Bob Scott’s

Winter 2015

Sponsored by

STARS2015VAR

Resellers Face A Sea Change

BSI | 2015 VAR Stars

Resellers Face a Sea Change

2015 VAR STARS

2 | www.bobscottsinsights.com

The noises coming from the reseller channel in 2015 resemble the contented sounds of a purring cat. For a substantial part of mid-market accounting software resellers, business this year has been good, very, very good, driven in part by the move to the cloud, but also by a much improved general business environment.

”It feels like a combination of Y2K and the good times of the dot-com era,” says Alex Solomon, co-founder and co-president of Net@Work, a New York City-based reseller. And there is agreement from the vendor community. This is a great time to be a VAR in the ERP in channel,” says Jon Roskill, CEO of Acu-matica which straddles the change, marketing both on-premise and cloud-based software.

On the other hand, given the amount of consolidation, maybe the market is more one of haves and have nots, with the latter perhaps not purring so loudly.

This year has been a year of change, like no other in the last decade or more. Consolidation is going at all levels and sizes of the business. Value-added Resellers increasing see their pipeline filled with companies seeking cloud products. They also see their traditional sources of revenue being pinched.

The structure of the software business has also changed. A number of ERP companies have gone pri-vate in the last four years with private equity groups

buying Epicor (2011), Deltek (2012), Jeeves Informa-tion Systems (2012), Unit4 (2014) and Exact (2015). In the case of Exact, the buyers said that going private was best for the future because public investors do not want to pay for development of cloud products.

Those factors also play a role in the leadership changes at the two companies that who have by far the largest number of resellers. A year ago, Stephen Kelly became CEO of the Sage Group and in June, Pascal Houillon departed from Sage North America with his job slot waiting to be filled. Kirill Tatarinov left Micro-soft Business Solutions in October after heading that organization since July 2007. Moreover, the Dynamics unit was subsumed into the parent, simply becoming another product line and not a separate business on its own.

The mid-market is in flux and four trends stand out this year, some of them affecting not just the ERP software business, but all segments of software. These are rapidly changing how business operates in ways we do not completely understand. Those are as follows:

continued on page 9

Patricia Bennett, PC Bennett

Bill Burke, Merit Solutions

2015 VAR Stars | BSI

Company Headquarters Product Line Employees Revenue $M

360 Cloud Solutions Scottsdale, Ariz. NetSuite 35 3.4

A.K.A. Consulting Staten Island, N.Y. AccountMate 4 700K

Accordant Morristown, N.J. Sage 100, Contractor/300 CRE 30 9.6

Accountnet New York, N.Y. Acumatica, Dynamics GP/ SL, Infor 23 6.1

AcctTwo Shared Services Houston, Texas Intacct 34 5

Ace MicroTech Atlanta, Ga. Dynamics GP 21 4.2

ADSS Global Miami, Fla. Sage 100/300, X3 150 28.5

Aim Solutions Dallas, Texas Acumatica, Dynamics GP/SL 16 4.8

AKA Enterprise Solutions New York, N.Y. Dynamics AX/GP 70 18.5

Aktion Associates Maumee, Ohio Deltek Vision, Infor Wholesale Distribution, Intacct, 100 16.7

Sage 100 Construction, 300 CRE

AMR Group Toronto, Ontario Deltek Vision 8 2.8

Archerpoint Atlanta, Ga. Dynamics NAV 90 16

Armanino San Ramon, Calif. Dynamics AX/GP, Intacct, Abila 236 66

Arxis Technology Simi Valley, Calif. Intacct, Sage 100/300/500 25 6.5

AVF Consulting Baltimore, Md. Dynamics NAV, Serenic Navigator 16 4.4

BAASS Business Solutions Thornhill, Ontario Deltek Vision, Intacct, NetSuite, Sage 300, X3 125 24.1

BCG Systems Akron, Ohio Dynamics GP, NetSuite 44 8.7

BCS/ProSoft San Antonio, Texas Deltek Vision, NetSuite, Sage 100/500 36 7.5

Bennett Porter Tigard, Ore. Acumatica, QuickBooks, Sage 100 18 3.9

Big Bang ERP Montreal, Quebec FinancialForce, NetSuite 60 6*

BKD Technologies Springfield, Mo. Dynamics AX/GP, Intacct, Sage 100/500, X3 47 19

