Leading accounting reseller Alex Solomon of Net at Work talks about the current state of the market and the challenges and opportunities ahead.
Transcription (This transcript was created by AI, and may contain errors; in case of discrepancies, refer to the recorded version of the podcast.):
Chris Gaetano (00:03):
Hi there. I'm Chris Gaetano, tech editor with Accounting Today, and you're listening to On The Air. Value-added resellers in the accounting software world are seeing their clients demand they step up their games and raise the bar in response to economic challenges and technological disruption. More than mere software implementation, clients today want their VARs to be strategic advisors and long-term partners, and of course they want it faster and cheaper than before. With us here today, we have Alexander Solomon, co-CEO, co-founder of value-added reseller Net at Work, the No. 9 VAR on our list this year, to talk a little bit more about what this all means. Alex, great to have you with us today.
Alex Solomon (00:41):
Thank you. Thanks for having me. Excited to be here.
Chris Gaetano (00:44):
All right, great. So yeah, let's get it right into it. When you look at the VAR 100 list this year, what commonalities do you see among the top entries? And overall, more broadly, what are the most successful bars today have in common?
Alex Solomon (00:58):
So we've been watching this list for years, obviously. We all watch this list every year as it comes out, and the list has changed tremendously over the years because of all the acquisitions. There's so many acquisitions. What used to be acquisitions in the VAR space primarily is now acquisitions by accounting firms into the VAR space, into the ERP space. So things have changed a lot. So you still recognize a lot of the names. They've just gotten a lot closer together with all these acquisitions. And I think the majority of us are all going through the same thing. Your intro didn't have the word AI in it, which we hear every day, all day. I don't think -
Chris Gaetano (01:37):
That's implied.
Alex Solomon (01:38):
Yeah. I don't even think you need to say that anymore. It's implied, and I think everybody's figuring that part out. And by next year, you'll probably see that weaved into everybody's messaging when they talk about who they are. I think we're at that point right now. But I think everybody on that list, the biggest commonality between all of those organizations, we're all in M&A mode. We are all in M&A mode. So let me touch on that, if I may. Of course. I think the term VAR, at least for net at work, hasn't really applied for a long time. Yes, there's a VAR element to our business, but it's so much more than that. When you look at Net at Work and who we are as compared to a lot of the folks out there, we're not the accounting firm folks. That's not who we do. It's who we partner with.
(02:29):
A lot of accounting firms are our partners and they feed us, but we're focused on the end-to-end technology stack for our customers. So whereas you have a lot of those VARs or those accounting firms or some of the larger shops that are focusing on ERP specifically, and they have multiple ERP solutions and they grow that, it's never really been about that for us. This is our 30th year. And for us, it's always been about handling the end-to-end technology stack for our customers. So ERP, CRM, HR, managed services, e-commerce, e-commerce integration, payments, business intelligence, and of course AI, managed AI and what we're doing there.
Chris Gaetano (03:09):
Okay. And so this kind of goes into the next thing that I wanted to ask about. As I talked about in my introduction, I was just observing, looking through a lot of the survey entries, a lot of them reporting that their clients are asking for just so much more from their bars than just software implementation. They want them to be long-term strategic partners. They want them to take on a more advisory role, as you had talked about. And so I was wondering, well, this is something you have observed. I was wondering maybe if you could talk about what this really means on a practical level and maybe how it defers today from maybe how it deferred last couple of years.
Alex Solomon (03:49):
Sure. So the truth is what folks are asking for, what customers are asking for is the true value proposition of what Net at Work was built to be in the first place. It was not focused on just implementing one solution for that customer because one of the biggest challenges in our space for customers in the SMB market is accountability. Who's accountable for my solution? There's so much finger pointing and there could be so much finger pointing between the ERP shop and the CRM shop and the infrastructure shop and the managed services shop and the e-commerce shop as to who is accountable for whatever's going on there right now, whatever issues they're having right now. And for clients in the SMB space, it's so much easier to have one company to handle the entire end-to-end for them. And that really was our value prop. So what did we do?
