This is not really a story about Blytheco (several other VARS have also picked up SugarCRM).

Rather this is about the future of the Sage Connected Service revenues and how Sage may in their short term thinking about channel policies (drastically increasing costs for many partners) be creating long term revenue problems.

Think about this scenario.

a. Sage has said that for the next few years Connected Services ARE their primary Sage 100 ERP (formerly Sage ERP MAS 90 and 200) roadmap. If you look on the MAS roadmaps you’re seeing mostly integrations (Connected Services) or improvements to allow integrations – versus significant feature upgrades.

Connected Services are integrations between Sage’s products and third party solutions.

Sage makes money (presumably) from agreements with “official” Connected Services that are provided through the channel. The revenue may be a percent of annual renewal or perhaps for more transaction heavy integration Sage could earn a stronger per transaction recurring revenue stream (think payments, EDI , sales tax).

Sage presumably makes no money from Connected Services (aka integrations) that are NOT provided officially through Sage but rather are picked up independently (as SugarCRM is and others will be) by partners.

b. When the Connected Service is offered outside the official Sage ‘approved’ list — Sage earns nothing…

c. In the near future some important Connected Services are going to become more prominent. I’m thinking primarily of the PC Charge integration to MAS which Sage have announced they are pulling in v5.0 of MAS.

If you haven’t heard – PC Charge integration is planned to go away in v5 of Sage 100 ERP (MAS90/200). This will be replaced by Sage Exchange which will only integrate to (wait for it)(wait for it) — Sage Payments….

Which will potentially create a huge problem — customers on PC Charge may be forced to change to Sage Payments which could be problematic if the customer can’t get approved for SPS.

It can’t be too long before third party solutions will be offered for credit card processing through MAS.

How will this impact Sage’s revenue projections if suddenly it’s not a relatively low profit third party SugarCRM integration that partners are independently offering but a more lucrative (by Sage’s own repeated discussions) third party payments integration?

I’m sure Sage is thinking about this – and the main solution to this seems to be to somehow close down direct integrations to MAS without obtaining some type of license from Sage.

If Sage doesn’t have a way to limit who can integrate to their product – then there’s potential that their Connected Service strategy cold unravel as partners follow the lead of Blytheco and others by taking on unofficial third party solutions and integrating them to Sage.

Blytheco and SugarCRM Join Forces to Meet Growing CRM Market Demand for Flexible, Affordable Solutions

Recently I’m noticing more top tier Sage VARS advertising SugarCRM – most recently Blytheco (Sage’s North America Partner Of The Year) , then Faye Business Solutions Group and Brainsell.

Faye and Brainsell are listed on SugarCRM’s partner site. Blytheco is not so it’s possible they’re just running a series of educational sessions though it’s difficult to believe they’re adverting a competitor for what’s supposed to be one of Sage’s bread and butter markets (CRM).

These are not lifestyle mom and poppers – but some of Sage’s up and coming VARS. In Blytheco’s case they’re “top of the food chain” and in early January hired a former Sage CRM Exec as VP Sales.

Either Blytheco’s new VP of Sales designed this as a “middle finger” salute to former employer Sage , or , as “smart money” (a former Sage insider with deep product knowledge) he knows something the rest of the channel may not.

Of course it’s also very possible that adding a third open sourced CRM package is just smart business and none of the above theories are valid.

Does this new fondness for an outside CRM solution imply Sage’s channel is destructing?

Probably not. But once you open the door a little to a competing product line – it can be difficult to shut.

And to be sure Sage’s recent changes to certifications, support and business care have provided lots of incentive for formerly loyal Sage VARS of all shapes and sizes to sit up and start making backup plans.

So why are top flight Sage VARS seeming to  take flight to third party CRM packages when Sage offers 3 of their own (Act!, SageCRM and SalesLogix)?

SugarCRM Demo Request

I’ve been testing Nimble Social  CRM – http://www.nimble.com .

