How To Succeed In Business Software12:00 AM EST Mon. Aug. 06, 2007
Ambitious solution providers are eyeing ERP, CRM and other business applications as areas for growing their business. Yet, hurdles such as lack of expertise and high training costs stand in their way. And when you throw Software-as-a-Service into the mix, solution providers are all over the map as to their plans for adding these on-demand apps to their offerings.
Those are some of the insights provided by the VARBusiness 2007 State of Technology Survey: Business Software, which provides a snapshot of the opportunities and challenges facing solution providers in the rapidly changing business applications market. The key question the survey addresses is this: How is business software evolving and what do solution providers need to know to be successful in this area?
For Eric Berridge, co-founder and principal of Bluewolf, a New York-based consulting company, the road to success in business software heads straight through on-demand apps. Working with Salesforce.com, Oracle and other vendors, Bluewolf provides a range of consulting and deployment services, including helping companies define their business processes and match them to on-premise and on-demand applications.
As on-demand technology alters the landscape for traditional VARs, Bluewolf is frequently seen as one of the new breed of solution providers that's breaking the old models. "We've never resold a nickel's worth of software," Berridge says. "I think more customers today expect [solution providers] to walk in the door with business knowledge rather than just providing them with another way to buy software."
Bluewolf and this new generation of solution providers now find that their core expertise is helping clients define their business processes and then getting business applications to match those processes, according to Berridge and Bluewolf co-founder Michael Kirven. That's made them evangelists for on-demand applications from such vendors as Salesforce.com and Google, which Berridge says require only 5 percent of the coding and technical work of on-premise software. The two have even written a book, due out later this year, on how they see the channel evolving, called "Iterate or Die: Keys to Success in 21st Century Consulting."
Next: CRM Leads The Pack
CRM Leads The Pack
How to succeed in business software is top of mind for so many solution providers primarily because so many have built all or part of their business around it. More than 78 percent of the 254 small, midsize and large VARs that participated in the survey already sell or recommend business software products or services, including ERP, CRM, supply chain management, product life-cycle management, accounting/finance or analytical applications. The survey also found that more than 36 percent of all respondents (including those that do and those that do not already sell business applications) plan to add business software products and/or services to their portfolio in the next 12 months, while nearly 48 percent are considering doing so.
CRM software is the most popular business application with 59.1 percent of the surveyed solution providers selling CRM applications and related services. That was followed closely by accounting/finance/analytics applications sold by 54.7 percent of those surveyed. Fewer solution providers work with ERP (32.5 percent), supply chain management (24.6 percent) and product life-cycle management applications (14.3 percent)—all of which tend to be less of an SMB play.
Even companies that start out far afield of business software often eventually find their way to this lucrative area. Take Spinnaker Network Solutions, an Irvine, Calif., solution provider that, despite its name and original business of building LANs and WANs, has for 10 years now focused almost exclusively on CRM and sales-force-automation applications. A longtime reseller of Sage's SalesLogix software, Spinnaker began reselling Microsoft's Dynamics CRM 18 months ago and the product already accounts for 40 percent of the company's sales and 90 percent of its new business. The company plans to expand by offering Microsoft's Dynamics CRM Live on-demand service once it becomes available next year. "The on-demand model is gaining a lot of ground with Microsoft coming into that market," says Spinnaker President Mitchell Cannady.
Solution providers, of course, also recognize that selling, implementing and servicing business applications is very different from installing a PC LAN. In the survey nearly 46 percent of respondents cited what they see as the high price of business applications as a major obstacle to working with business software. That was followed closely by the time and expense of training and certifying staff, difficulties in hiring experienced staff, and the complexities of integrating business applications with other information technology.
For example, Stenstrom Group, an Olympia, Wash., solution provider, resells project management apps from Primavera Systems, mostly to the construction industry. But an effort to expand into CRM apps by reselling SalesLogix some years back didn't pan out. Part of the problem was a lack of expertise among staffers, acknowledges President and CEO Mark Stenstrom, although issues surrounding Sage's acquisition of SalesLogix at the time also created problems. Stenstrom remains open to expanding into other business application areas that complement project management, and his company might add on-demand project management software to its repertoire. "That definitely appears to be where things are going and where people want to go," he says.