(04:38):
Some years back, as we approached, I'd say about a $50 million level, so some years back, we realized that even though we had a ton of competitors, friendly competitors out there in the market, we really had no competitors that did what we do end-to-end. Didn't exist. So we went out to the market and we said to everybody, "Ladies and gentlemen, we no longer compete with you. We're happy to walk away from anything we're competing with you on. But if you believe you are the trusted advisor to your customer for all things technology and you just handle the ERP or you just handle the managed services side, then you really aren't the trusted advisor for all things technology. You're just the ERP shop. You're just the VAR for ERP. You're just the VAR for managed services. And if you want to be able to be the true trusted advisor, then you need to leverage many more solutions to the customers you're going after.
(05:31):
And we opened up what we call the Partner Alliance Program, the Net at Work Partner Alliance Program. And we took our value prop of all those other solutions, our differentiator, we brought it to market, and we told the channel, leverage our portfolio of products and services to help you go to market. So if you're an ERP shop and you don't do CRM, you leverage our CRM group. If you're a managed services company and your clients need ERP or they need CRM or they need an online business build, leverage our portfolio of product services. Be the trusted advisor to your clients for all things technology. Now, if you have the wherewithal to launch a division to do those other things, God bless, we'll even help you do that. Do it. But if you don't have the wherewithal or it's not where you're comfortable, it doesn't mean your clients don't want it and need it.
(06:18):
And if your clients want it and need it and you don't offer it, they're going to find somebody else that does. And so that for us, we love that clients are asking for a lot more than what the traditional VAR was doing for that customers, speak to that customer, because that's what allowed all these ERP shops. And we have about 300 partners right now within our alliance program that leveraged the portfolio of net at work. And then we took it one level further because it wasn't just about network over the years, and as are many of the VARs on the list, are very horizontal. You focus on so many different industries because you have a solution in the SMB space that can work for an array of industries. But we wanted to actually go much deeper within certain verticals. So now how does that help that program?
(07:03):
So now managed services companies, using them as an example, that focuses on the construction world, but all they do is managed services. Now they're able to tap into the network construction vertical and we help them implement an entire construction solution for their customer. So they're handling the managed services like they always have, but they're able to offer the business applications, the solutions required for the construction vertical end-to-end. ERP, CRM, HR and payroll. They handle the managed services. Great. Maybe they need cloud, we have cloud at work, maybe they need payments, we have our payments piece. So different channel partners that we work with leverage us for different things, depending on what they do and what role they play for a customer. So I'm loving that we are at the point where everybody realizes that what we've been saying for years is actually what's happening. That's what clients need.
Chris Gaetano (07:52):
Now I do have to wonder, are there sort of mixed feelings about this? Because on the one hand, as you said, it's sort of a vindication of what you've been saying for years, but on the other now, so many other people have figured out the thing that you have figured out so long. Is there maybe an anxiety about the competitive space?
Alex Solomon (08:09):
I love it. No, no. Rising tides, right? No, look, this is our 30th year in the business. We've been doing stories with you guys, stories and articles. And over the years, if you look back at the history, you'll see that you tracked our growth as we've grown. We've done so many great stories together with a lot of the old timers that we're doing them. No, this is beautiful. This is what we want. At the end of the day, this is our 30th year in the business. The fact that others are able to scale, it's also great because they're also leveraging our stack in order to go to market. And it took us 30 years to build out all these different divisions. Didn't happen overnight. We were initially just an ERP shop for one ERP company. Then we became the largest safe shop globally. Then we became the largest Acumatica shop co-lead, then became a massive NetSuite shop.
(09:04):
It took us years to get to where we are. And then it took us a while to build out our full CRM team and pick the right solution for our CRM team, and then our HR and payroll team and pick the right solutions there and build out our managed services so we can support clients on our national level and build out a whole cloud stack so we can host legacy applications for our customers and then figure out what we're doing with payments so we can serve payments up to our customers regularly and do what we need to do with e-commerce and integrate that into years. So the fact that everybody just realized that this is what they need to do right now, that's great. Doesn't mean that they can build out all those things in the next three months or three years. It took us years to get there.