According to Wikipedia Social CRM is “

use of social media services, techniques and technology to enable organisations to engage with their customers. As an emerging discipline, interpretations of Social CRM vary, but the most frequently quoted definition is from Paul Greenberg[1]:

Social CRM is a philosophy and a business strategy, supported by a technology platform, business rules, workflow, processes and social characteristics, designed to engage the customer in a collaborative conversation in order to provide mutually beneficial value in a trusted and transparent business environment. It’s the company’s response to the customer’s ownership of the conversation.

Social CRM is often used as a synonym for Social Media Monitoring, where organisations watch services like Facebook, Twitter and LinkedIn for relevant mentions of their product and brand and react accordingly. However, this is too narrow an interpretation, as Social CRM also includes customer communities managed by the organisation themselves.

I spotted Nimble in an online post about their new service. The ability to have an online system automatically seek out social media profiles for your contacts is intriguing. So I set an account up for testing.

Setup of Nimble is very simple. You input your social accounts. I entered Facebook, LinkedIn, Twitter and Google+.

Then you connect your email – in my case Gmail. As email is received the system makes an attempt to match the sender with your contact list – or if they are not on a contact list the system appears to match them to social media profiles — as described on the Nimble web site:

..identify contact’s social profiles on Facebook, LinkedIn, and Twitter so that you and your team can easily connect, listen, and engage with your most important business associates.

Essentially Social CRM is supposed to save you from having to search and find social media activity and profiles of your contacts. Nimble’s web site claims they’ll automatically find and identify social accounts so that you can gather information from all the various online activities your contacts participate in.

Except in my testing — with an email received from my Mom (who has a Facebook and Google+ account)  – the Nimble Social CRM engine was 0 for 4. It appears to have taken what looks like a wild assed guess at my Mom’s Social Media accounts based largely on her name.

Now I understand that these types of matches likely have to be made based upon a common email address or some other link. It’s highly likely that my Mom is using a personal email (which was in the Nimble system already) for social media accounts and not the same email (our company) which she used to send me my sample email.

But isn’t a personal (not business) email  how most users setup social media accounts?

How many users take their company address and use it to create Facebook, Twitter or Google+? I’d even recommend that most people not use their company email to create their LinkedIN account.

I’d bet that with more information about my Mom – such as her personal email account – Nimble might have provided me with more accurate information about her social activities. Doesn’t that in some way diminish the purpose of a Social CRM system whose goal seems to be to gather this information magically and without additional user input.

And in this case that does not seem to have occurred and instead of returning a “we couldn’t find anything” the result I’m given is misleading.

What would occur in business if I wasn’t aware that all four of the profiles below were not the Pat Murray that I knew and loved?

Are You My Mom?

According to Nimble my Mom is on Facebook – and she’s grown a mustache:

The profile that Nimble suggests is my Mom on Google+ shows that she’s lost her hair, moved to Michigan and grown a beard:

To find my Mom on LinkedIn Nimble traveled all the way to Ireland where they think my Mom has donned a business suite and tie and opened a tax and accounting business:

On Twitter Nimble suggests I follow my mom’s “dumb drunken thought’s here:

The common thread of all these suggested profiles – are that they’re completely wrong.

None are even in:

• The same state
• The same sex
• The same age range

What value does Social CRM bring to the table if at best it seems to  rely upon wild guesses based on a name lookup?

Nimble is one example of Social CRM. In the past I’ve used other add-ins such as Rapportive for Gmail that claimed to integrate various social accounts of my contacts and  in past testing (about a year ago) returned similar uneven results.

Social CRM = great concept but my testing shows it need less sizzle – more steak.

According to the website –  benefits offered include great rewards such as: CPE Credits, Client Discount and Referral Program, Badge, Listing in “Find a Certified Bean Counter”.

I use Freshbooks for my billing. I love it and recommend it to anyone who is seeking a simple online invoicing program which allows for online estimating/quoting (with customer approval) and invoicing. Using electronic delivery of Freshbooks invoices I estimate we save anywhere from $50 to $100 per month in postage. That’s not bad considering the entire fee we pay to use Freshbooks is about $ 300 per year.

