Will Sage Group Cement Its SME Leadership with ACCPAC and Softline Acquisitions? Part Six: Market Impact--Nurturing Channels

Market Impact—Nurturing Channels

In March, Best Software, Inc., one of the leading current providers of integrated accounting, business management, human resources (HR)/payroll and fixed asset solutions for small and mid-sized companies in North America, announced that its parent company, UK-based The Sage Group plc (LSE: SGE.L), had completed the acquisition of ACCPAC International, Inc. (www.accpac.com). The Sage Group plc (LSE:SGE.L)one of the leading providers of business management software for mid-sized companies worldwide, with annual sales of nearly $900 million (USD) and 3.6 million customers worldwide in fiscal 2003. ACCPAC International, Inc. (was, until recently, an independent subsidiary of the software powerhouse Computer Associates International, Inc. (NYSE: CA).

Further, Best and ACCPAC seem to have similar strategies for nurturing their channels. Namely, both companies sell almost entirely through VARs, and have found an army of CPAs to be very effective in marketing their bottom-of-the-range of accounting products. The 2002 acquisition of CPASoftware and introduction of the Best Software Accountants Network (BSAN) have further nurtured Best's relationship with the over 40,000 accounting and bookkeeping firms that use or recommend its products. On its side, late 2002, ACCPAC signed an agreement to collaborate with CGA Online Services Corporation to develop CGA Online—a new web-based on-line system that will provide a single source of information and services for certified general accountants (CGAs), primarily in Canada.

In 2003, Best announced a variety of enhancements to its Partner Advantage Program, which was designed to drive business for multiple, core, mid-market products and to provide even more opportunities for training, financing, guaranteed lead-generation, and alliances with loyal business partners selling other Best Software products. Additionally, to encourage business partners to offer additional products, Best Software has of late been providing discounts on sign-up fees, and offering renewal discounts to partners selling three or more Best Software products.

To recognize the success of those business partners selling multiple Best Software products, the company has also introduced a Common Tier Recognition Program. Given that most channel partners do not have the resources (or the inclination) to represent the entire Best's product set, it is inevitable that the vendor helps them to focus on where their skills lie, and cooperate in those areas that complement their core competencies. These efforts have included educational sessions at VAR conferences, workshops to learning how to identify customer needs, publishing a third-party solutions guide, and compiling a digest of customer success stories.

Best is also making use of a Solution Selling methodology, which was devised by Sales Performance Inc. and is incorporated as a module within SalesLogix. At recent Best Insights reseller conferences, a few hundred partners were trained in the methodology, and plans are under way for conducting regional training sessions as well. Another recent initiative is the Best Cross-Product Referral Program, which provides a 10 percent referral credit and 25 percent tier credit whenever a VAR refers a customer to an authorized partner who represents Best products not handled by the referring VAR. A newly-unveiled "In the Family" discount program, gives existing partners a 50 percent discount on their product authorization fees when they enlist to represent additional Best products. Additionally, Best is completing a plan to provide improved margin opportunities for partners representing multiple products. Namely, partners who carry three or more Best products should get a 25 percent discount on their annual PartnerCare fees. This could also mean that a top MAS 90 partner can also receive the top margin when taking on Abra.

This is Part Six of an eight-part note.

Parts One, Two, and Three presented the event summary.

Parts Four and Five began a discussion of the market impact.

Part Seven will cover challenges and Part Eight will make user recommendations.

ACCPAC Channel Support

As for ACCPAC, it has placed a premium on product education, as is the case with its required Certified Solutions Consulting program. Like in Best's case, few resellers are logically in a position to take on the entire ACCPAC portfolio. Therefore, at no cost to the customer, ACCPAC will loan out a Strategic Sales Professional with expertise in some product niche (such as, HR, CRM or WMS) to make sure the client's needs are fully met. The vendor hopes this should allow VARs to sell, implement, and support newer products, and possibly encourage the reseller to get certification after seeing how it is done. ACCPAC also sponsors promotions that provide additional margin to bolster the sales of a particular product. It has also compiled a qualification checklist to help its VARs determine if a prospect is a good fit for a certain item. Also, regional account managers will serve as "matchmakers" to promote VAR partnering opportunities.