(09:39):
So nah, I love it. It's amazing. And the truth is, in many cases, it's helped our M&A strategy because the folks that realize they have to provide that and don't have the wherewithal to do it themselves or to partner properly, a lot of them are actually joining at work and becoming part of our family. So it's amazing for so many reasons.
Chris Gaetano (09:56):
Excellent. And so one of the things that really struck me also just going through a lot of these responses and going through people observing the things that you've observed that more and more customers want this more advisory focus aspect, they want the strategic aspect, is how much it mirrors what I've been hearing, what clients want from their CPA firms as well. They want more than just somebody who does their taxes once a year. They want more than just somebody who does their audit. They themselves want to have this long-term strategic partner. They want to have this trusted professional with them. So in what ways, if at all, in your mind, does the role of a VAR as this sort of strategic partner defer from an advisory folks' CPA firm as a strategic partner? Although of course we are seeing that with a lot of M&A, sometimes they're one and the same.
Alex Solomon (10:46):
So look, one of the areas that we get the most opportunities from is our partnerships with accounting firms. So while you have some accounting firms that did get into the business of business applications for their customers, many of them did not. And even those that did do it for certain solutions and don't do it for others, they themselves leverage us as well. At the end of the day, the objective is when we're talking about implementing technology solutions for our clients, you need to understand technology and you need to understand the industry you're implementing that technology for. Understanding accounting is a little bit different. They bring us in because they want to make sure that the clients are running the right applications for what they're doing, not because they get involved on that side of it, besides building out the chart of accounts and sometimes process re-engineering, things like that.
(11:38):
But accounting firms, as do we, have fractional CIO programs, or in their case, fractional CFO programs where they play the role of accountant or internal accounting department for some of their firms. We do that on the technology side where we will be the IT department for some of our customers or in some cases where a client needs a CIO but doesn't have the need or the funding to have a full-time CIO. They'll leverage our product and service offering for that. In many cases, the accounting firm is leveraging their own fractional CIO services or fractional CFO services. In many cases, they're giving accounting advice. We don't do that. We'll bring in accountants for that. That's what they do. But for our customers, we really focus on being. We try to meet them where they are, being what they need from us. In some cases, it's being their IT department entirely.
(12:37):
In some cases, it's being their fractional CIO and putting together a five-year roadmap. I'll give you a great example.
Chris Gaetano (12:43):
Sure.
Alex Solomon (12:43):
One of the biggest areas that we get opportunities from right now is private equity firms.
(12:50):
Private equity firms, because we're able to handle the end-to-end for customers, and we're able to vet technology when they're buying companies, and we're able to figure out what the right solution is for the platform that the private equity company is buying because they're going to roll up into that platform. They buy a platform and then they scale up. The last couple of years, especially over the last 12 months, private equity firms have bringing us in nonstop to help them vet the companies they're buying and to help them build out the technology roadmap for the companies they've purchased so that they can have a five-year technology plan for those companies. That's massive.
(13:31):
They work with their accounting firm. They don't think of their accounting firm as the company that's going to come in there and help them with that. As a matter of fact, in many cases, they'll want to keep that totally separate. So it's a massive opportunity, but it's also where we're seeing a tremendous, with everything that's going on in the PE world and the amount of M&A that's going on in the market, that's amazing for us. Now, it's also a little different for us because they realize with us, we're not forcing that one solution into their customers. We'll determine based on the industry and based on the needs of that company they're acquiring and where they're going in the future, whether they should go with one manufacturer, one publisher, or another publisher. We'll determine what they need to do from a CRM and HR and payroll perspective.
(14:14):
And it doesn't mean we have to do everything right away, but we can roadmap what we're going to do over the next five years. And if they start rolling up companies with different applications, but they need to standardize on one application eventually, we're the right company to do that with. They're able to bring us in and we can help them figure out what the right solution is and how to migrate from those other solutions into them. So that's an area where, yes, accounting firms of course are involved in that, but you need a company like Net at Work to be able to do that. And it's been amazing. It's been an amazing partnership with private equity firms.
Chris Gaetano (14:43):
Gotcha. And so looking overall at the landscape, how would you describe the economic health of the value added retail and market right now? Is it tough to be a VAR nowadays? Is it easier than ever? Or I'm going to guess maybe somewhere in between?