My question is not about Freshbooks – I’m using them as an example of a publisher which appears to be just starting a channel effort. To point out how channel and certification programs offered by software publishers can go from well intentioned to cannibalistic as market growth for products slows.

Is certification for any product the first step software publishers take in a long road aimed at locking in consultants to one particular solution or publisher, imposing tough impossible to avoid future fee increases and ultimately ignoring the consultant(s) and selling direct to the customer(s) the consultant brought to the relationship.

Increasingly my feeling is that this is the case.

It never starts out that way. When demand is growing for products and services everyone is happy – publisher and consultant.

As soon as demand slows some publishers starts to look a bit like cannibals – staring intently at their partners not as partners but as a desperately needed source of revenue. Soon there’s a steady increase in the  paid “classes” the consultant must take, the level of product that must be sold and ultimately when nothing else is left to take — a reduction in the margin paid to the consultant for product previously sold.

I see this pattern happening over and over and over.

While I don’t have a solution for this trend – here are four specific strategies that have helped me avoid being eaten by software publishers:

• Go Local - No matter how hard they try big software publishers have enormous difficulty making money when forced to service customers locally.  You’re local. They’re not. Need any more info? Get your ass on site.
• Secret Sauce – If all you’re doing is providing help desk level service – you have created a perfect commodity business where the software publisher will replace you. It’s only a matter of time.  Add value to your customers by creating unique reporting tools, data imports, integrations or code that greatly increases the value of their software – and your services. These are nearly impossible for a publisher to replace – at least if done properly. Yes it’s tougher to do – but isn’t that why they call it work?

Poster via: Despair

• Mirror (Some) Publisher  Policies- When the publisher requires a customer to be on a maintenance plan or refuses to service them – create your own local plan and require customers to join or refuse to continue servicing them. Most publishers aren’t (too) dumb – just greedy. Learn from their strategy. Mirror them. There’s no business model to becoming an unpaid evangelist or working as the unpaid complaint department for an ever shrinking commission on someone else’s maintenance fee. Yes some customers will leave. Let them go bankrupt your  dumb competitor who still bills hourly in 1 minute increments and doesn’t charge for quick questions.
• Hustle Faster – If your “secret sauce” is thin –  don’t despair – you can beat publishers by responding faster and being more complete in your replies to customer inquiries. Collaborate with other (smarter)  partners you know and trust. Customers pay for speed. Customers pay a premium for speed and quality. Give them your cell number, personal email – and don’t worry 99% never use it but they’ll have an increased measure of comfort knowing that they could call you in an emergency. Do you think software publishers are giving out cell phone numbers of their help desk staff? If the customer wants to text, Facebook Message, Google Chat, BBM  or Skype you – do it! Wake up – it’s 2012 not 1986 – hustle smarter.

As a Sage partner do you feel as if you’re taking a spanking with the new Business Care changes – which boost the lowest priced Sage ERP 100, 300, 500 maintenance plan by 3% and add 5 customer calls direct to Sage?

Are you thinking your days of selling support to customers are done and over – just because Sage is going to duplicate your offering and deliver a limited help desk experience?

One thing to remember. With these changes to the Sage 100, 300, 500 Business Care plans — customers will no longer have an pay-as-go support option with Sage.

Doesn’t this present a perfect opportunity to align your own agreement with Sage’s and require all customers to enroll in your agreement as a pre-condition to doing business with your firm?

• Sage (and almost any other top tier ERP publisher)  won’t provide services without enrollment in a plan
• Are you?  If so, why?

If you take the attitude that “we’re not going to gouge the customer like Sage seems to be doing” — then you should rethink exactly why Sage is doing this (Hint: It’s all about the recurring revenue and covering overhead) and consider how this concept may be applied at your firm.

Assuming that you don’t already have a mandatory agreement for your customers, why are you offering a pay as you go service which requires you to stay highly staffed, trained, certified and open to numerous opportunities to serve as the unpaid complaint department for any of your software integrations?

