VAR 100 A Year of Change

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The world of Value-added Resellers that handle financial software has changed dramatically in the past year and the results are reflected in the rankings. The revenue for the No. 100 firm has moved to $3.7 million this year from just under $3 million for the 2005 sales figures as consolidation has changed the face of the business. Part of this is the impact of the demands for resources to handle higher level products such as Microsoft's Dynamics AX (formerly Axapta) and Sage Software's MAS 500.

The big not only got bigger, the midsize got bigger, and the small got bigger. In fact, there was M&A activity across the broad market, including firms that do not make this list. There is a widespread view that many $1 million and $2 million firms are merging to produce $3 million and $4 million reselling organizations because that level of sales is necessary to thrive.

The Sage reselling channel is just starting to catch up with the Microsoft channel in size. Although Sage has had many more resellers than Microsoft, and Great Plains before it, there have been far more large Dynamics VARs and that has shown up in the rankings each year.

Partner Insights

Still, there are only two Sage-only resellers, MIS Group and Net@Work, in the top 20 and that came as MIS Group put together a company of Timberline dealers and the MAS reseller Enterprise Resource Group last year. Eleven firms at that level sell only Microsoft products.

Notable deals involved Accpac resellers Dynamic Software Systems International of Miami and Applied Data Solutions of Exton, Pa., which produced ADSS Global, while SWK has been growing by a series of smaller acquisitions that has continued into 2007. Next year's list will reflect the February 2007 merger of Blytheco and Macdonald Consulting Group, both Sage specialists.

Another factor impacting this list has been the greater publicity that Sage has given the resellers of its Timberline construction software. Before Sage purchased the formerly independent Timberline, the company and its resellers had little in the way of a public relations program.

That has changed with the move by Robert Muir, the head of the MIS group, to bring greater attention to this section of the market. Another factor has been the impact that the Timberline resellers have had on the awards handed out by Sage Software. Earlier this year, Timberline resellers accounted for eight out of the 11 companies picked in the vendor's new chairman's club.

Among the Top 20, only the accounting firms are notable in spanning multiple product lines and their participation in the market is rapidly changing.

Not all growth came from M&A activity: New York-based InterDyn AKA, which won numerous awards from last year, showed why as its revenue for 2006 hit $11.1 million, up 39 percent from $8 million the prior year. Meanwhile, another Microsoft reseller, the Rand Group, had even greater growth with 2006 revenue reaching $5.9 million, up 64 percent from $3.6 million.

Rand's growth included geographic expansion as the Houston-based company opened an Austin, Texas, office and added Dynamics SL (formerly Solomon) to the Dynamics GP and NAV packages.

"We also experienced great growth in providing services around SharePoint, BizTalk, SQL Server and InfoPath to extend clients' business management solutions," says owner Ron Rand.

Another big change came with Altara's sale of its Dynamic assets to New York-based Computer Generated Solutions. Altara had $17 million in revenue in 2005, and had also been named to the Microsoft Inner Circle. Last year, Altara did not make the Inner Circle and made its sale in November. CGS reported its Dynamics business hit $15 million.

Sometimes it takes time to see the impact of an acquisition. This was the case with the 2005 acquisition of the former American Express Tax & Business Solutions by RSM McGladrey. McGladrey reported fiscal 2005 revenue at $52.5 million. For calendar 2006, the period covered by the VAR 100, the company said it had $75.7 million in the mid-market reselling arena.

Accountants Exiting?

There is also a notable retreat on the part of the multi-office-level accounting firms and some recent developments suggest that the retreat from reselling is likely to continue.

Plante Moran ended its brief foray into midmarket accounting software last year, selling its Dynamics practice. The TM Group, which has had an unmatched string of 17 years in the Dynamics President's Club acquired the reselling business from UHY Advisors. LBMC Technologies, an affiliate of Lattimore Black Morgan & Cain, just parted ways with its CEO Scotte Hudsmith in what appears to be a disagreement over how fast the business should grow. The leader of another accounting firm's technology practice placed a private inquiry to Accounting Technology about the names of other firms of similar size that have reselling operations. It's an increasingly small list.

None of this surprises Ron Eagle, president of the Information Technology Alliance, an association of technologists in accounting, consulting and reselling firms.

"If you are a CPA firm partner with some limitation on the amount of capital you can put into the growing business, wouldn't you put it into something that feels more like home, like financial services," he says.

This probably has more consequences for Sage than for Microsoft because the regional accounting firms were among the largest firms that handle multiple products.

For example, RSM McGladrey initially submitted its information without listing Sage Software products among the lines it carries. When asked about the omission, a spokesperson responded that the firm continues to handle Sage, but that it is no longer a focus.

The two largest companies, but their merger and acquisition activity was almost entirely outside of the United States.

In fact, Tectura began moving into new countries to establish offices, rather than by acquiring other organizations. It used that tactic to move into Sweden, Latin America and the Caribbean. But it switched back into acquisition mode, buying New Delhi-based Euroinfo and its 180 employees in order to move into the Indian subcontinent.

In May, Columbus IT Partner, a Dynamics reseller based in Denmark, moved into the Middle East via a joint venture and into Mexico, Brazil and Chile by 51 percent interest in reselling areas there. It entered Poland by opening an office there.

Of the two, Tectura has a far bigger presence within the United States. Meanwhile, Tectura is giving signals that this could be the year it makes an initial public offering. It did not reveal revenue for Euroinfo, as it often had during prior deals.

And it provided a range of revenue for 2006 with a spokesperson saying the reason was the sensitivity of the issue.

The 2007 VAR 100 Part 1

The 2007 VAR 100 Part 2

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