Alex Solomon (14:58):
It's tough to be a smaller VAR right now. It's very, very difficult to be a smaller VAR right now because of what we talked about, because clients need more than just that one thing that you do for them, which is why you're seeing so much M&A. A lot of these smaller companies need to get out. There's so much opportunity to be a large consulting firm for the SMB space right now. There's so much opportunity there right now because I think of AI as Y2K. I remember Y2K and how crazy it was and how busy everybody was and everybody needed to do something. Well, that's the world of AI right now. Everybody thinks of AI as what's the AI solution you're going to be implementing for your customers? It's not about that. What's the AI solution that our publishers are going to be integrating into their application to bring to their end users?
(15:44):
It's not about that. You know what AI is for the SMB market right now? It's figuring out how to leverage AI to automate their business. It's not automating their business, it's figuring out how to leverage AI to automate their business. So for us, it's not about going and delivering AI solutions to our customers right now. It's about going to our customers and working with them to figure out how they're going to be able to leverage AI, to workshop with them how they're going to leverage AI. And that's the world we're living in right now. Everybody's trying to figure that out. A little while back, we stood up two teams, an AI internal team that's building it out internally and figuring out how we ourselves are automating it. And then an AI team that's sole focus is to work with our clients to figure out how they're going to leverage AI within their business.
(16:32):
Now, why is it great for Net at Work and why is it difficult for some of the smaller guys? Because at the end of the day, you can't just start implementing AI solutions with understanding one element of that company's business or one element of their stack. You need to have a holistic view of that organization to understand how the organization functions, how that industry functions, really have situational fluency in the industry, and then figure out how you can leverage AI for that industry within that company. To do that, you need to be able to be able to handle the end-to-end for those customers. A lot of the smaller companies, I mean, they'll be able to do that. They'll just need to leverage a company like Net at Work to help them do that. But to do that themselves is going to be very, very difficult.
Chris Gaetano (17:16):
All right. And so now let's just take a really quick break for a commercial, but we'll be back with more accounting tech talk after this. And we're back with Alex Solomon, co - CEO, co-founder of Net at Work, here to talk about the value-added reseller landscape today. Now, with everything that we've talked about, what are the biggest ways that you've seen the products and services offered by VARs change over the years? And what do you think seems to be driving this change?
Alex Solomon (17:48):
I think we're at the point right now where I touched on this earlier when we discussed verticals. I think you're starting to find that a lot of the VARs are realizing that to be horizontal is just way too difficult. There's way too much to do across the different applications that to do that across different applications and across different industries, it's just way too difficult. So you're seeing a lot of these resellers, you're seeing them focus on specific verticals. So even when you look at managed services companies, managed service companies, which are traditionally horizontal, besides the ones that focus on the hedge fund world, for example, or the healthcare world, the rest of them are really horizontal in nature. Now you're finding that these managed services companies are vertical. They're going after not-for-profit, they're going after construction, they're going after food and bev or chemical processing, and they're going after certain things so they have situational fluency.
(18:40):
I think that's the world we're in right now. You're seeing the change. Because there's so much changing, you need to really have situational fluency in order to deal with all that change so you can really help the client and be their trust advisor.
Chris Gaetano (18:55):
Actually, as I speak, as we talk about this, it occurs to me that this maybe connects with what you had talked about regarding the need for a holistic understanding of that business. And so when you were very horizontal, there was almost this assumption of a fungibility of different kinds of businesses. It doesn't matter whether you're in construction, doesn't matter whether you're in a nonprofit, doesn't matter whether you are in retail, you're going to need to have this kind of system in place. As time's gone on, things become much more specialized, things become much more complex. And now the differences between sectors, the differences between industries has gotten to be so big that you almost got to specialize. It's very difficult, as you had said, to be this generic kind of service provider.