Blytheco Laguna Hills, Calif. NetSuite, Sage 100/300/500, X3 104 23

Boyer & Associates Minneapolis, Minn. Dynamics GP/NAV/SL 20 5.3

Brainsell Technologies Topsfield, Mass. NetSuite, QuickBooks, Sage 50/100/200/300/500 58 5

Bredet Services Oakville, Ontario Dynamics AX, Sage 300/500 9 1*

www.bobscottsinsights.com | 3

A.K.A. Consulting Staten Island, N.Y. AccountMate 4 700KK

Accountnet New York, N.Y. Acumatica, Dynamics GP/ SL, Infor 23 6.1

Ace MicroTech Atlanta, Ga. Dynamics GP 21 4.2

Aim Solutions Dallas, Texas Acumatica, Dynamics GP/SL 16 4.8

Aktion Associates Maumee, Ohio Deltek Vision, Infor Wholesale Distribution, Intacct, 100 16.7

Sage 100 Construction, 300 CRE

Archerpoint Atlanta, Ga. Dynamics NAV 90 16

Arxis Technology Simi Valley, Calif. Intacct, Sage 100/300/500 25 6.5

BAASS Business Solutions Thornhill, Ontario Deltek Vision, Intacct, NetSuite, Sage 300, X3 125 24.1

BCS/ProSoft San Antonio, Texas Deltek Vision, NetSuite, Sage 100/500 36 7.5

Big Bang ERP Montreal, Quebec FinancialForce, NetSuite 60 6*

Blytheco Laguna Hills, Calif. NetSuite, Sage 100/300/500, X3 104 23

Brainsell Technologies Topsfield, Mass. NetSuite, QuickBooks, Sage 50/100/200/300/500 58 5

Brittenford Systems Reston, Va. Dynamics GP/SL, Intacct 30 4.8

CAL Business Solutions Harwinton, Conn. Dynamics GP 27 5.4

Cargas Systems Lancaster, Pa. Dynamics GP, Intacct 72 10.2

Central Consulting Group St. Paul, Minn. Deltek Vision, Intacct 35 13

Clients First Business Solutions Holmdel, N.J. Acumatica, Business 1, Dynamics AX/NAV, Epicor 105 23.5

CliftonLarsonAllen Peoria, Ill. Intacct 80 20

Collins Computing Mission Viejo, Calif. Acumatica, Dynamics GP 38 11.9E

CompuData Philadelphia, Pa. Epicor, Intacct, Sage 100/500 37 6.4

Copley Consulting East Greenwich, R.I. Infor SyteLine 34 7.5

Cornerstone Consulting Clearwater, Fla. SAP Business One 25 4.5

Crestwood Associates Mount Prospect, Ill. Acumatica, Dynamics GP/SL, Greentree 48 10.2

CS3 Technology Tulsa, Okla. Acumatica, Intacct, Sage 100, 500 17 2.9

Demand Solutions Group Los Gatos, Calif., Calif. NetSuite 50 7.9

DSD Business Systems San Diego, Calif. Sage 100/300/500 77 9.5

DWD Technologies Fort Wayne, Ind. Abila, BusinessWorks, Sage 50/100 ERP 23 4.5

e2b Technologies Chardon, Ohio Epicor, Intacct, Sage 100/500, X3 45 6.3

Eide Bailly Technology Consulting Fargo, N.D. NetSuite, Sage 100/500 127 14.2

Faye Business Systems Group Woodland Hills, Calif. Acumatica, Sage 100/300/500??, X3 20 4.2

Finley-Cook Shawnee, Okla., Dynamics AX/NAV, Serenic Navigator 23 2

FMT Consultants San Diego and ByD, Dynamics GP, NetSuite 67 9.2

Los Angeles, Calif.

Fourlane Austin, Texas QB Online, Pro, QBES 20 3.9

Godlan Clinton Township, Mich. Infor Industrial Cloud Suite (SyteLine) 45 8.1

IBIS Peachtree Corners, Ga. Dynamics AX 59 21

IE Solutions Monterey, Calif. QuickBooks 1 200K

Information Systems Management Portland, Ore. Acumatica, Sage 100/300/500, X3 24 5

CAL Business Solutions Harwinton, Conn. Dynamics GP 27 5.4

Central Consulting Group St. Paul, Minn. Deltek Vision, Intacct 35 13

CliftonLarsonAllen Peoria, Ill. Intacct 80 20

CompuData Philadelphia, Pa. Epicor, Intacct, Sage 100/500 37 6.4

Cornerstone Consulting Clearwater, Fla. SAP Business One 25 4.5

CS3 Technology Tulsa, Okla. Acumatica, Intacct, Sage 100, 500 17 2.9

DSD Business Systems San Diego, Calif. Sage 100/300/500 77 9.5

e2b Technologies Chardon, Ohio Epicor, Intacct, Sage 100/500, X3 45 6.3

Faye Business Systems Group Woodland Hills, Calif. Acumatica, Sage 100/300/500??, X3 20 4.2

FMT Consultants San Diego and ByD, Dynamics GP, NetSuite 67 9.2

Los Angeles, Calif.

