A Big Dose of Consolidation

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It seems like reseller consolidation has been a subject of discussion forever, and that it's been happening about as long. Yet the latest round of mergers and acquisitions with the accounting software channel is something different. It's reshaping the face of a market that had held roughly the same form for about 20 years.

We knew what value-added resellers in this space were-they handled accounting software and offered a variety of services. None of them were all that big and most were fairly local operations. That is changing rapidly.

Readers had barely received the July issue of Accounting Technology, whose cover story was titled, "Going Global," when Sage resellers Dynamic Software Systems International and Applied Data Solutions merged to become ADDS Global.

Partner Insights

DSS already has operations in the Caribbean, but the name says a lot about the market. Besides getting bigger, an increasing number of resellers are looking outside of the United States for additional clients.

The DSS/ADS deal also produced a $9 million Sage Accpac reseller. While Microsoft has long had several resellers in that range, Sage has not and the reports are there are more, and larger, deals on the way. And the way Sage rewards its national partners, it appears there are some financial incentives for growth.

On the Microsoft side, New Jersey's SBS Group has put together a few deals that should bring it close to the same range of sales as ADDS, while LBMC Technologies, based in Nashville, has avowed that it needs to hit the $25 million a year level in about two years to stay competitive.

What's driving this? A few influences come together here, including verticalization. When a company goes vertical, it has to mine a broader geography. Also, as applications grow more robust, they become appropriate for companies with international operation. Meanwhile, midmarket VARs are also being pushed upwards by the increasing capabilities of low-cost offerings such as QuickBooks and Peachtree, which are going to make it tough to profit at the bottom.

This trend is just starting to hit full speed. When it is done in a year or so, we will not recognize the reselling market.

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