Alex Solomon (19:43):
A lot of the market, a lot of the channel, they focus on the product that they know and they lead with that product. And for them, they're going to try to make that product fit to that customer because that's what they know. Our approach is forget about what we sell. Forget about it. It's not important. Let's talk about your needs, your wants, what you want to accomplish, where you're going with the business, and we got a whole bag of tricks to choose from. Now let's talk about a vertical because it takes it one level further. It's we understand the construction world or the not-for-profit world or the food and beverage world, and we know what others in that world are doing, your competitors are doing. And we know what type of technology they're leveraging in order to scale. And we understand that you're going to have to leverage AI within that too.
(20:33):
So let us help you figure that out. And then we got a whole bag of tricks to choose from. We got a whole bunch of tools to choose from.
(20:43):
So you're seeing a big focus on verticals, very important focus on verticals. And it's also back to M&A. It's driving a lot of M&A. It's driving a lot of these smaller companies to say, "Hey, if I'm going to really take care of my customer, and if I really want to help my customer, I have to do it with a lot more skills than what I have here internally. Let me join an organization that has a lot more skills that could actually offer that to our customers and even give the employees of the company a career path." So this is all about, we're talking about clients and we're talking about us. At the end of the day, all of this requires super duper, duper smart people, really smart people. And those are the employees that are in our space. Those are the consultants that we tap into and the developers we tap into and the AI specialists that we tap into.
(21:24):
Without them, we're not offering, forget the tools. We're not offering the right expertise to our customers. So it's situational fluency brought to them by really smart people that understand the tools they need to use to what we say at Net at Work is to unleash the power or unleash the potential of our client's business.
Chris Gaetano (21:42):
So looking at the landscape right now, what products or services have, I guess, been selling especially well right now? And conversely, what's been especially hard to sell right now and why?
Alex Solomon (21:54):
I think, again, if you let the vertical lead the solution, then it'll all come out in the wash. Based on the needs, you can figure out what the right solution set for that customer is. What you're finding now is there's still tons of customers out there that are running legacy applications and they love their application and they want to stay with their application. But running their legacy application means they're not moving to a next gen application. And that means they're not moving to a cloud application. And that means they can't take advantage of all these other products and features and other solutions that integrate to a next gen application. So what we've done is we launched a company many years ago called Cloud at Work. And in essence, Cloud at Work was a way for us to tell our customers, look, we understand that you love the application you love.
(22:46):
Eventually you're going to have to move to next gen, but in the meantime, let's at least give you a cloud experience. And we started hosting a lot of those customers on our cloud. I mean, we probably host a thousand customers on legacy applications on our cloud today.
(23:03):
But what happens to those customers? So for us, those customers live on our cloud until they're ready to go to the next gen solution. So when you talk about what's happening today, especially in the world of AI and especially in the world of integrated solutions to other applications, you're seeing a lot more migrations from legacy to next gen. Many more of our clients are now leaving our hosted platform to go to a true next gen applications that is application that's integrated to other applications they need to integrate to. Now, we're able to take a lot of those applications, those ancillary applications. If a client loves their ERP system and it's a legacy system, we're able to take a Net at Work, at least we are, we're able to take a lot of the other solutions that are out there that are next gen, like a CRM with a Creatio or an HR solution like a Sage HCM, which was the old criterion or a rippling.
(23:54):
We're able to take those and integrate it to those legacy applications on our cloud and eventually move the ERP application out to next gen as well because the add-on applications will work with both the legacy and the new. But in many cases, you're finding people, especially as the next generation is coming into the business right now where in the family businesses, the next generation is coming up and they want to leverage technology more. You're finding a lot of those companies are now, you're seeing migrations happen more and more often. And then you have things like Microsoft announcing that they're sunsetting their legacy products. So a lot of Microsoft customers know they need to go somewhere right now and they're leaving. So even though to some, especially to those that have built their entire business around this legacy and they've never invested in learning a next gen application, it's very hard for them.
(24:43):
What's their future? But for others that have invested in next gen applications, it's a massive opportunity. Again, like a Y2K to take all of these customers that are running legacy applications and bring them to the new world, bring them to next gen.
Chris Gaetano (24:57):
Alrighty. And so just to sum up over here, and you've brought up a lot of this indirectly, directly, but overall, what do you think are the biggest challenges right now for the Vara community and where are its biggest opportunities?
Alex Solomon (25:13):
So there's a common theme through everything we talked about today.