Godlan Clinton Township, Mich. Infor Industrial Cloud Suite (SyteLine) 45 8.1

IE Solutions Monterey, Calif. QuickBooks 1 200K K

Company Headquarters Product Line Employees Revenue $M

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BSI | 2015 VAR Stars

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Innovergent Alpharetta, Ga. NetSuite 18 2.2

Innovia Consulting (formerly ABC) Waupaca, Wis. Dynamics NAV 50 7.9

Intellitec Solutions Wilmington, Del. Dynamics GP/SL, Intacct 30 5.5

Interdyn Artis Charlotte, N.C. Dynamics GP, Intacct 22 5.1

Interdyn Business MicroVar Roseville, Minn. Dynamics AX/GP, NAV, Intacct, Open Systems, Traverse 168 29.8

Junction Solutions Denver, Colo. Dynamics AX NA 50

Kennedy Vomberg Toronto, Ontario, Deltek Vision 3 1

Knaster Technology Group Centennial, Colo. Dynamics GP 10 2.6

L. Kianoff & Associates Birmingham, Ala. Dynamics GP, Intacct, Sage 100/500, Vision 22 5

LBMC Technologies Nashville, Tenn. Dynamics GP/SL, Intacct 50 11.2

Maner Costerisan Lansing, Mich. Dynamics GP, Intacct 10 3.5

Martin & Associates Cincinnati, Ohio Acumatica, Dynamic GP, Intacct, Sage 100/500 23 4.3

Massey Consulting Raleigh, N.C. Dynamics GP, Intacct 6 1.3

mcaConnect Greenwood Village, Colo. Dynamics GP/SL, Intacct 170 45

Merit Solutions Wheaton, Ill. Dynamics AX 60 10

MicroAccounting-xkzero Dallas; Chicago, Acumatica, Intacct, Sage 100/500, X3 41 9.6

Texas, Illinois

Navigator Business Solutions Sale Lake City, Utah SAP All-in-One, Business 1, Business 1 Cloud, 70 14

Business ByDesign

Net@Work New York, N.Y. Abila, NetSuite, Sage 100/300/500, X3 180 38

Nexlan Danville, Ill. AccountMate 10 1.3

NexTec Group Seattle, Wash. Acumatica, Dynamics AX/GP/SL, Sage 500, X3 92 19.5

PC Bennett North Bend, Wash. Acumatica 24 2.5

Practical Software Solutions Concord, N.C. Sage 100/500, X3; Sage CRE 100/300 19 4.2

Rand Group Houston, Texas Dynamics AX/GP/NAV 87 22.1

RKL eSolutions Lancaster, Pa. Sage 100/300/500, X3 60 9.1

RSM (formerly McGladrey) Minneapolis, Minn. Dynamics AX/GP/ SL, Intacct, NetSuite 600 174

Innovia Consulting (formerly ABC) Waupaca, Wis. Dynamics NAV 50 7.9

Interdyn Artis Charlotte, N.C. Dynamics GP, Intacct 22 5.1

Junction Solutions Denver, Colo. Dynamics AX NA 50

Knaster Technology Group Centennial, Colo. Dynamics GP 10 2.6

LBMC Technologies Nashville, Tenn. Dynamics GP/SL, Intacct 50 11.2

Martin & Associates Cincinnati, Ohio Acumatica, Dynamic GP, Intacct, Sage 100/500 23 4.3

mcaConnect Greenwood Village, Colo. Dynamics GP/SL, Intacct 170 45

MicroAccounting-xkzero Dallas; Chicago, Acumatica, Intacct, Sage 100/500, X3 41 9.6

Texas, Illinois

Net@Work New York, N.Y. Abila, NetSuite, Sage 100/300/500, X3 180 38

NexTec Group Seattle, Wash. Acumatica, Dynamics AX/GP/SL, Sage 500, X3 92 19.5

Practical Software Solutions Concord, N.C. Sage 100/500, X3; Sage CRE 100/300 19 4.2

