Eighteen months ago, Robert Raymond's DataNational Corporation joined Kintera FundWare's Value-added Reseller program to sell the FundWare software line as a complement to his firm's billing and collections applications for its government clientele. It's a Web thing, says Raymond, president of the Pembroke, Mass.-based consulting firm.
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In addition to the revenue DataNational could generate by selling the nonprofit accounting software, the $2 million software consulting and development firm gained recurring revenue stream from selling Kintera Sphere, a Web-based fund raising package for nonprofits.
"It's opened up the ability to sell the application and consulting services which produces an annuity stream," says Raymond. "That is what's attracting a lot of resellers to FundWare-that they can create a revenue stream."
FundWare isn't a Web-based application-yet. But it will be by later this year and the company says that resellers will benefit from an Internet version of the nonprofit accounting software as they have from the fundraising application.
Selling subscription-based software is a significant move for VARs, says Scott Bechler, vice president of sales for Kintera FundWare
"This is the most fundamental aspect of what we're doing," says Bechler. "For the first time, resellers in the government and nonprofit space can predict how many new clients they need to sell to cover the salary of a new person in their Kintera practice."
Instead of getting paid in lump sums with the close of each sale, with the Internet-based program, VARs are paid monthly, based on the length of the client's subscription,
Bechler, who was recruited to work for FundWare in October 2003 before it was acquired in December 2004 by Kintera, says he is helping build the FundWare accounting software channel.
Actually, the phrase should be re-build the reseller base. In 1997, the company urged many of its 120 resellers to become recommenders or go inactive. The number dropped to 30 by early 1998 and has stayed in double digits since then.
In 2002, the product's parent company, the Flagship Group, was acquired by Intuit, which paid $26.6 million in stock and cash, and assumed $4.7 million in debt. In 2004, Intuit sold the FundWare operations to Kintera because they hadn't met Intuit's expectations.
Kintera does not break out FundWare results on a recurring basis. But shortly after buying the Flagship operations, Kintera reported that FundWare had a loss of $2.5 million on $13 million in revenue for the year ended January 31, 2005.
Since then, Kintera has been in channel-building mode. Bechler recruited Steve Johnson as vice president of channel sales to recruit resellers for Kintera's CRM and fundraising applications. Meanwhile, Bechler intends to merge the two channels this year or next.
In the meantime, Bechler says, VARs are joining Kintera FundWare reseller program to take advantage of its applications, all of which will be available via the Web later this year.
"FundWare resellers have signed on with Kintera to sell both product lines, rather than wait until the second half of 2006," Bechler says.
In early March, FundWare had 24 resellers, up from a low of 18 in 2000/2001, but down from 32 in 2003. FundWare recently picked up four new resellers after Charleston, S.C.-based Blackbaud ended its reselling program for its nonprofit accounting application.
FundWare has three categories in its channel: resellers, consulting partners, and referrals.
Resellers are required to sell at least $25,000 per year in software licenses, while Consulting Partners must produce at least five referrals annually. All partners pay $1,000 to join. Resellers and Consulting Partners pay another $6,000 to cover costs associated with annual training and the certification of up to 10 employees. Both resellers and consultants must be certified.
Reseller margins are determined by sales volume. Platinum VARs, those whose sales exceed $100,000 annually, receive a 50 percent margin. Margins scale down by five percentage points each for the Gold, Silver, and Bronze tiers. Resellers whose sales are less than $25,000 a year receive 25 percent margin.
However, to get recruits started FundWare offers new resellers 50 percent margin for the first six months as they ramp up their sales.
"We're providing incentive to get them over that $25,000 bar in their first six months," says Bechler.
Approximately 55 percent of FundWare's clients are supported by its channel. The Kintera unit has a small in-house sales force that sells to end-user organizations whose sales top $20 million. This group also handles FundWare customers that want to deal directly with the vendor and don't require consulting services provided by local partners or who are located in areas not served by a reseller.
The price of FundWare ranges from $5,000 for the basic single-user package, which includes the general ledger, accounts payable, and the Excel-based Report Writer, to $50,000 for a 25-user system that has access to all 22 FundWare modules.
The latest module released was Fixed Assets, which shipped in December. The package enables users to record depreciation using one of several methods that would be determined by the asset. Its Fixed Assets module also tracks all fixed assets through their lifecycle including acquisition, depreciation, and disposal.
"The week it was released, we had 10 to 12 orders for it," says Rob Helvey, a long-time FundWare reseller. According to Bechler, Kintera sold approximately 100 Fixed Asset modules to existing FundWare customers within the first three months of its release.
For Helvey, vice president of business development, at St. Louis-based WTI Systems, FundWare's software is better suited for the nonprofit and government vertical markets than other vendors' products, which he says are more generic.
A Platinum reseller, WTI, which has sold FundWare for 18 years, also handles Microsoft Dynamics GP, SL, and Small Business Financials. With offices in Dallas and Indianapolis, WTI provides consulting services for city and county governments, as well as nonprofits in the health, social services, and arts and humanities sectors.
"They live and die by budgets," Helvey says. "Kintera FundWare allows them to see what's coming in and what's going out. Also the system has controls in place to regulate spending of their grants."
The reporting features in FundWare permit users to assess their fiscal health instantly. According to Helvey, FundWare's automated reports eliminate time-consuming manual calculations using ledgers and spreadsheets to see how money is flowing through an organization. He says one client saw a 20-percent reduction in the amount of hours required to manage its grants using FundWare.
"An overall theme for not-for-profits is containing costs on their administrative fees to ensure that the monies are going to the intended purpose as opposed to operating costs," Helvey says.
Riccardo A. Davis is Associate Editor of Accounting Technology and can be reached at email@example.com.
KINTERA FUNDWARE SNAPSHOT
HQ: Denver, Colo.
Phone: (800) 551-4458
Revenue: $40.9 million (Kintera total)
Employees: 487 (Kintera total)
Founded: 1976 (FundWare only)