The State of the VAR Market


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Robert Muir’s secret plan for building the MIS Group is not a big secret. It’s really Business 101. “What a lot of companies have is people who are first and foremost either sales people or technical,” says Muir, who founded the Houston-based organization 12 years ago as a Timberline reseller. “We have those things, but in the senior management group, we have veteran business people who are applying largely a scale business concept to a traditionally smaller business. It’s a different way.”

That has propelled the MIS Group from a role as a little-known member of the channel for Timberline’s construction software to the largest reseller that handles only applications from Sage Software.

In 2006, it acquired the Enterprise Resource Group, along with purchasing two Timberline dealers, which propelled it to the top of the Sage channels. In December, it acquired MicroAccounting Systems of Dallas, which itself had about $8 million in revenue.

Partner Insights

Growing by acquisition produces rapid expansion and unites companies that are using different hardware, software and telephony systems.

“We are a mini example of what Sage is doing—taking a disparate group and bringing it under one culture,” says Muir.

But in dealing with those changes, the MIS Group’s other key tactic is pretty old fashioned, too — communicate with employees. As it acquired companies, it began talking to their employees about how those companies operate.

“We have tried to have staff meetings with as large a percent of the group in the meeting as we can,” says Muir. “But that is getting harder and harder to do.”

The MIS Group has significantly increased its travel budget to enable senior managers to visit other locations, which Muir considers essential in giving them the ability to understand and be understood.

A Year of Change

The changes Muir and the MIS Group are grappling with are changes facing the rest of the market. As he pointed out, Sage Software is dealing with integrating product lines. So is rival Microsoft. And both vendors experienced personnel changes at the top.

Doug Burgum, who had led Microsoft Business Solutions and before that Great Plains for 23 years, retired. Most of his team was broken up—some leaving Microsoft, but others, like corporate VP Tami Reller, moving into positions of more responsibility within the large company.

But leadership changes often have little impact on resellers, as long as they can make sales. What worries them more is competition from other dealers, whether they are selling the same or different products.

For example, while MIS Group was moving into Dallas, so were other regional dealers, including Interdyn Pro Data, which moved in to the Dallas office last year.

Although it’s not close to the MIS Group in size, with $4.5 million in revenue, the company had a good year, says CEO Chris Burleson.

Pro Data is following a familiar course, developing more specialized skills and moving into more sophisticated systems.

“We have heavily focused on supply chain accounts. We have expanded our support personnel to include individuals with significant industry experience,” he says. That includes an Apics-certified consultant, a move Burleson says will help his organization expand beyond financial software.

The move into more sophisticated systems involves Microsoft’s Dynamics AX. And here, Burleson says his company is participating in that development, along with other members of the InterDyn consortium. It’s also important to have broader geographical presence to promote such products.

“More and more companies are looking for organizations that have more capabilities beyond a few local consultants,” he says.

Maybe, there’s something about Texas. Or maybe, what is happening in the Texas market reflects the growing competition among VARs that are trying to move into new regions.

Among those moving in more depth was Morganville, N.J.-based Clients First Business Services, which has additional locations in Houston and El Paso. The company shares another thing with Interdyn Pro Data—it is moving into specialized markets.

“We are moving more towards verticals, which shortens the sales cycle,” says Clients First’s Sheldon Kralstein, who added the company is also being more selective in accepting client business.

Also showing up in the Lone Star State was SIS, based in Duluth, Ga., which opened two offices in Dallas and Houston in March. SIS, which handles Dynamics SL, has added SharePoint and is also ramping up its Dynamics CRM business.

“Managing growth like ours is always tricky, and I foresee staying ahead of the curve for the software-as-a-service model will be our next challenge,” says spokeswoman Julie Johnson.

Expansion works the other way as well. The Rand Group, a Dynamics reseller based in Houston, opened a Chicago office early in 2008.

The company has been on a roll since it spun out of CPA firm Hein+Associates a few years ago. It grew from $5.9 million in revenue for 2006 to $7.3 million last year, ending what owner CEO Ron Rand called a strong push.

Like many others, the Rand Group moved beyond the accounting software marketing, opening a CRM practice in May.

Growth Factors

Getting people to work together has also been an important factor in results for the Sikich Technology Division.

The group had “a lot of traction with Dynamics NAV last year and started 2008 with five dealers in Dynamics GP, while its CRM practice also picked up, according to Jeff Rudolph, who leads the group. The unit’s revenue grew from $14.53 million in 2006 to $16.12 million, an increase of just under 11 percent.

Eric Sheehan, of Olsen Thielen Technologies, says that company is also seeing the size of engagements increase.

“The increase is being driven with more overall integration and Web services strategies,” he says. The company is also increasing the amount of business in integrating CRM to ERP applications, and using technologies such as SharePoint, “to deploy more executive information systems (dashboards) to help drive decisions for the business.”

New Faces in the Channel

For resellers looking for the safety of having another line, either to keep from having all their bets in one basket, or to move in new business segments, the market is offering opportunities.

Among these has been the emergence of new vendors, at least existing vendors with a new opportunities.

This includes newly public Deltek, which snagged former Sage Software VP Taylor Macdonald to run its channel program. His impact has been felt by the quick enlistment of two Sage resellers, SoftwareLink and Information Systems Management, to handle Deltek’s project software. More are likely to follow.

Macdonald notes the expansion of larger VARs into “hotel service,” such as network services and programming. He has expressed doubts about organizations forming larger ones. Far more productive than merging, he believes, is adding products.

As intriguing is Intuit’s establishment last year of its reselling program. That hasn’t budged the typical 4,000 units per quarter that Intuit has been selling. But four resellers of its QuickBooks Enterprise Solutions made this year’s VAR 100 list.

Pro Data is one of them. But like most dealers handling the Intuit mid-market product, Burleson is not certain how this market will develop.

“We have not yet figured out how to sell and support small systems like QuickBooks, so we plan to take it slow to see if it can even match our strategic direction. I’m thinking that I will just need to hire someone to just do it for us and make it totally separate from the rest of our business,” he says.

But Burleson believes that QBES will be a factor in the market. “QuickBooks is going to take over the small business market of companies of revenues of $10 million and below,” he believes.

The businesses that Intuit is expected to cause difficulties for are those selling MAS 90 and the low end of the Great Plains market.

“New Sage business is a struggle,” says David Faye, owner of Faye Pollack & Associates, an Encino, Calif.-based MAS reseller. But Pollack also notes that economic slowdowns have tended to dry up new sales, while existing clients invest in their installed systems.

“Ongoing consulting work for existing Sage users is booming,” he says. “In addition, there seems to be a huge push right now from existing Sage users to find ‘new and improved’ resellers. In the last two weeks, we’ve gotten at least a call per day from a disenchanted user.”

Changing Lines

Like its smaller competitors, the MIS Group is changing its business line, broadening beyond the Sage MAS accounting software and the Timberline construction line.

It expects a substantial amount of growth in the CRM market in 2008, through sales of Sage CRM.

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