Redwood Shores, Calif. (April 26, 2004) -- A new incentive program being offered by hosted accounting and customer relationship management vendor NetSuite Inc., where resellers can receive up to a 50 percent recurring margin on all product sales, has caused a positive stir here at the company’s third partner conference.

Under the Channel Star Program, its network of over 200 partners, and any new resellers, can earn a 30 to 50 percent margin on net new sales. NetSuite partners’ revenue share also extends to the recurring revenue generated by the on-demand software model. Compensation is based on the level of subscriptions sold of the company’s products, including NetSuite, NetERP, NetCRM and Oracle Small Business Suite.

NetSuite chief executive Zach Nelson said the ultimate goal of the program is to help retain current partners, to encourage new ones and to boost multi-year contracts for the products. Resellers currently account for up to 25 percent of NetSuite’s overall revenue.

“Essentially, the more you sell, the higher status you will attain. For instance if you sell over $1 million in licenses in a given year, you earn the right to a 50 percent margin for the next year. Kind of similar to frequent flyer miles,” Nelson said. He stressed that mostly this level of sale will likely come about through multi-year contracts, which he said many resellers are starting to see.

Over the next year, Nelson said the company aims to add 120 specific resellers to its network -- a goal he realizes isn't without its challenges. “This new program will certainly help, but we also have to think about how to manage it intelligently as new partners come over,” he said.

CPA Mike Galloway, president of Bingham Farms, Mich. reseller AappTech, is a fan of the new incentive. “We recently closed a multi-year deal and are averaging two- to four-year agreements lately,” Galloway said. “When you price those out at around $125,000 per deal and you do a few of those a year, this [new incentive] will really work for you.”

Separately, NetSuite hiked its estimates for its 2004 revenue by roughly 25 percent. The company, known until last year as NetLedger, originally expected revenue to pass $40 million this year. But based on results for the first quarter, it now expects sales to top $50 million.

Normally quarterly revenue drops from the December quarter to the March quarter. However, this year, "We had sequential growth from the fourth quarter through the first quarter for the first time," Nelson said. The company says that revenue for 2003 was just under $20 million. It expects the sales via its channel will continue to grow at a 300 percent rate over the next year.

-- Seth Fineberg and Robert Scott

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