Show me the money. That’s been the battle cry of accounting software resellers who are used to collecting their fat chunk of license fees up front and don’t want to venture into the subscription-based software-as-a-service model. Now, some are starting to march to a different beat, choosing to go after specific verticals within verticals (things like warehouse management and commercial flooring within wholesale distribution) and tweaking a SaaS product like NetSuite for those verticals. Then they can charge whatever they want for their product, add other service fees to it and collect cash for the rest of their lives. Seems like a pretty attractive opportunity. But not that many people have caught on yet. And the reason usually boils down to dollars. “They don’t want a dinky check every month, but that’s one of the common myths,” Craig West, NetSuite’s director of alliances and channel sales, said at the vendor’s fifth annual partner conference in San Francisco on Wednesday. “The biggest misconception is that customers pay for NetSuite monthly and the revenue stream trickles in to the partner monthly.” In reality, about 60 vertical applications fill NetSuite’s product directory and the successful resellers are selling three-year deals in which their customer pays for all three years at once, West said. When you look at the top 15 of Accounting Technology’s Var 100 based on 2006 revenue, most of them, not surprisingly, are Microsoft Dynamics GP, NAV, AX and Sage shops. Those guys, like Tectura and RSM McGladrey, likely aren’t going to take on NetSuite because they’ve built their entire businesses around those other vendors, CEO Zach Nelson acknowledged. But about 24 Microsoft and Sage resellers have added the SaaS vendor’s products to their rosters, and this revenue model is part of what’s helping them succeed. Many of them started seeing more of a demand for on-demand offerings that don’t require the end-customer to have the IT infrastructure needed in the traditional world and see it as a way to potentially tap into a market that they couldn’t with those other products, according to West. Some are holding shootouts in which they bring in the customers and show them how their company would run using all three products and let them self-select. And if they are doing mega-customization work, one would think that Joe’s Warehouse would rather purchase the warehouse management version of NetSuite than someone else’s vanilla software. When traditional VARs are saying no thanks to NetSuite, it’s either not a great fit in their particular vertical (West acknowledged that manufacturing is on that list) or they don’t want to invest the time and money essentially building out a new practice to support another product. At last year’s conference, most of the resellers who were climbing aboard the vertical ship were doing so based on requests from customers in a particular industry, learning that industry, building a product and then selling it to others in that industry by positioning themselves as experts. This time West is seeing them take a chance on building something “just on the promise of what those industries offer” based on market research. Again, we’re talking microverticals like seaport management and agriculture. But that kind of intense research takes time and money, too. So NetSuite plans to eventually provide more tools to let vertical resellers do things like analyze the number of prospects and where they’re located and find the right trade publications to talk to about their work. The new kids on the block also want to talk to the veterans who have not only built things, but sold them to a lot of people. NetSuite has a partner forum for this, but it’s not heavily used and some don’t even know it exists. (Another action item for West: promoting what the company already has.) Vertical gurus at the conference warned the newbies that starting off isn’t as easy as it seems. Developing something that specific takes a lot of time, and closing that first deal might, too. But if a reseller out there thinks they could come up with the perfect product for a company that buys and sells moving boxes to figure out when those boxes will arrive by customizing a product like NetSuite, they might be opening up a big box of opportunity. Well, actually, someone already did that, but I’m sure there are loads of untapped industries out there to choose from.
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