RKL eSolutions Lancaster, Pa. Sage 100/300/500, X3 60 9.1

Company Headquarters Product Line Employees Revenue $M

6 | www.bobscottsinsights.com

BSI | 2015 VAR Stars

SBS Group Edison, N.J. Acumatica, Deltek Vision, Dynamics AX/GP/NAV/SL, 75 26

Sage 500, Sage PFW

Sererra Consulting Group Irvine, Calif. NetSuite 50 9.8

Sikich Naperville, Ill. Dynamics AX/GP/NAV/SL 235 45

Silver Edge Solutions Schaumburg, Ill. Deltek Vision 6 2

SIS Duluth, Ga. Dynamics AX/ SL 51 11.9

Socius Dublin, Ohio Dynamics AX/GP/SL/NAV, NetSuite, Sage 100/500, Syspro 135 34

SSI Consulting Vienna, Va. Dynamics GP/SL, Intacct 22 6

Stambaugh Ness York, Pa. Deltek GCS, Vision 30 8

Stanley Stuart Yoffee & Hendrix Orlando, Fla. Dynamics GP/NAV/SL, Intacct 22 3

Stoneridge Software Barnesville, Minn. Dynamics AX/NAV 51 8.4

Sunrise Technologies Winston Salem, N.C. Dynamics AX 122 28.2

SWK Technologies Livingston, N.J. Acumatica, NetSuite, Sage 100/500, X3 130 21.46

Synergy Business Solutions Portland, Ore. Dynamics SL, Intacct 24 4.4

Technology Management Concepts Marina del Rey, Calif. Dynamics GP/NAV/SL, NetSuite 28 6

Third Wave Business Systems, Wayne, N.J. Business One, Dynamics GP 36 6

TM Group Farmington Hills, Mich. Dynamics GP/NAV/SL, NetSuite 48 10

Tribridge Tampa, Fla. Dynamics AX/GP/NAV/SL 600 110

TrueCloud Tempe, Ariz. NetSuite 32 5

UXC Eclipse New York, N.Y. Dynamics AX/GP/NAV 400 86

VARC Solutions Friendswood, Texas QuickBooks 10 1.5

Vision33 Irvine, Calif. Business One, Business ByDesign 200 27

WAC Consulting Northborough, Mass. Abila, Acumatica, Sage 50/100/300, X3, NetSuite, QBES 48 7

Websan Solutions Toronto, Ontario Dynamics GP 24 4

Western Computer Oxnard, Calif. Dynamics AX/NAV 120 22

Wipfli Milwaukee, Wis. Abila, Dynamics AX/GP 250 37

Sererra Consulting Group Irvine, Calif. NetSuite 50 9.8

Silver Edge Solutions Schaumburg, Ill. Deltek Vision 6 2

Socius Dublin, Ohio Dynamics AX/GP/SL/NAV, NetSuite, Sage 100/500, Syspro 135 34

Stambaugh Ness York, Pa. Deltek GCS, Vision 30 8

Stoneridge Software Barnesville, Minn. Dynamics AX/NAV 51 8.4

SWK Technologies Livingston, N.J. Acumatica, NetSuite, Sage 100/500, X3 130 21.46

Technology Management Concepts Marina del Rey, Calif. Dynamics GP/NAV/SL, NetSuite 28 6

TM Group Farmington Hills, Mich. Dynamics GP/NAV/SL, NetSuite 48 10

TrueCloud Tempe, Ariz. NetSuite 32 5

VARC Solutions Friendswood, Texas QuickBooks 10 1.5

WAC Consulting Northborough, Mass. Abila, Acumatica, Sage 50/100/300, X3, NetSuite, QBES 48 7

Western Computer Oxnard, Calif. Dynamics AX/NAV 120 22

Company Headquarters Product Line Employees Revenue $M

Notes: *Canadian dollars; E, Estimate

8 | www.bobscottsinsights.com

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• The move of applications to the cloud• The replacement of license sales with subscriptions• Rapid consolidation in the Dynamics AX market• Less reliance on margin on product and more on service income.

The CloudEveryone talks about the

cloud. Right now, most of the world has done something about it, except for businesses running mid-market accounting software. Acumatica’s Roskill says it is estimat-ed that only 8 percent of mid-market companies are using web-based systems in their financial operations.