Next: Partner Preferences
The survey also provides insights into what solution providers are looking for when partnering with a business application vendor. When asked which vendor attributes they considered most important, the list was topped by the quality of technical support (75.9 percent), the quality of pre-/post-sales support (59.6 percent) and ease of doing business with the vendor (57.9 percent).
Solution providers also were asked about their preferred vendor within each product category. When one thinks of business applications, especially ERP software, SAP and Oracle usually come to mind because of their domination of the enterprise application market. But many solution providers cater to small and midsize companies, and when asked in the survey which vendors are best able to deliver the products and services they need, respondents cited Microsoft in nearly all product categories as their vendor of choice.
In CRM, for example, almost half (46.9 percent) of the respondents that resell CRM apps said Microsoft is best able to provide them with the products they need. Sage was picked by 11.1 percent with Oracle, Salesforce.com, SAP and NetSuite all in single digits. Microsoft was likewise far and away the preferred vendor over Oracle and SAP among solution providers that resell ERP and supply chain management software. The competition was closer between Microsoft, Intuit and Sage for accounting/finance/analytics applications.
San Francisco-based Apollo Consulting began reselling SAP's Business One application bundle for small businesses two and a half years ago after reselling software from Epicor, Infor and Microsoft. "They've built a very friendly channel program," Apollo Consulting partner Scott McMahon says of SAP. He specifically cited channel conflict problems with Infor—18 percent of survey respondents said minimizing channel conflict was their top criteria for choosing a business application vendor.
Some VARs, however, are underwhelmed by the choice of vendors that actually "get" the channel and the types of products solution providers need to serve their customers. Looking out over the business application market space, there's not a lot of choice for VARs, says Steve Ciarciello, CEO of CompuData, a Philadelphia-based solution provider and longtime reseller of Sage ERP and CRM products. In 2003, CompuData inked a deal with SAP to resell Business One, but dropped the relationship two years later because, Ciarciello says, SAP didn't really understand the channel and the product "wasn't ready for prime time" in the SMB space. "It was very disappointing," says Ciarciello. As for the channel's other main choices, Oracle is too focused on big customers, Ciarciello adds, and he even questions how much Microsoft understands the channel for its Dynamics applications, noting the recent turnover of executives in that division.
What do solution providers look for when adopting a business application? Ease/speed of deployment (43.8 percent), product quality and reliability (43.5 percent) and pricing (41.7 percent) topped the list. The Business One software is what convinced Apollo Consulting to sign up with SAP after lengthy efforts by the vendor to woo the reseller. "Within 10 minutes of seeing the product, I was sold on it," McMahon says. "The look and feel is very unique." CRM is an integral part of the bundle, he says, rather than being an add-on module. And he likes the way SAP continues to improve the product's functionality through acquisitions such as Praxis (e-commerce software) and XL Reporter (financial reporting and analysis).
Most solution providers recognize that the old model of reselling and installing IT systems with little value-add doesn't cut it in the business application world. "Today it's less about the technology and more about the business processes these applications will enable on a vertical industry basis," says Michael Speyer, a Forrester Research analyst.
When asked how they sell business software, 62.8 percent of those surveyed said they sell a combination of products and services. On the question of providing a value proposition to help clients solve their business needs, 64.4 percent cited "improving customer service" and 63.4 percent said "improving customers' access to information." And when asked how they innovate when developing business application solutions, 65.5 percent said providing professional services. Still, 56.2 percent said they "innovate" by providing technical "break/fix" services.
The survey shows that solution providers at least understand the changes occurring in the business applications market and that they need to change along with it. But Bluewolf's Kirven says they can't delay. "I think if they don't start making that transition now, they won't be able to make it."