Consulting Insights, May 22, 2009

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Intuit doesn’t hand out many numbers on its QuickBooks Enterprise Solutions Business. And you may remember that last year, it changed from reporting units sold to active customers. There were 36,000 in that category when the third quarter ended on April 30, up 30 percent over last year. And given the double-digit drops most mid-market vendors had in license revenue, that’s an awfully good result, especially in light of that fact that overall QuickBooks revenue was $149 million for the quarter, down 8 percent from a year earlier. However, overall units rose to 517,000 sold for the most recently ended period, up from 508,000, as Intuit used price promotion to grow volume. In a conference call with analysts, CEO Brad Smith described the company’s strategy of trying to grow the business in all areas. “Growing our customer bases remains our number one goal in this downturn,” he told listeners.


Trey Resources, whose only business is Sage reseller SWK Technologies of Livingston, N.J., managed to turn a profit on a 7 percent rise in revenue for the first quarter ended March 31. But how it did it represents another fun fact about this company. Revenue for the most recently ended quarter reached $2.09 million, up from $1.95 million as gross margins rose to 40.3 percent from 35.7 percent. However, the company did not hold the line on expenses so the operating loss grew to $121,692 in the most recently ended period, from $98,553 a year earlier. It operating margin grew to a negative 5.9 percent up from a negative 5 percent. So how did Trey turn the bottom line black? It recognized $192,543 from the gain on revaluing derivatives, compared to $2,562 in income from the same source a year earlier. And while last year, Trey had a loss of $55,045 from the amortization of discount on debt conversion, there was no entry in that category this time. That resulted in net income of $27,045, compared to a net loss of $195,751.


Despite a tough market for QuickBooks, Intuit turned in a strong third quarter for the period ended April 30 as net income rose to $484.8 million, up 9.1 percent from $444.2 million a year ago. Revenue reached $1.43 billion, a 9 percent increase of $1.3 million in last year’s corresponding period. With Intuit having trimmed its staff by 7 percent a year ago, before the roof fell in on the economy, management looks very smart. Besides the QuickBooks business, already discussed, Intuit had $777 million in consumer tax revenue, up 18 percent, although that reflected a lot of people filing later. Payroll and payments revenue hit $157 million, up 11 percent and the accounting professional segment revenue was $179 million, up 4 percent, not bad for what is usually thought as a low- or no-growth business.


It's unclear exactly what all the Facebook writings I do accomplish, although I think it relieves pressure on my brain. Besides having created a group for the community pool (how valuable that is remains to be seen), I joined the "Fans of Joe Rotella" group, which seems rather odd. Many know Joe from his presentations at places like the Information Technology Alliance. In any event, since I once described Rotella, the chief technology officer at Delphia Consulting, as a one-man think tank, I felt that qualified me a fan. (He’s actually one of the few people that fits nicely into the much-abused term “Thought Leader”). But the different ways in which communication untangles and re-spins, like DNA replicating, is probably one of the roots of the concept “viral.” On my own Facebook page, I've tried to balance out groups, adding different people, like putting a new and unexpected ingredient in a favorite recipe. I do find that if I invite Sage resellers to join, then my "Suggestions" list of people to invite skews towards Sage, so I invite someone from the Microsoft channel and the list then turns that direction.


For the first time in memory, Sage released installed base figures for many of its products during presentations to press and analysts at the Insights reseller conference. There were 44,000 reported customers for Accpac, 19,000 on-premise customers for Abra and 15,000 for the combined SalesLogix and Sage CRM business. It was also reported that there are 2,300 customers worldwide for X-3, the manufacturing package that has become one of three Sage worldwide products, along with Accpac and Sage CRM. There are 160 installations of X-3 reported for North America.