Still, there has been a notable shift. At last year’s Intacct Advantage conference, many resellers were just ramping up their cloud business. At this year’s, while most still draw the majority of their revenue from on-premise systems, they were reporting their pipelines are overwhelmingly coming from those that wish to purchase web-based Intacct.

In the last year, there were several notable resellers adding Internet-based applications. Aktion, Collins Computing, DSD Business So-lutions, NexTec and South East Computer Sys-tems added Acumatica; Tribridge, previously a Microsoft loyalist, and Net@Work, formerly dedicated to Sage, picked up NetSuite, while MicroAccounting Solutions took on Intacct.

But reseller recruiting by web-based compa-nies has probably passed its peak. In the case of San Jose, Calif.-based Intacct, it was a year more of encouraging some resellers to find a new home, rather than growing the base.

“If you were of a size that would not be suc-

cessful we asked you to go partner with some-body or do something else,” Taylor Macdonald, Intacct’s VP of channels, said at the company’s Advantage user and reseller conference last month. And while Intacct had 95 resellers a year ago, it had dropped to 80 by the time this year’s conference rolled around.

It takes time to get a cloud systems prac-tice rolling. Doug Deane, CEO of San Diego, Calif.-based DSD Business Systems picked up Acumatica after being a Sage-only company during most of its 31-year history.

“The Sage stuff is really, really doing very well,” Deane says. Meanwhile, the company is being very deliberate in building up the Acumatica business. “We didn’t start to try to sell Acumatica systems before everybody was trained and before we had an in-house, in-depth knowledge of the product,” Deane says. As to Acumatica? “They are disappointed in our performance. We don’t care,” Deane continues. “We have to satisfy ourselves. We are not going to do something until it’s time.”

The advent of the cloud has also speeded the spread of subscription pricing. This affects more than just ERP software vendors. In the last year, Adobe Systems stopped selling ap-plications via licenses. You can only purchase any of the company’s well-known products via a subscription on the web.

In the last financial quarter, subscriptions represented slightly less than 51 percent of revenue for nonprofit software vendor Blackbaud. While that com-pany moved to subscriptions before most other financial software vendors—and few publicly held companies re-main for comparison—there is little doubt the industry is moving that direction.

CEO Roskill says 90 per-

cent of Acumatica’s third-quarter sales were from subscriptions. “It is the way customers are going,” he says. Roskill notes that subscription revenue “gets into the cap ex (capital expen-diture) versus op ex (operating expenditure) trade off.” For resellers, it provides more pre-dictable revenue, which enables them to budget more accurately.

Subscription carries the disadvantage in that during the transition from license sales, revenue can dip be-cause the VARs do not benefit from that big chunk of money for licenses. But the predict-able stream of revenue makes up for that problem, once a company has built up a base of subscription income.

“We like the recurring revenue model,” says Bryan Wilton, president of InterDyn BMI, which is based in the Min-neapolis, Minn., area. “Although transitioning to a recurring revenue model has challenges, like giving up cash flow today in place of poten-tially more cash flow but spread over years to come, overall it is a better model. The insur-ance industry figured this out years ago and built annuity streams for themselves and their reselling agents. “

Although the company has committed to winning 12 new Intacct clients by next June, the bulk of BMI’s revenue comes from on-premise systems with Dynamics GP contribut-ing more than 60 percent of the total. “GP is going very strong,” Wilton says. The firm’s sales of Dynamics AX are growing and the Dynam-ics NAV business is increasing faster than the other two Microsoft products.

“We have increased our NAV team by 30 percent,“ Wilton says. He attributes that to NAV’s modern technology, particularly when compared to GP, whose origins are in the early 1980s and in which “You are still opening and closing windows.” NAV operates via a grid, more like Intacct, Wilton says. “NAV is a very easy sell to a younger finance person.”

BMI itself kicked off the year by being acquired by Denmark-based Columbus in February. Then in July, Columbus purchased Sherwood Systems, which it folded into BMI, and the next few months are likely to see more deals.

“We have four being looked at right now. I think we have a high probability of doing three of those in the next six months,” says Wilton. With Columbus’ backing, BMI is looking at targets with range of more than $10 million, although Wilton notes, “They are OK with $2 million and $3 million shops.”

AX Rolls UpThe last two months demonstrated the

rapid consolidation of the Dynamics AX mar-

continued from page 2

Selecting the 2015 VAR StarsThe selection of mid-market accounting

software resellers for Bob Scott’s VAR Stars

rest on one basic principal: quality, not revenue,

as the deciding factor in picking the 100

businesses that are selected for this honor.

