a margin based on license revenue from NetSuite's $99 per user per month fee that starts at 30 percent and increases in 5 percent increments to a maximum 50 percent based on revenue achievements.

Gross revenue of $250,000 in new license sales earns them a 35 percent margin, $500,000 gets 40 percent, $750,000 earns 45 percent, and the highest rating on the five-star scale is $1 million, which has been achieved by only one company to date. Skyytek Worldwide accomplished that milestone in September and received NetSuite's Best Value-Added Business Services award.

The Miami-based company has experienced consistent growth for the last four years of 125 to 150 percent- from $250,000 in 2002 to an anticipated $7.5 million in 2006, according to CEO Ray Tetlow.

The average deal size for the company continues to increase as the average customer size increases, causing Skyytek to expand its salesforce, serving clients around the world.

NetSuite recognizes this benefit and is starting to think more globally itself, searching for resellers in Japan, France, Germany, and the Netherlands, and planning to integrate its products with payroll services in other countries in 2007.

"NetSuite's reputation is growing," says Mark Walker, the Toronto-based president of Skyytek WorldWide's North American region. "A lot of customers will naturally go looking for an independent consultant. We have a lot of inbound customer traffic.

Walker expects the vertical focus will provide even more opportunities for resellers and anticipates that people with vertical expertise will either join his team or emerge as competitors.

"You should join the NetSuite program if you have something to add to the program," Walker says. "A successful reseller is someone that brings value to already valuable software. If you have a strong background in business operations, accounting, and workflow and you're prepared to leverage the product, the world's your oyster. You can find a lot of customers out there."

Alexandra DeFelice is Associate Editor of Accounting Technology and can be reached at alexandra.defelice@sourcemedia.com.

NetSuite Company Snapshot

HQ: San Mateo, Calif.

Founded: 1998

Employees: 500

Resellers: 150

Offices: 9

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

Web site: www.netsuite.com

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