While Sage Insights was going on in Nashville last week, Deltek’s Insight conference was happening in Orlando, Fla. The company’s newsletter said there were 3,000 attendees (not including staff), which was down from 3,700, according to last year’s report. That’s a 19 percent reduction, which is not all that bad. I was getting the same reports from the trade show floor of the Sage confab that I got from Microsoft Convergence that despite lower traffic, the quality of traffic was good. It’s the same idea that tire kickers stayed home and the people hitting the booth were serious. The company also handed out the second annual Project Excellence Awards. Jewell & Associates received the Partner Award for implementing Deltek Vision at ARH Associates, which works in the field of engineering, surveying and environmental sciences. I don’t know if the fact that was the only award involving Vision, the product handled by most resellers means anything. Not that I would have attended because of the overlap with the Sage conference, but nobody asked. Nor did any of the press releases issued in May make it our way. Maybe our email is blacklisting Deltek. Or maybe it’s just back to the way the company was pre-Taylor Macdonald.


NetSuite, which always has its knives out for Sage, has announced a online NetSuite Career Fair for former Sage UK employees who lost their jobs. The company didn’t say how many positions might be open for the more the hundred laid off in the U.K. NetSuite quoted The Times of London as saying that up to 600 could lose their jobs in the British Isles this year on top of 400 last year. I’ll be everybody would like NetSuite to see just how many openings it’s reserving for the former Sage people. NetSuite will not disclose numbers but reported it had openings in most departments.


Although revenue dropped by 9.7 percent for the second quarter ended March 31, Softbrands reported a sharp increase in earnings. Net income was $203,000, up from $45,000 in last year’s corresponding period. Meanwhile revenue fell to $21.4 million from just over $23.7 million a year earlier. Software license revenue plunged to $2.8 million, down 29.6 million from just over $4 million. Manufacturing revenue dropped to $10.1 million in the period most recently ended, down from $11.9 million a year ago. Given what we’ve seen from manufacturing VARs from Syspro and Exact Software, that’s not all that bad.


JMT Consulting Group, a reseller of nonprofit software, has acquired a Lavine BMC Technologies, a Brownsville, Texas-based organization that operates in the same market. Jacqueline Tiso, president of Patterson, N.Y.-based JMT said Pat Lavine will join her company as regional vice president and will help develop new lines of business. A member of the Sage Chairman's Club for 2008, JMT last year acquired NFP Technologies, another Chairman's Club member. JMT is buying quality, which is the way to go in consolidation.


At Sage Insights, Jodi Uecker-Rust, in her first interview as president of the new Business Solutions Division, talked about the aging of the reseller channel. I was thinking that as I leave this job, the VARs at the conference were many of the same people who were operating when I started in this business 18 years ago. If this trend keeps going, the 2015 Collaborative meeting of the Information Technology Alliance will be held at the Phoenix Golf Club Resort, Spa and Assisted Living Center.


BLYTHECO HIRING CONTINUES. Blytheco, the major Sage reseller based in Laguna Hills, Calif., appears to be working to single handedly boost the accounting software economy. It has 10 postings on, which is more than Sage or Intuit. These include open positions in a number of cities for the MAS line, Sage CRM and SalesLogix, and Abra. Some of these may be for multiple positions, although I haven’t read them all. What strikes me is the Abra postings because, coupled with Net@Work’s purchase of Raleigh, N.C.-based Business Technology Solutions earlier this year, it strikes me that there’s some expansion into the HR space going on among the previously accounting-oriented reseller base.


Activant, which markets specialized accounting software, had a devastating March quarter as it recoded a $82 million impairment of goodwill, $59.5 million related to its hardlines and lumber segment and $22.5 million in Automotive. That's after recognizing $18.5 million in impairment in the first category during the December quarter and $22.5 million in automotive. The result was a loss of $94.5 million for the half ended March 31, compared to earnings of $536,000 a year earlier. Revenue dropped to $108.1 million from $217 million. Ouch! A year or so ago, I talked about the prospects of specialized accounting software vendors. But it turns out, they’ve been harder hit by the economy than the more generalized folks.


I’ve often described my job as one of sales person. I buy information. I sell trust. Because no matter what knowledge I have of this business, your trust is the only really real asset I have. You have trusted me to help make your businesses and lives better. And I am very grateful for that and also somewhat frightened by that responsibility.