Chris Gaetano (25:16):
Oh, yeah.
Alex Solomon (25:17):
The biggest challenge and the biggest opportunity is end-to-end. If you don't do it, it's a massive challenge for you because that's what your clients need. If you do it, it's a massive opportunity because not many companies can handle the end-to-end to those customers for those customers, especially once you start focusing on situational fluency or verticals you're going after. So massive opportunity. It's also a massive opportunity to exit right now because so many companies like ours and a few of the other ones that are out there in the accounting firms that are looking to actually bring on not only more great talent, but a lot of legacy customers so that you can migrate these customers over to a next gen application. So that's a massive opportunity as well. So I think the challenge and the opportunity is it comes from the same place. It is the same thing.
(26:06):
You need to be able to be the trusted advisor for your clients, for all things technology into the vertical that they're in. And if you don't do that, they're going to find somebody that does because that's what they need. It's too hard for a customer.
(26:22):
It's too hard for a customer, especially in the SMB space that knows their business and only knows their business to manage five, six, seven different vendors or partners, an ERP one or a CRM one, an HR one, an infrastructure one, a cloud one, an e-commerce one. It's too hard. You need to have one company that's accountable for the entire solution. And it doesn't mean there's no finger pointing. There's finger pointing, but at least the finger pointing's internal. The client doesn't see you sweat. You're able to work that out behind the scenes. You're able to do that and manage through it and provide a great level of service so it's easy for the client. For us, the objective is to have the client focus on their business and let us focus on all the technology they need in order to scale their business. And it needs to be that for everybody in our space today.
(27:03):
It's not like it was in the olden days. In the olden days, you can just be an ERP shop. Again, it would be better if you did more than that, but you could just be an ERP shop and build a massive business around ERP with one publisher specifically. Those days are over. You need to be able to handle a lot more for your customers. And with the world of AI playing the role it's going to play, you need to figure out how you're going to start leveraging AI to automate your business and to make sure it's weaved into all of the applications of your organization. Otherwise, your competitors are going to blow past you. You need that as a competitor. Today it's a competitive advantage if we leverage it. Eventually you'll be at a competitive disadvantage if you don't.
Chris Gaetano (27:44):
All right. So then that actually covers all the questions that I had pre-prepared for this. But is there anything that you would like to go over, sir, about anything at all?
Alex Solomon (27:55):
It's a good one. We covered a lot. And we gave our fair share of time to AI as we need to these days especially. But look, it's an exciting time. I know to many out there, it is a scary time, but it's such an exciting time. And to a lot of those that have been in this business for a long time that are looking for an exit, we welcome you with open arms to Net at Work. We would love to chat with you about it. But there's so many companies, great companies out there that are welcoming a lot of the smaller shops into them. And if you decide you want to stay independent and that's not what you want to do, then either leverage our partner program and leverage those other solutions that you know your clients need. Leverage that for your customers or somebody else's partner program.
(28:41):
But you need to provide your customers a lot more than what you've done in the past. And if we can help you do that, that's great. And if we can get you to join our family, that's great too. But at the end of the day, it comes down to the same thing I mentioned earlier, which is it's all about the people that we employ. And Net at Work, like I said, this is our 30th year. We're 530 people right now. We have probably two or three acquisitions we're about to announce, so we're about to go to a whole other level. We would be nowhere without the talent that we have within our organization. And we would also be nowhere without all the customers that entrust us to be their technology shop and to help us unleash the power of their business. And I think all of us in our business, this has been a great business for a lot of us.
(29:27):
All of us need to appreciate that and need to be able to continue to grow and change our business so we can continue to service our customers.
Chris Gaetano (29:33):
All right, great. So I guess that's all the time we've got for today, but I want to thank our guest, Alex, again, for all of his time, all of his expertise, as well as you, the audience, for listening. Thank you. No problem. This episode of On the Air was produced by Accounting Today with audio production by Adnan Khan. Rate or review us on your favorite podcast platform and see the rest of our content on accountingtoday.com. I'm Chris Gaetano, technology at letter with accounting today till next time.
Alex Solomon (30:02):
Thank you for having me, Chris.