VARs from very small shops to the largest

participants in the business have been selected

in past years’ and in this year’s rendition.

A variety of criteria go into the definition of

quality including awards resellers have received

from vendors, such as the Microsoft Dynamics

President’s Club and Inner Circle, and the

President’s Circle, Million Dollar Club and

Chairman’s Club of Sage North America. Growth,

leadership in the industry and development and

acceptance of important software products by

the resellers are all factors in the selection. There

is also an effort to represent as many software

publishers as possible. There is no ranking within

these 100 firms.

Firms were asked to provide the number

of employees and revenue. In cases in which

businesses did not provide revenue, it was

estimated based on the number of employees,

also taking into account the general price range

of the ERP applications that these firms handle.

In virtually every case, resellers derive

revenue from sources other than the sale of

mid-market financial applications. These include

infrastructure and networking services and a

variety of other software products. However, all

VARs considered feature accounting applications

as the core around which their businesses are

built.

Taylor Macdonald, Intacct

Jeff Roth, SWK Technologies

continued on page 10

Jon Roskill, Acumatica

10 | www.bobscottsinsights.com

BSI | 2015 VAR Stars

www.bobscottsinsights.com | 9

2015 VAR Stars | BSI

ket. Some major deals immediately preceded the official announcement of the last version of AX—sans the version number, it would have been AX 7—as Microsoft seeks to go upstream. And it showed that the market is splitting along the lines of large systems and SMB applica-tions. (The new AX product was hardly a secret. It was in the hands of many early users).

Late in October, Bangalore, India-based So-nata Systems, said it was purchasing Peachtree Corners, Ga.-based, I.B.I.S., now an AX-only VAR. About the same time, Ameri100, which has back-office operations in India, mounted a hostile bid for AX VAR Edgewater Technology.

One of the biggest events was the purchase of Junction Solutions by the accounting firm, RSM (until recently known as McGladrey), which also carries Intaact, NetSuite and Dynamics GP. It is a big chunk for RSM to bite off—Junction Solutions had $50 million in rev-enue and RSM had $175 million. But the firm says it instantly vaults RSM to the role of No. 1 AX reseller in the United Sates.

“This one really gives a huge uplift in capac-ity,” says Steve Ems, principal and national business applications leader. “It gives a huge entrée and credibility, consumer products food and beverage and retail side. And it also helps accelerate the life sciences practice that we are building.”

Ems comments reflect that the movement of the AX market is also about the participants’ development of their own products based

on Dynamics AX because product margin is becoming increasingly less important as a source of revenue and probably will vanish one day.

The market realignment is also shown in firms’ drop-ping products to concentrate on a single line. I.B.I.S. sold its long-time Great Plains practice to Socius to concen-trate on AX. Last year, P.C. Bennett divested its Micro-

soft business to specialize in Acumatica and Net@Work recently purchased the Sage 100 practice from CliftonLarsonAllen, leaving the accounting firm with its Intacct cloud business.

I.B.I.S. CEO Andy Vabulas says Microsoft had outlined a clear vision of the AX market that is now unfolding. “I have been working toward this for about five years,” he says. “I lis-tened to Microsoft way back when they talked about the future partners they wanted. I tried to do what they asked partners to do.”

That means not only do resellers need to have the intellectual property, they need to fit their businesses into a broader business frame-work. “You can’t just be another wholesaler. You have got to be a specialist,” says Vabulas. “It’s a managed services game.”

Sonata, he says, has world-class managed services and gives I.B.I.S. a global presence, while offering an important foothold for that company in the United States. And Vabulas adds one more reason why he chose Sonata over other suitors. It is because of “How nice the people are and how easy they are to work—that’s impor-tant to me.”

Not everyone wants to be acquired. Another AX VAR, Wheaton, Ill.-based Merit Solutions used a new approach to the market to triple its sales to $10 million annually over the last three years. “We changed the model,” says CEO Bill Burke. He describes the approach as “Driven out of the client outcome. We are paying less attention on the reseller side, and paying more attention to the services side. We shifted the culture and had a complete change of manage-ment team.”

The firm also emphasized service as it invested in its focus on the Life Sciences Industry. The company had served as an ISV with resellers handling its product. That was a difficult way to succeed, Burke says. Merit also now measures client satisfaction every quarter.

“We shifted away from letting people resell our products and took them direct and focused on service,” he says.