A fire at the courthouse in Madison, Ind., severely damaged the building and it remains to been seen what impact the fire, smoke and water had on historical records, not all of which have been microfilmed. I am probably one of the few people in America whose vacation plans can be changed by a courthouse fire.


SpeedTax, which markets sales-and-use-tax software, has signed 10 Sage resellers to market its product line. Signing on with the Laguna Hills, Calif.-based vendor was Sage's largest VAR, Blytheco. Also joining the program was SWK Technologies, Livingston, N.J.; Arxis Technology, Simi Valley, Calif.; Forepoint USA, Seattle, Wash.; IncorTech, Fontana, Calif.; Martin & Associates, Cincinnati; Terrell & Terrell, Dallas; Axis Global Partners, Miami, Fla.; KasTech Consulting, Langhorne, Pa., and e2e Business Management Solutions, Vancouver, British Columbia.


Mize, Houser & Co., a CPA firm based in Topeka, Kan., has decided to stop selling its CPA/MIS practice management system and to instead of the Star Global Suite from Star Americas Software Solutions. The accounting firm began selling CPA/MIS to other CPA organizations more than 20 years ago. Mize, Houser and Co. will transition the user base to Star Global and the firm will also market the Star produce to midsize firms.


Deltek reached a split decision against three former employees who formed a company called Iuvo Systems that provides consulting services for Deltek products. A court refused to immediately enjoin the company from operating, based on claims the three violated a noncompete agreement, and also alleging trademark and copyright infringement. A number of analyses of Web sites show the court agreed to bar Iuvo from using Deltek trademarked terms on its site and limited its use of certain terms in metatags.


In the movie, “Harry Potter and the Prisoner of Azkaban” students at Hogwarts learn to deal with the thing they fear most by dealing with a creature called a Boggart which can assume the shape of whatever each student fears. Professor Lupin, in charge of the class, tells them to imagine whatever they fear as something ludicrous and by using the spell word, “Ridic-oo-lous.” Ron Weasley, who fears giant spiders (a reasonable approach if you ask me), defeats the Boggart by imaging the giant spider as wearing slippers. This is the essence of humor. It is fear and anger overcome and rendered absurd. We call our fears before the fire and the tribe and name them and render them powerless.


With this issue the last of Consulting Insights from SourceMedia, there are a variety of ways to stay up on my business plans, which involve remaining in this space and continuing to reach you via this medium. My business email is I am on Linkedin and my Twitter page is @BobWScott. I have also started a Facebook group called “Bob Scott’s Insights” which will provide some news and humor postings during the transition, although I will be taking it easy for a couple of months.


Republicans are planning to have former vice president Dick Cheney bound and gagged. Democrats hope it might work on Joe Biden. … I’m planning on starting a little self-service sanitarium. I already have my slogan: “Where mental health is a matter of opinion.” … Some asked my thoughts on the Somali pirates. I said, “Good starters. No bullpen.” … The country band at the big party at Sage Insights played "Hey, Jude." I think that should be a hanging offense. It would be like having bag pipes play "the Devil Went Down to Georgia." … The economy is so bad, the hit show “24” is having its day reduced. It will now be “18”. … With the Sage show being held in Nashville, I couldn't help but think of an old Bob Hope joke. Lost in Tennessee, he asked a local for directions: "How do you get to the Grand Ole Opry?" "Learn to sing through your nose." … Disney was shooting the movie, “The Sorcerer’s Apprentice,” here this week. It stars Nicholas Cage. I think he’s a good pick, but he’ll look silly in the mouse ears and tail. … I think the U.S. should close the Senate at Guantanamo Bay. Hey, if people like Harold and Kumar can break out of there, just how secure can it be? ... There’s so many gimmicks on Facebook, asking “Which Star Trek character are you?” My new one is “What kind of Kentuckian are you?” and rates participants on issues such as how they eat possum: baked, broiled or right off the road. TH


This will be the final issue of Consulting Insights. Accountants Media Group is developing an expanded technology-centric newsletter, which will continue to include VAR news but also encompass a broader scope of tech coverage. Stay tuned for more details in the coming weeks. In the interim, please send any VAR/tech-related news items to Senior Editor Alexandra DeFelice,

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