All of this has value. The cost should be spread across customers by enrolling them in an agreement of your own. If you’re NOT already doing this – don’t blame Sage.

In my opinion you should take this concept further and not perform upgrades, enhancements or other projects for any user not on your own agreement.

The biggest reason to do this for new customers is that first projects for users you did not sell the software to are very high risk because you’re learning where the land mines are laid. The landmines have often , in my experience, been laid by the company requesting the work – just to see if you can find them.

Or you could just piss and moan, hold your breath, hope that Sage reverses course.

When life gives lemons….

There seems to be a steady stream of news related to ERP vendor Epicor (Full disclosure – I work exclusively as an independent consultant with a competitive ERP product). The latest lawsuit from Major Brands claims that Epicor over-promised and under-delivered on a $1,000,000+ software and services ERP engagement.

According to the lawsuit the initial cost of $500,000 in software licenses and $ 670,000 in services (to be provided by Epicor directly because “there’s only one throat to choke”) not only ran past the initial go-live date of  ”mid 2011″ but also doubled in price and according to the suit Epicor eventually admitted the software they’d recommended was ” not suitable for Major Brands’ needs and that it would not perform as previously represented”.

By the time Major Brands filed suit Epicor was indicating that their net version, ICE 3.0, would fix everything – but not until it was available in mid 2012.

 During the testing, the V9 software was so ill-suited for Major Brands’ needs, no invoicing or shipments were able to occur.

Two questions

1. What type of due diligence happens before a company spends $1 million on a software project? In this case it would seem as if the most that was done was some type of free demo and followup — “the company gave Epicor a detailed accounting of its business processes and transaction volumes, according to the complaint. The company also allowed Epicor personnel to “visually observe all aspects of its order entry process [so] it would understand Major Brands’ needs and requirements and the processed involved.”
2. Is the software publisher really best suited to deliver implementation services in this mid-market space? Here, according to the suit, Epicor represented that they were the best resource because there would be only “one throat to choke” if things went wrong. Ultimately for Major Brands it may turn out that Epicor was most favorable not because of a throat chokehold but deep pockets when the system doesn’t activate as they claim.

In an environment where software publishers are desperate for new sources of revenue it’s tempting to think that taking on the role of implementer is an easy road to high margin profits. And in some cases where the implementations are cut and dry that may be true. Increasingly the bulk of implementations , such as Major Brands which was replacing a 20 year old system, have some type of quirk that requires more than a free demonstration and conference room meeting to uncover.

Current best practices include a paid conference room pilot – or at least rolling out the software in test phases prior to jumping in with both feet. Companies who have stayed on software for 20 years (though Year 2000 scares, upgrades to Windows) almost always have some type of special needs inherent in their old software which make a migration challenging. Most experienced VARs recognize this. It doesn’t sound like in this case Epicor did.

The message for software publishers – be careful what you wish for (one throat choke) – because you may get it.

You literally never ever see this. A large (huge) market leading software company recommending an existing customer to use another software package if their existing solution isn’t good enough.

But you say – oh this is just Intuit being charitable…. ha, yeah ok right…

The tech press all picked upon on this and have run with it – which apparently caused Intuit to pull the landing page — though there is still a copy of the Intuit and Intacct Co-Marketing in Google Cache

In a move that might surprise some of their business partners who haven’t been paying attention and noticed that Sage’s compensation for maintenance plan subscriptions is amongst the highest of any competitor, Sage is expected to announce today that all Sage 100, 300 and 500 customers will have access to 5 support cases as their plans renew beginning with those expiring on or after March 1, 2012.

Several partners have contacted me to confirm they’ve been informed that Sage will announce elimination of the Bronze plan for Sage 100, 300, 500 ERP (Formerly Sage ERP MAS90, 200, Accpac and 500) which previously allowed for only maintenance upgrades and no calls to Sage support. Instead of calling Sage support most customers  relied on their local Sage Business Partner for support..

Customers instead will now be enrolled in the Silver plan. Under the new plan,  effective for renewals on or after March 1, 2012,  for an annual fee of 21 % of product SLP (versus the  previous 18% that the Bronze plan had cost ) Sage ERP 100, 300 and 500 (no other product lines were impacted) customers will have access to direct Sage support.