Merit built an AX Accelerator, a pre-defined, pre-configured system that focuses on business processes. “If you are a candidate for this, we have 141 business processes that we think fit most companies,” Burke says. The company placed those processes in flow charts and provides videos to enable prospects to decide if they are candidates for the approach. Those that are can reduce costs by 40 percent. Those that are not can take advantage of BPM busi-ness transformation services offered by Merit.

Burke is aware of the companies seeking to purchase AX resellers. “We get those calls all the time. We are not in a hurry to do that,” Burke says. Whether or not Merit should acquire other resellers, Bourke notes that buying another busi-ness is not something to be done lightly.

“The challenge with these services compa-nies is they are very hard to combine because of people and culture,” he says.

RealigningPC Bennett owner Patricia Bennett points

to the factors that propelled her towards the de-cision to exit the Dynamics market. The main one is the difficulty that smaller VARs have in dealing with Microsoft with its emphasis on Dynamics AX.

“They got rid of everybody, except people who work at AX,” she says and that included a focus on the larger AX dealers. Otherwise, smaller fry were left scrambling for information and help

via email and toll-free telephone numbers.For the North Bend, Ore-.based company,

this represents a major shift in business. With the sale of the Dynamics business, PC Bennett went from having more than 100 customers to 18. “We are rebuilding the business. But it is very exciting,” Bennett says. “Truthfully, it’s a lot nicer.”

The move to the cloud provides challenges for everyone. Earlier this year, Intuit decided to recognize all revenue ratably and that included the income from its desktop tax software products, ProSeries and Lacerte. That shoved $150 million out of Intuit’s third quarter ended April 30 into its future quarters. Moreover, the increasing use of subscription pricing for cloud and desktop products means that dealers can no longer rely on the chunks of money coming from license sales.

That was part of the explanation for a sharp drop in product revenue for the third quarter ended September 30 for Livingston, N.J.-based VAR SWK Technologies as reported by its pub-licly held parent, Silver Sun Technologies. SWK is selling both Acumatica and NetSuite and the transition had an impact on current revenue, says CEO Jeff Roth

“Our NetSuite and Acumatica Cloud ERP sales are strong and are coming in as subscrip-tion/SaaS deals where we don’t recognize all of the revenue up front,” Roth notes. He also says sealing deals for the Sage X-3 manufacturing package take longer and SWK has been working on several big deals that have yet to close.

The Quiet CompanyCompanies usually make noise about

acquisitions—whether they are buying another entity or are the one being purchased. That has never made sense to DSD’s Deane, whose firm recently took on Acumatica.

“There is no compelling business case that anybody has ever made to me about announcing acquisitions,” Deane says. He continues that only “if it were impor-tant to your customers, your market or prospects, would you aggressively want to announce it.” However, for the most part Deane thinks, “M&A strategies don’t mean a hill of beans to customers or prospects. What is important is are the products you are selling relevant and how good is your service?”

So Deane has quietly purchased eight other VARs since 2012.

His criteria sound different that what might be listed by other business people. He says the strategy is binary—he rates companies as a “1” or “0” on various factors and the most impor-tant are ethics and culture.

While other companies see growth as one mea-

Andy Vabulas, I.B.I.S.

Craig West, NetSuite

Alex Solomon, Net@Work

continued from page 9

sure of success, Deane has a different measure. “I have never done it to be the largest anything,” he says. “I’d like to be the best or the happiest.”

Two other resellers are actively picking up other Sage VARs, but doing it much more pub-licly than DSD. Those are SWK and New York City-based Net@Work.

SWK started out the year buying Accounting Technol-ogy Resources of Santa Ana, Calif., which it said would add about $1.5 million in revenue. It picked up ProductiveTech, a managed services provider based in Westfield, N.J., in May, portending about $1.7 million in annual revenue for the purchaser. In September, SWK said it was picking up Oates & Co., based in Greens-

boro, N.C., and The Macabe Associates, based in Seattle, Wash., expected to add about $2.4 million and $1 million in revenue respectively.

Net@Work, meanwhile, utilized its Alliance partner program to “date” other resellers before considering a marriage. It acquired St. Louis, Mo.-based Axis Integrated Solutions in May. It also purchased the CliftonLarsonAllen Sage reselling practice in November.

There 61 members of the alliance “and that is growing nicely,” says co-president Solomon. He notes his company’s M&A strategy goes beyond midmarket financial software .”Each of our business units has its own acquisition strategy we have been building momentum on those.”

There are 11 business units, each with its own leadership and business strategy. “We built a support team that supports each of those business units,” Solomon says.

