MIS Group And AIG: Unhappy Bedfellows

There are a lot of lessons from the sudden recent demise of Sage Software's largest channel partner, Dallas-based MIS Group.

First and foremost, the MIS Group tale is a classic example of why it's just plain stupid for a solution provider to bet too heavily on one vendor. And by the way, Sage itself openly and aggressively encouraged that type of bet with a channel strategy that placed a premium on Sage-centric partners.

That strategy has left Sage with a black eye and could very well cause customers to reconsider their commitments to the Sage product line. The fact is far too many vendors have a homogeneous, focus on your biggest partners view of the world. They invest far too little in recruiting and refreshing their partner base and view smaller partners as less strategic. That's because they simply don't want to invest the time, money and resources to keep a healthy, robust channel.

So how does the Sage partner of the year, achieving the highest total sales of Sage products in both 2007 and 2008, suddenly post a note on its Web site that it was for all practical purposes insolvent and unable to continue as a viable business?

Just like AIG bet beyond reason on credit default swaps and watched its balance sheet crumble through a $600 billion bet on credit derivatives, MIS Group made the same kind of foolhardy bet, only this one on scaling its Sage business beyond all reason. It's no surprise that acquisitions that put a boatload of debt on the balance sheet are part of the story.

MIS Group CEO Robert Muir, who founded MIS Group 13 years ago, actually boasts in a WebCPA piece that while many solution providers have either sales or technical people, MIS Group has "veteran businesspeople who are applying largely a scale business concept to a traditionally smaller business." The strategy was simply to bet that scaling the Sage business would give MIS Group a pricing advantage over any and all comers. It was a Wal-Mart strategy run amok.

What's so interesting about the MIS Group story is that Sage itself was caught off guard by the death of its largest solution provider. In a ChannelWeb follow-up, Sage Vice President of Marketing Dennis Frahmann says the vendor was unaware that MIS Group would close up shop on July 6. He then goes on to say that it's obviously a difficult market out there. A difficult market is one thing. Your largest partner going out of business is plain and simple a sign of a faulty channel strategy.

There's a lot of blame to go around in this channel story. MIS Group made a foolish bet to scale its Sage business beyond all reason. And Sage was more interested in a focus on the big partners and a stick with your current lineup of partners strategy rather than cultivating a strong and stable channel force based on solutions breadth and depth.

In the end, MIS Group didn't get a bailout from the vendor or the federal government. That may be the only difference between AIG and MIS Group.

SHARE THIS ARTICLE