Open Systems: It's the Relationship

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The relationship Open Systems resellers have with the vendor's executives yields big returns for its VARs. For Kathy Walsh, president of Wilmore, Ky.-based Dynamic Accounting Solutions, that relationship translates into an ability to market to large prospects that she had previously avoided.

The reason, she says, is that there is a direct line of communication to Open Systems chief executive officer Michael Bertini and vice president of sales Paul Lundquist, not to mention access to the technical staff of the Shakopee, Minn.-based vendor, for assistance in closing a sale.

"Previously, I stayed away from businesses over $90 million because of my size," Walsh says. "I am ready to tap into that market because if I were to call Michael or Paul and ask them to come help me close a sale they would be here in a day or two."

Partner Insights

If size counts, with Open Systems it's because of the smaller size of the 30-year-old accounting software firm, compared with players the size of Sage Software and Microsoft Business Solutions.

Bertini says Open System sees its size, which gives it the ability to establish closer relationships, as a competitive advantage when recruiting new VARs. It's especially important to the entrepreneurs who head smaller reselling organizations.

The company stresses the ability to reach management in pitching the advantages of joining the Open Systems program.

"We like resellers that are selling other products," says Bertini. "It's a pretty good chance they are dealing with a larger company that isn't providing them with a relationship."

To exploit the perceived dissatisfaction of smaller VARs with other vendors, the company has beefed up its reseller recruitment team in the last two years.

Late in 2003, it hired Rita Strauss from NetSuite as director of business development and a year later it picked up Linda Schillingburg, a long-time manager for Sage's MIP product line, to serve in a similar position for its Traverse NFP package. Early in 2005, it hired Darlene McQueen, a manager at Accpac, as partner recruitment manager.

Bertini says the NFP program is the same as for the rest of the accounting software line. However, he says that resellers specializing in NFP and other vertical markets need support from specialists. He says the effort to recruit nonprofit resellers is working well, although it is still "a fairly recent push."

The company has four categories of resellers: Associate, Partner, Executive, and Premier, whose margins scale up to 55 percent on new licenses and 40 percent on annual maintenance. For example, a VAR that sells a minimum of $55,000 of software per year would be a top-tier Premier reseller. Margins decline 5 percentage points for each descending category.

Resellers pay $200 per month for an in-house copy of each software package, a price that includes free telephone support, registration for the annual conference and any training courses offered. They also receive access to eVAR, the reseller-only section of the Open Systems Web site.

In an era in which competitors are tightening the qualifications to reach top margins, the system looks good to Louis Stratton, president of Highland, Ind.-based reselling firm Meador-Stratton.

"I think [the margins] are the best around," says Stratton. "I've talked to other companies and they don't want to give me as much as Open Systems does." Approximately 30 percent of Meador-Stratton's $1 million in revenues last year was derived from sales of accounting software.

The vendor-VAR relationship is among the top three reasons VARs come to Open Systems, Bertini says. The other two are the product line and open source code.

Source code enables VARs to customize the company's Open Systems Accounting Software and Traverse for clients. It also means the packages run on a variety of operating systems.

"For resellers and end users," says Bertini, "the source code is a big deal."

Another way that Open Systems supports its channel has been the development of specialized modules.

In 2003, Open Systems developed a tracking module for a food manufacturer at the request of Meador-Stratton.

According to Stratton, his organization could have developed its own customizations. However, the customer wanted the modifications incorporated intro Traverse so it would not have to pay each time it upgraded the accounting package. And although all of the vendor's revenue comes from sales by resellers, it has a small staff to support their attempts to land large prospects.

But it's not the source code that comes to the top of the list for dealing with Open Systems.

"What matters most to me most is the support I receive," Stratton says.

Making a Choice

The reasons that end users choose Traverse or OSAS are clearly defined.

Traverse is for the Windows market and is available on both the server and workstation in Access and SQL database versions. OSAS supports a variety of non-Windows platforms, including Linux, Unix, and, most recently, Macintosh OS X.

Linux is often sold into large companies that want a stable platform, and that may have been using a flavor of Unix, which has been crowded out by Linux.

Support for the Mac came in OSAS 7.0, which was released in December. That product also moved the architecture for the product into the Java world, a move that the company said was a major technical transition. The product is priced at $1,500 per application, plus $225 a year for a continuous enhancement subscription.

The architecture enables OSAS to function in organizations that have multiple operating systems.

"They may have Macintosh in marketing, Windows in accounting, and Linux in the warehouse," says Strauss. Support for Macintosh accounting, for which there have been few choices in the mid-market, is helping to attract resellers, Strauss says.

Other factors driving resellers included dissatisfaction with other vendors and the fact that they see Open Systems as "being the way it used to be" in the accounting software market, says Strauss. The company has picked up resellers "about evenly" from Sage, Accpac, and AccountMate.

While there are fewer Microsoft resellers joining the Open Systems program, most of those who do are looking for Linux. The OSAS line is certified for the Red Hat, Nitix, and Novell versions of Linux.

In many cases, new resellers join Open Systems "because they don't feel safe, and they want to diversify," she says.

Open Systems reveals few numbers. It does not release either revenue or staffing figures. However, it says there are 1,200 resellers and Strauss says these are active organizations since the channel had previously been pruned.

The number of new resellers signed in 2005 was double the number that enrolled in 2004, Strauss says.

The plan for this year is for a more aggressive push on recruiting VARs that sell into vertical markets. However, there is not going to be a separate campaign, as there is with Traverse NFP. Strauss says there are no different authorization requirements for VARs with a niche focus.

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

OPEN SYSTEMS SNAPSHOT

HQ: Shakopee, Minn.

Phone: (800) 328-2276

Web: www.osas.com

Revenue: NA

Employees: NA

Founded: 1976

Products: OSAS, Traverse

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