To further bolster its channel's loyalty, during a time when almost everybody is cutting margins, ACCPAC's channel strategy has been to keep margins high, meaning the average VAR could earn up to 50 percent on products sold, and up to 55 percent if it achieves the Master-level status. Also, to help VARs that are new to the fold, the company guarantees margins for their first year, regardless of sales volume. It has also increased marketing efforts, providing hands-free marketing, telemarketing, advertising, and direct-mail support to partners. On the technology side, vendors have put together a professional services group to help resellers implement their various product lines, and has set up an on-line support center.

Another thing that ACCPAC brings to Sage and Best is a tighter relationship with IBM, which is in tune with the "freedom of choice" mantra. On its side, IBM counts very much on ACCPAC's help with its foray into the mid-market (see IBM Express-es Its Candid Desire for SMEs), as can be witnessed by over one hundred instances in which the name ACCPAC comes up on searches of IBM's web site. Accpac uses an IBM system as the basis of ACCPAC Exchange—the first electronic data interchange (EDI) offering to integrate mid-market accounting applications with IBM Business Exchange Services, aimed at delivering affordable EDI transaction documents over the Internet. In 2003, ACCPAC began shipping bundled IBM DB2 database with its Advantage Series accounting software as the default database at no charge, in place of the previously used Pervasive product line, a move that has been extended to include the DB2 database with the Pro Series and ACCPAC CRM products.

Very recently (May 3), ACCPAC announced its support of the forthcoming version of IBM DB2, code-named Stinger, as part of its continuing business partnership with IBM. ACCPAC will provide full support for the new database, which IBM just opened for beta testing, to clients of ACCPAC CRM, and ACCPAC Advantage Series and ACCPAC Pro Series accounting systems. Several key features in this new version of DB2 promise to offer compelling value to small and medium businesses (SMB), including autonomic computing for self-management tasks such as data backups; high availability with automatic fail-over protection; ease of administration features; and, the freedom to run on multiple platforms. Last but not least, ACCPAC has reached out to IBM Solution Providers to become eligible to carry the Advantage series.

What Customers Want

The merging vendors, Sage/Best and ACCPAC, have understood that a broad, impeccably integrated horizontal offering with selected vertical enhancements, a nurturing resellers network, in addition to providing well-attuned pricing, and catering to the evolving scalability and migration needs of customers through products of upward compatibility are necessary tenets for success in the SME market segment. SME customers continue to increasingly realize the importance of seamless integration between front-office and back-office applications, and to consequently look for one strategic vendor (i.e., "one throat to choke") to fulfill and be solely accountable for the vast majority of their business application needs, particularly in the lower end of the segment. Also, many of them have long outgrown their entry-level accounting solutions la QuickBooks, DacEasy, Peachtree or Simply Accounting, and are looking to their original provider for functional expansion opportunities in contact management/SFA, CRM, HR/Payroll, EDI, WMS. These of which ACCPAC has tackled.

From web-based access to important back-office data, for instance, ACCPAC eTransact is the web storefront solution that integrates with Advantage accounting modules. Information entered into the back-office modules (i.e., Inventory Management) flows to the web store interface, while information entered through the web store (i.e., Order Entry), flows to the accounting modules like AP or AR. Owing to the ability to expose its business logic, the company has been able to tightly integrate ACCPAC CRM with Advantage Series—for example, the Order Entry screens from Advantage Series are invoked from within the CRM interface, enabling telephone sales representatives such as both review customer sales prospecting information and order information from one point. The Order Entry screen has not had to be re-written, since it is called up as a functional object.

Last but not least, contrary to its archrivals and to its current parent-sister companies, ACCPAC has embraced the support for multiple platforms, believing it as a competitive strength rather than a weakness within a truly international market. While no one disputes Microsoft's dominance in the market segment, a notable percentage of servers already run on Linux (and even some desktops) in Europe, while IBM DB2 and Oracle database still have strength and appeal in many parts of the world. Thus, the vendor supports all the above platforms, and because of the Advantage system's architecture (i.e. separate object-oriented business logic from database), it does not require the excruciating work to update drivers for ACCPAC to produce new platform supporting versions. Consequently, Both Pro and Advantage Series run on Windows and Linux, and both run on Microsoft SQL and IBM DB2 databases. What differs however is that Pro Series also runs on Microsoft FoxPro, while Advantage Series also runs on Oracle and Pervasive. This selection has yet to be seen from any other vendor within this tier of enterprise application providers.

This concludes Part Six of an eight-part note.

Parts One, Two, and Three presented the event summary.

Parts Four and Five began a discussion of the market impact.

Part Seven will cover challenges and Part Eight will make user recommendations.