NetSuite Recruiting Resellers With 100-Percent Margin Offer

CRM e-commerce

While some of NetSuite's existing channel partners may join the limited-time program, the invite-only offer is largely targeted at recruiting new resellers, said Craig West, channel sales vice president, in an interview.

"This is really an unprecedented offer for our VARs," West said. "We think this makes it a no-brainer for partners to embrace the cloud in their business."

NetSuite's offer comes on the heels of comments by CEO Zach Nelson who, during an earnings conference call last month, said: "I think this is the year the channel will finally bite the bullet and begin to transition their business model from selling archaic, on-premise software to selling cloud-based suites. If traditional midmarket VARs don't change to meet the demand for cloud computing solutions, they will go out of business."

About 80 percent of NetSuite's sales today come from customers who directly subscribe to the company's Software-as-a-Service applications. About 20 percent of the company's sales are made through its approximately 200 resellers who now earn 50 percent margins on the first year of customer contracts and 30 percent on subsequent years.

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NetSuite launched its channel program in 2002.

Under the new NetSuite SP 100 program unveiled Tuesday, some partners can earn 100 percent margins on the first year of new contracts -- that is, keep all revenue from that year -- and 10 percent on annual renewals.

The intent of the initiative is to front-load revenue for new partners, particularly those that only sell on-premise software, to help them recoup expenses associated with adopting a new business model, West said. Along with expenses for training, sales and engineering staff, solution providers moving into cloud computing have to adjust to a recurring revenue model instead of collecting big up-front fees for system implementation.

Many solution providers are also heavily dependent on selling hardware, network infrastructure and database licenses -- the demand for which is greatly reduced with cloud computing.

"This 100 percent plan will give the stragglers, if you will, the opportunity to make the switch with no pain," Nelson said in a brief interview. "I think this is a great offer."

West acknowledged that over a period of years channel partners actually make more money under the 50 percent, first-year/30 percent, subsequent-years margins resellers get today. "The driver for this is clearly a partner acquisition campaign," he said.

Solution providers invited to participate in the NetSuite SP 100 plan, whether new or existing partners, will have the option of using either the 100/10 percent or 50/30 percent plans for new contracts.

NetSuite is particularly looking to enlist solution providers who sell on-premise ERP and CRM applications from Microsoft, SAP, Sage, Epicor and Deltek.

Solution providers that want to take advantage of the NetSuite SP 100 program must have a core competency in ERP and CRM applications, particularly in midmarket and large companies, and show a "proven commitment to build a [NetSuite] practice," West said.

New channel partners will receive other benefits of NetSuite's partner program, including sales and technical training, pre- and post-sales support, and marketing assistance.

West emphasized that this is a limited-time offer, although he said NetSuite hasn't set a definite date for when it will end. He said the program would continue at least through the company's channel partner conference in mid-April. The company does not have a specific target for the number of solution providers it hopes to recruit, West said, although 50 to 100 is a possible goal.