Small-Biz Meets ERP

The Place To Start
For startup customers, the usual path is planning a chart of accounts and helping them automate their general ledger, accounts payable and accounts receivables—the holy trinity of basic accounting.

VARs getting small companies started with a basic accounting package say they often find that once the customer gets automated and starts to grow, it will find more uses for technology. In addition to accounting software, solution providers then must be able to work with report writers, business intelligence tools and portals and write code as needed.

Accounting solutions is where Net@Work began 10 years ago. "Initially, we just did accounting software, not financial reporting or CRM," said Alex Solomon, president of the New York-based company. "We then added infrastructure, then e-commerce." Net@Work has since been growing with its customer base, as well as moving into larger accounts, and it launched a separate document management business.

The key for solution providers wanting to make hay in this market? One strategy is to work like an incubator for customers. "Start with smaller companies and grow with them. You get these people when they're babies. I'm willing to take a small deal and bet that this business is growing. I get them and nurture them and then they are my client and locked in," Queue Associates' Goldstein said.

People are often amazed at what automation can do for them, Goldstein said. He said financial reporting tends to be the big "wow" inducer. Basically, if the VAR can show customers that it can make sure they get home at a reasonable time rather than working all night on financial statements, it's a big plus.

Required Skill Sets
Another key, according to solution providers, is being a full-service partner and trusted adviser for clients. "The VAR is the single point of contact and typically manages the full cycle of the client's growth, not just the day-to-day stuff," said Dan Evans, president of Dragon 9, a Las Vegas-based ERP specialist that has worked with NetSuite's hosted ERP platform.

Even more so than accounting software, ERP applications require customization for vertical markets, and having both vertical-market focus and an ability to customize solutions is critical, solution providers say. Microsoft is certainly banking on that as it positions its four ERP lines as development platforms, even as it continues to add functionality to them.

Dallas-based ePartners builds atop Microsoft's Dynamics offerings, targeting the health-care, government and manufacturing segments. EPartners offers management advice and consulting services around how a company should organize its manufacturing, streamline order processing and close books faster. An infrastructure services group helps make sure that hardware, networking and security are up to snuff, said Jeff Margolies, executive vice president of consulting and professional services at ePartners.

Solution providers such as ePartners stress their own brand over that of the underlying ERP software, and that might be a good thing because it is often hard for customers to distinguish between ERP products, which have similar features. Thus, many customer buying decisions are not based on the product but on the solution provider that presented a solution. Marketing plays a larger role than product differentiation.

So do the solution provider's services. "The license sale is a one-time pop, but people won't necessarily continue to buy software," Margolies said. "Services let you engage with a client on an ongoing basis, and you use the software to drive significant improvement in the company. Once the software is in, you can sell more services to solve more problems."

Services are big part of the equation for solution providers. According to the January CRN Solution Provider Survey, 34 percent of 146 ERP partners surveyed said they derive from 61 percent to 80 percent of their revenue from services, and a majority of respondents said they get at least two-thirds of their revenue from services.

Attacking the small-business ERP space need not cost big bucks initially. A CPA or VAR with accounting expertise can join the Intuit ProAdvantage program for a nominal fee, less than $400 per year. VARs wanting to build a slightly higher-end practice—say with Sage or Microsoft Dynamics ERP offerings—face relatively low monetary barriers to entry as well, although those costs vary.

Solomon said signing up with Sage costs about $5,000, and training costs between $5,000 and $10,000. Setting up a Web site is another $5,000 to $8,000. The real dough is spent on hiring experienced help. A full-time business consultant or a technical resource person generally earns between $60,000 and $80,000 a year.

The key is getting the domain expertise down. That takes time, and time is money. "We have to show we know their industry. We could be the best expert in the world on this accounting package, but if I don't know their business, it won't matter," Goldstein said.

AMI Partners analyst Laurie McCabe said while current ERP adoption is becoming "mainstream" in midsize businesses, it is still very early on for small-business adoption. AMI defines midsize businesses as those with 100 to 999 employees, and small businesses those with up to 99 workers. "The little guys aren't doing all that much yet. Probably because of cost and probably because many don't know what ERP can do," she said.

Next: A Look At The Key Players