V Is for Vertical

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Verticalization is the name of the game, and it's being played across the accounting software community. At least, it's being talked about. The speed at which software resellers that handle general accounting software become specialists hasn't really been measured. There is evidence it can happen; the larger accounting firms moved into specialties years ago. But then, many of them didn't have to master complicated software packages, the business process and learn a market simultaneously.

Now, the game is changing and in a way that may challenge how well the likes of Microsoft and Sage Software, the two remaining giant players in the general accounting market, can move their channels into niches.


Partner Insights

A new group of specialized business software vendors is emerging, some selling only direct, others using resellers, consultants and the like to challenge the attempts by the generalists to become experts.

These companies are growing. Infor has bought its way to becoming an international competitor. Deltek, which is going public, had sales of $228.3 million for the year ended Dec. 31, 2006. Activant Solutions, which has been assembled from various pieces, just paid $100 million for Intuit's Eclipse Distribution software, which had $52 million in revenue for Intuit's fiscal year, which ended on July 31. That purchase price, nearly twice revenue, is pretty good for a software company these days. There aren't any true yearly results for Activant Solutions, which was formed on April 1, 2006, but with revenue of $100.2 million for the quarter ended June 30, it looks like Activant should easily top $400 million and move quickly on to $500 million. And toss in CDC Software (which owns Ross Systems and Pivotal) and Consona, whose Consona ERP is built around Made2Manage, and you've got consolidation in the specialized market that yields companies that look a lot different than the GL crew.

That's a lot of money, some of it at the enterprise level, a lot in the midmarket, that is not going to be available for people trying to move into the high end of the Sage and Microsoft lines.

This is the crew that is awaiting the Dynamics, MAS and Accpac VARs who are trying to achieve greater profits and lessen competition from other VARs by increasingly narrowing their focus.

It's hard to write off either Microsoft or Sage as unable to establish themselves as generalists that also have specialists-as many medical practices do. But it's also hard not to conclude that this move is going to rapidly become much tougher for the channel than it already was.

Need Insights?

Editor Robert Scott also writes "Consulting Insights," a free, twice-monthly electronic newsletter that addresses issues concerning the consulting and reselling market. It's insight with an attitude. If you want to subscribe, put the following in your browser address line: subscribe.webcpa.com. You can also visit us at www.accountingtechnology.com

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