Blue Tie Sees Value Of Partners As It Takes On Microsoft In SMB Space

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David Koretz, CEO of Blue Tie, is taking on Microsoft in the small-business market, but he realizes he doesn't have a chance without help from the channel.

"There's only one group of people that can make the difference between us becoming a billion-dollar company or us going out of business, and that's solution providers and their sales teams," Koretz said. "I'm the underdog, but there's one thing I'm able to do for a solution provider sales team that no one else seems to be doing, and that's to commission the hell out of them. We'll keep raising the commission rates so there's nothing else that a solution provider will logically sell."

CEO David Koretz said Blue Tie is the underdog but can "commission thell' out of solution providers.

Rochester, N.Y.-based Blue Tie started two years ago with a clear mission: Create and deliver e-mail, instant messaging, shared calendaring and files, electronic business cards and other Web-based applications to businesses with 200 seats or less at $25 per seat per month.

The ideal customer is a business with employees that work remotely. The fixed price for Blue Tie's solution covers installation, fault-tolerant redundant servers, storage, administration and training. Having spent the past two years developing the application and selling it through a small direct sales force, Blue Tie said it's ready to build a solution provider channel.

"We want our resellers to be able to walk into a small business and say that with Blue Tie there are no installation costs, no setup costs, no training or ongoing support costs. The customer will know exactly what their cost is going to be every month," Koretz said. "We build our technology so that a small business can access technology reserved for big companies, but at a fraction of the cost."

Solution provider incentives include perpetual recurring revenue: 20 percent of the entire sale for the first year, 15 percent for the second year, and 5 percent for three years and beyond. For a sale of 200 seats, for example, a solution provider can earn $30,000. In addition, the salesperson receives spiffs equaling 3 percent of the sale and a $50 American Express gift certificate for each company sale.

Blue Tie provides co-op dollars for marketing and direct-mail initiatives. The solution can also lead to additional sales in broadband, hardware updates and business-process consulting, Koretz said.

Blue Tie started with a clear mission: Create and deliver Web-based apps to small businesses.


"One of the things that's intriguing to me as a business owner is the recurring revenue stream," said Justin Smith, vice president of Brite Computers, a Rochester-based white-box builder and solution provider that helped Blue Tie develop its solution provider program. "Being local, I got a ton of support from them. As the company ramps up nationally, that same support will be available to other solution providers."

Blue Tie recently opened sales offices in Massachusetts, New Jersey, New York, Ohio and Connecticut.

In a two-year total cost of ownership study for a brand-new company with 20 seats, Brite Computer estimated the cost of the Blue Tie solution was one-third less than a comparable Microsoft Exchange solution. For a 20-seat company with some of the infrastructure in place, "Blue Tie is not as compelling, but there are still good cost benefits," Smith said.

While the Blue Tie solution is best suited for companies with up to 25 seats, the product scales well and will be more compelling for larger companies once Blue Tie adds new sales-automation features, which it plans to do in the next several months, Smith said.

Brite found a perfect customer in Wet Planet Beverages, the manufacturer of Jolt Cola. Initially, the solution provider was installing a T1 line, router and firewall for the company when management asked about an e-mail solution.

Smith said Blue Tie was a good fit for Wet Planet's 20 in-house and mobile employees, who needed to access and send large graphics files and sales reports to customers and distributors.

"Instead of implementation and administration costs, we pay Blue Tie a monthly fee for everything," said Tammy Truax, project manager at Wet Planet. "There's a tremendous cost advantage for us compared with [using Exchange."

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