Being successful in the accounting software resale business has been enough of a challenge over the past few years to say the least, but for the handful of value-added resellers that continue to outpace even the top firms in the field, growth comes more from the new ways they serve their clients and structure their business than just from the software they sell.
Granted, software sales are indeed returning for many of the top VARs, and they are glad to continue to represent an array of products -- whether they're from publishers that they have had longstanding relationships with or expanding outside of traditional offerings. Ultimately, high-growth-oriented VARs - or consultants, as many are opting to be called -- are looking to expand outside of the ways they've conducted business over the past few decades, and have accomplished this in a variety of ways.
Aktion Associates Inc.
Approximately three years ago, long-time Sage partner Aktion Associates expanded its ERP software offerings to carry Deltek, and it currently has products from Infor and Intacct in its arsenal. The firm saw that its customers were expecting more, but also saw that the future would consist of more services, particularly of the cloud variety. As such, in addition to growing its product line, Aktion looked to managed services, which support the growing trend of companies moving more products to the cloud and taking advantage of application hosting.
The past year did see Aktion's gross revenue jump approximately 53 percent. The acquisition of Sage Timberline reseller CIS Consulting certainly contributed to that, but it was demand for its managed services that impacted the firm's bottom line the most.
"Staying committed to our customers has been key; they look to us for industry and technology expertise. However, the initiative that has driven a lot of growth is our managed services business," said Aktion vice president Paul Bachran. "I think we will see our cloud-related business, including application hosting, drive a lot of growth. Expansion with on-premises publishers will continue as well, but managed services will definitely continue to be a big area of growth for Aktion."
Bachran also noted the trend of more VARs adding products, as well as services, to better meet future client needs. Though he claims to have a "solid" relationship with his traditional publishers, he also sees the advantage of offering more non-premises-based products and services for long-term growth.
"From a business sustainability standpoint, to be able to offer products that are newer in their lifecycle is important to any VAR," said Bachran. "Part of the flux going on is how does a firm transition from products they had been carrying for years to those that will ultimately replace them. You have to have a long-term approach to building your practice."
San Ramon, Calif.
More often than not, top firms like Aktion no longer want to be seen as resellers of software, but as service providers and long-term business partners for their clients.
Armanino Consulting, the technology consulting arm of regional accounting firm Armanino McKenna, has made it the practice's mission to be seen as a service organization, rather than just a software reseller -- particularly to those clients looking for chief financial officer-level assistance.
While acquisitions have been a part of Armanino's DNA, its exponential growth over the past year was due largely to the services it offers, especially when it adds them on to software deals. Armanino Consulting had the largest year-on-year growth of any of the Top 100 VARs in the accounting market, as the firm vaulted from $9.8 million in gross revenue in 2010 to $28.7 million last year, and is on pace to exceed those numbers for 2012.
"All of our services do have a technology component to them -- for one, the growth rate of our Dynamics AX business is off the charts -- but it's not just selling the product; it's the fact that we're serving high-growth companies and everything we can do for them in addition to that [software] sale," said partner-in-charge Tom Mescall. "Three years ago, we surveyed high-growth companies and the vast majority said that they were spending too much time just doing accounting and less than 20 percent of their time doing business leadership tactics and driving the business. We focus on how to minimize the time and resources spent on accounting and maximize on business leadership. This has proven to be incredibly powerful for us; it's not just going in and putting new technology in."
Focusing on serving high-growth companies aside, Armanino Consulting does have a selective acquisition strategy, particularly merging in companies that will enhance a particular practice area. In February, for example, the company purchased Dynamics CRM specialist Gateway Solutions, and this month, to further grow its Intacct business, Armanino is due to close on the purchase of a top Intacct partner, AccessTek.
Growing through acquisition is nothing new for top Sage partner Net@Work, which last year became a national firm through the purchase of Forepoint's Sage business and, more recently, moved into Canada by buying award-winning Sage reseller Synergy Plus Solutions. Even so, the company claims that its "end-to-end" service approach, and the way it has structured its organization, had the greatest impact on its recent growth -- and likely will do so for its future.
"The way we've grown has been one to one. Yes, we've had referrals and networking, but now over the past year we're much better at bringing in everything else we do to those customers," said Net@Work co-president Alex Solomon. "There's been incredible cross-educating of our other offerings into our client base and our inside sales team has grown very nicely. There have been acquisitions, of course, but taking those and putting account managers on those [acquired] accounts and educating them and the customers on what else we do has been very successful. We may not show a net new ERP sale, but maybe it's a net new CRM customer and we can sell services and other products too."
Even during the height of the economic downturn, Net@Work continued to outpace many other VARs, particularly in the Sage channel, and though it was predominantly through strategic acquisitions, the firm is at the point of being able to sell its own branded products and services to customers and other VARs.
"We're moving to a one-to-many strategy -- launching an alliance program and taking what works for us internally and rolling it out to the [Sage] channel. We will be selling products and services to them and their customers," said Net@Work co-president Ed Solomon. "The killer VAR of the future is this: building our own channel and us being there to support our sales efforts. It is also going out to accounting firms and infrastructure companies that don't sell ERP and having an alliance with all of them."
Size doesn't always translate to success, though in McGladrey's case it has helped to have the ability to serve thousands of customers in specific niches. But it has been the firm's ability to retain clients year in and year out that has led to its exceptional growth.
The technology consulting practice of the fifth largest public accounting firm in the country saw its gross revenue climb from $104.5 million to $139.35 million in just over a year. Underneath those numbers, it has been McGladrey's ability to service specific client needs and vertical knowledge that has had the greatest impact.
"People are hanging on to their systems a lot longer these days, so you have to know their business well to help them get more out of their existing systems. We can go to clients and say, 'We've been here before, here's some strong best practices, here's how to look at your data differently,' and a lot of times that will lead to trust and credibility," said national technology consulting leader Brian Becker. "Being part of an accounting firm, we can't afford bad installations. We need clients for life and the right solution needs to be there. We've been lucky that we've never been reliant on software margins, and have been focused on services for a while, which has served us well when things slowed down."
Creating specific solutions for its clients -- particularly in the cloud -- and not just being one of three Microsoft Dynamics Master VARs has helped push Florida-based Tribridge to being a $100 million business, a plan it had five years ago when it was just a $21 million company.
Like McGladrey's Becker, Tribridge co-founder and chief executive officer Tony DiBenedetto admitted that size does have its advantages, and the firm does "think big," but overall, its success has been about executing on its strategies and serving specific client niches.
"For us, the vertical solutions we created for the cloud have contributed largely to our growth, but just 'cloudifying' something doesn't allow you to generate a lot of revenue. We win a high percent of deals because of how deep our knowledge is in key industries, and we've built a tremendous amount of solutions and success in these areas," said DiBenedetto. "We also have a lot of customers, over 3,000, so for any business, one way to grow is to add value for those you have. We do so much to add value that they stay with us."
DiBenedetto explained that the company's own Concerto Cloud Services, in which it hosts Microsoft Dynamics products, and its Offender 360 inmate information tracking product have allowed the firm to close large deals. Ultimately, the firm no longer sees itself as a VAR, but a service provider.
"We never really use the word VAR; we are a consulting organization and we are the firm our clients turn to for service. We build services around our clients, we don't chase new deals and we are regularly signing new work," said DiBenedetto. "Our client retention is at 97 percent and our organic growth rate is about 34 percent over the past year. We target 20 percent and clearly are beating that. We still expect that, even with the nice gross revenue base we have."
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access