Those units include its growing HRMS busi-ness, in which Solomon says Net@Work has es-tablished itself as a leader and becoming larger than the long-time leaders. “We surpassed the Delphias and the Dressers,” he said.

The indicator of that progress was that Net@Work was honored by Sage for the HRMS Top New License Sales and it was a winner elsewhere. It was also cited for X3 Top New Customer Additions, and Sage Payment Solu-tions Top New Customer Cross Sell.

Solomon also says that NetSuite is gaining traction for the company. “NetSuite is a godsend for us. We love it,” he says. It gives Net@Work a product to offer to prospects looking for cloud products and for those willing to look at both on-premise and cloud systems. Solomon said the company hired “an incredible practice director” and is staffing up for the product.

Pointing the wayOne indicator of the growing acceptance

of cloud computing is the size of the channel members it has been able to attract, says Craig West, VP of channel sales for NetSuite. “In the last year, you’ve seen an increase in the size of the organizations carrying cloud products,” says West.

The big wins for NetSuite this year were Tribridge, No. 2 on Bob Scott’s Top 100 VAR list with $130 million in revenue and Socius, No. 21 with $24 million. Late in December 2014, Net@Work, No. 11 on the chart with $38.5 million sales joined the NetSuite team.

Movement among the larger resellers will spur interest among smaller ones, West contends. “These folks are bellwethers in our community,” he says. “The smaller folks in our community see that and follow.”

NetSuite continues to seek VARs, but now focuses more on special-ists than on filling in the map with generalists. At SuiteWorld, the company launched its Vertical Velocity program, a set of tools that enable dealers to build applica-tions on top of NetSuite. “What we are getting focused on going forward is forward is verticals and micro-verticals,” West says.

Acumatica also emphasizes the importance of resellers moving into specialized areas. “I encourage every VAR I talk to think about ‘What is their differentiation?’” CEO Roskill says. While those marketing core accounting products often find themselves with crowd of competitors for deals, “in oil field service, you could the only person to talk to about that.”

Intacct’s channel VP Taylor Macdonald says there is a growing trend for those sell-ing on-premise systems to divest those op-erations and move to the cloud and says the value of the traditional VAR operations has dropped. He notes the experience of Lindy Antonelli, now a partner at Armanino, who sold her Dynamics GP practice in 2011.

“How much less is it worth today than 2011?” Macdonald says. “It’s worth about half.” As practice values fall, vendors continue to pres-sure dealer profits, particularly Microsoft, which has been in a pattern of lowering the cost of its software.

Finally, the emotions surrounding a field in which there is lots of opportunity for new sales and working with a company such as Intacct that is of a size the channel can con-nect with decision makers is important to the growth of the channel.

“People are excited to be somewhere where there is some excitement,” Macdonald says.

Guide to Software Products Listed Here are the products listed in this chart by

vendor. When abbreviated, the abbreviations are

listed first and the fuller name is in parenthesis.

Abila: Abila MIP

AccountMate: AccountMate

Acumatica: Acumatica

Cyma Systems: Cyma

Deltek: Premier, Vision

Epicor: Epicor

FinancialForce.com: FinancialForce

Greentree ERP: Greentree

Infor: Distribution A+; SyteLine

Intacct: Intacct

Intuit: QBES (QuickBooks Enterprise Solutions)

Microsoft: Dynamics AX, Dynamics GP, Dynamics

NAV, Dynamics SL,

NetSuite: NetSuite

Open Systems: OSAS (Open Systems Accounting

Software), Traverse

SAP: B1 (Business One), ByD (Business ByDesign)

Financials OnDemand.

Sage North America: Business Works, Sage 50,

Sage 100, Sage 300, Sage 500, Sage 100 Contrac-

tor, Sage 300 CRE (Construction & Real Estate);

PFW; X3

Serenic: Serenic Navigator

Syspro: Syspro

Byran Wilton, InterDyn BMI

Steve Ems, RSM

continued from page 10

Doug Deane, DSD Business Solutions

Bob Scott has been informing and enter-taining the mid-market financial software community with his email newsletters for 16 years. And he has been covering this market through print publications for 24 years, first as technology editor of Accounting Today and then as the Editor of Accounting Technology from 1997 through 2009. He has covered the traditional tax and accounting profession dur-ing the same time and continues to address that as Executive Editor of The Progressive Accountant.

12 | www.bobscottsinsights.com

BSI | 2015 VAR Stars