Epicor: Making Resellers Comfortable

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Epicor was once the poster child for channel conflict. It was a difficult environment for resellers thrown into competition with its direct sales force. In fact, that latter group still racks up by far the biggest part of its revenue. Despite that reliance on direct sales, the company and some of its leading dealers say that VARs are treated just like the direct sales team.

'I am literally treated as an internal salesman," says David Warford, president of Manufacturing Solutions Group, based in Alpharetta, Ga. "And because I have access to all their resources, my organization has grown 10-fold in the past four years."

Warford declines to disclose revenues for the 13-year-old firm. However, last year, he says, MGS outsold every Epicor reseller in the United States to be named 2005 U.S. Partner of the Year, and was also named Worldwide Partner of the Year.

Partner Insights

Over the years, Epicor has had many changes to its reseller program.

In 2000, it dictated that VARs had to drop competing packages or be dropped from the Epicor program, a move that helped reduce the number of resellers.

During the same time, it has tinkered with product names, made important acquisitions, particularly Scala, and revamped its channel management a couple of times.

Two years ago, the company parted ways with the general manager and director of channel sales, and hired back Arleigh Taylor, a former Epicor employee, only to see him join Microsoft. The main financial program, which went through much of the Internet era as e by Epicor, got a new name, Enterprise.

Despite those changes, and the higher volume brought in by Scala, which uses only direct sales, the percentage of revenue generated by resellers rose to 16 percent for 2005, up from 13 percent for 2004.

It's a varied channel program: Epicor has 300 partners that include 252 resellers and 48 referral partners. There are 270 internal sales people worldwide. In the Americas, including Canada, Latin America, and the Caribbean, there are 107 partners, 87 of which are resellers that handle Epicor's mid-market companies across 10 verticals areas.

The channel is now in the hands of James Bork, vice president of sales for Eastern Americas, who says that Epicor actively promotes good relationships between the different elements of the sales system. "Our account managers work with the partners to go out and work side by side to help the end user," says Bork. "We want our sales force to embrace the channel to provide the end customer with all the benefits of dealing with Epicor."

In classic channel conflict, a company sales force, which has the ability to cut prices, can usually take away business from resellers, who have less flexibility, and often goes after the plum accounts.

To avoid that, Epicor compensates its internal sales force on sales by VARs in their territory. Those reseller sales count towards their quota and they receive a commission on the sale.

"What makes us unique as a company is we compensate our direct sales force on our indirect sales," says Bork.

Bork brings an insider's perspective to the program. He joined Epicor in 1997 as a sales representative. Previously, he had worked for Amex Inc., developing international distribution channels for domestic companies with sales organizations outside the U.S.

The decision of how to buy is in the hands of the prospect. "We allow end customers to deal with us directly if they want to," Bork says.

And that's okay with Fremont, Calif.-based reseller Avayle Solutions, which sees an upside even when a client decides to choose Epicor over a reseller. "While there is potentially some conflict with Epicor's direct sales channel," says Avayle's president Rick Sexauer, "we more often choose to leverage the direct channel relationship to initiate the publisher and end-user relationship which is lacking in the market."

Collaborating with Epicor during the sales cycle is a differentiator too for Armand Brunelle, president of Emerald Consulting Partners.

"In the 10 years we've been doing this I can only think of one instance where there was a conflict, and we resolved it quickly,"' says Brunelle.

Brunnelle's Attleboro, Mass.-based firm has been reselling Epicor's ERP software for more than a decade. Last year, the organization, which specializes in applications for the distribution industry, had revenue of $1.2 million.

Epicor has a system for keeping things straight. When the firm gets a lead, Brunnelle say it is registered as an Emerald lead through Epicor's Partner Portal so that the territory manager and channel operations personnel can assess any potential conflict.

However, Sexauer, whose firm spends approximately 12 percent of its $350,000 revenue on marketing, sees some room for improvement with the Web registration. "I'd like Epicor to see a referral that comes in from Avayle, so we could have a joint follow up," he says. He notes Avayle's Web site receives 80 hits per month from people downloading information on Epicor, but the process results in just one inquiry.

"Based on that," says Sexauer, "I have to believe that they are going directly to Epicor from the Web site."

Similarly, Sexauer would like to see more co-branding opportunities on Epicor marketing materials so that prospects to which Avayle distributes them can contact him as opposed to Epicor.

No Dragnet

Since it downsized its channel six years ago, Epicor has stuck to a strategy of not flooding the market with its VARs, a stance intended to minimize the probability of conflicts among its the resellers.

"We're taking a very surgical approach," says Bork. "We don't take a shotgun approach. We don't want to sign up 200 resellers who are poorly trained and have them fighting over the same Zip code."

There is something to be said for having a smaller market, Emerald's Brunelle agrees. He recalls a crowded market when the firm resold Sage Software's MAS 500. "They [Epicor] would never have 10 VARs in Attleboro,'' says Brunelle. "They don't want to have as many VARs as possible in a market to the point of saturation."

While Epicor is actively recruiting for additional VARs in New England, Mid-Atlantic, and the Northwest, it is only considering those with vertical-market expertise. For instance, in New England Epicor is seeking VARs with knowledge of the manufacturing industry. In the Washington, D.C. corridor it is seeking resellers within its professional services vertical to complement its manufacturing partners. And it is seeking dealers with expertise in manufacturing and distribution for Washington and Oregon.

"They have to truly provide value add," says Bork. He continues that prospective resellers need to be "those with an industry niche and are able to speak to and service a particular industry or have an existing client base that makes sense for both them and us to partner with."

A Good Deal

Vendor pricing is one of the main concerns that resellers have in choosing a product line and MSG's Warford says that Epicor's margins are the best in the industry. "Their rolling margins allow me to have a successful year and carry the same margin into the next year rather than having to restart at the lower margin every January," he says.

The average cost of software for an Epicor enterprise-wide package for a $30 million company with 150 employees is $120,000. While there is no cost for partners to join and no sales requirement for referral partners, Epicor VARs have prescribed sales goals that are determined by the size of their market and their tenure.

For instance, margins start at 30 percent for a partner in the Mid-Atlantic region. Upon reaching sales of $100,000 in a given year, margins increase to 35 percent and rise to 40 percent if they hit $200,000.

"I think the margins are adequate," says Sexauer. "Greed would tell me it's not enough." Margins for referral partners can go up to 20 percent.

EPICOR COMPANY SNAPSHOT

HQ: Irvine, Calif.

Phone: (800) 999-6995

Web: www.epicor.com

Revenue: $289.4 million (year ended Dec. 31, 2005)

Employees: 2,000 worldwide

Founded: 1984

Products: Enterprise, iScala, Vantage, CRS Retail Suite, Vista, Clientele

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