Additionally, two tiers of Sage’s top partners – Diamond and Platinum will have tier margin on maintenance renewals reduced effective April 1, 2012.

Tom Miller, Sage’s VP of Channel Management, explained that customers on Sage support have shown higher net promoter scores and Sage’s reason for changing the support options was to create happier customers who stay with Sage, continue renewing maintenance, etc.

In addition certain changes were also implemented where Sage partners must actively participate in renewing customers who have fallen 90 days or more off plan or they lose any compensation for the reinstatement order.

When questioned about how Sage will monitor some of these changes such as channel conflict with Sage’s own renewal teams and  how to make sure partners and consultants don’t usurp customer cases without customer consent Sage indicated that they’re still working on the details.

The subscription margin reductions had been widely anticipated (I’d expected them as early as my December 2009 predictions post)  in recent months by some Sage partners. In Sage’s own earnings reports such as this 2010 summary of North America, Sage repeatedly talks about premium support sales as a goal.

In short, Sage partners surprised by these announcements should be paying closer attention to the surrounding environment (what other software companies pay for similar renewals) and even Sage’s own earnings releases which are often full of hints about their future direction.

I’ve spoken at length about how Sage Business Partners need to get local with their customers and develop their own special sauce to clearly differentiate and add value to their firm’s own services. Sage themselves over the last two corporate earnings calls have indicated that adding premium support subscribers was one of their top goals.

What remains to be seen is the level of impact that changes will have on customers.  Will customers subscribing to a partner support plan abandon that plan in favor of the modified Sage offering?

If Sage continuously advertises the availability of support cases then partners might see drop off of 10% or more from their lower end customer base who could switch to Sage support.

A long time Sage partner who has been offering  their own agreements for years  indicates that even before these changes  they’d been heavily promoting Sage Silver plans as as backup option for their customers and would continue to do so since it gives customers a great help desk resource for simple questions and the difference in price was immaterial for larger customers.

Partners can continue to offer similar support agreements though it’s probably best to start labeling them as other than support (one successful Sage VAR labels theirs as Knowledge Transfer Agreements) . Modify your agreements by shoring up existing plans to include local (note the use of this word loca) on-site upgrades as a component of  the agreement .

Following in the footsteps of Sage I recommend enrollment in your company’s own plan be a requirement for you to perform any work for a customer. If a customer balks at maintaining two plans there’s no reason you cannot have a separate fee schedule for customers off-plan.

Where I expect to see the biggest impact of these changes is with what we in the industry term “orphan” users which are companies who have left their prior VAR for any number of reasons and in turn search the Internet for a replacement. It’s difficult to tell what percent of this business might disappear but provided the user is active on a Sage maintenance plan they may chose to migrate directly to Sage for future support instead of another partner as they  may have done in the past before support cases were included in their plan.

It’s important to note that support cases will only be added as customers renew their plans starting on or after March 1, 2012. There is no change to a pre-existing plan until the renewal.

If you think this type of lead is worth pursuing on any level – time to close shop.

A company with no budget, an unreal time table and they want you to show their (paid) consultant all your tricks so the (paid) consultant can turn around and present it to management.

Actually I do hope that my competition chases these time wasters.

According to the brochure the PRO stands not for professional but for:

Profit
Resource
Opportunity

What’s interesting about this program is the terms of their PRO Partner Program (Profit, Resource & Opportunity) appear to create an easy environment for Sage partners to dodge the new certification requirements while still retaining a variable level of commission on both new product  and maintenance sales.

Other VARS have worked to consolidate smaller Sage partners though in most cases it appears that Sage have required the remote offices to toe the line with respect to continued certifications to ensure quality implementation and support.

In short my impression is that Sage have been discouraging the creation of buying pools or Master VARS which might be created for smaller VARS to combine their purchasing power and avoid any increasing tier or program requirements introduced by Sage.

Unusual in this program is the following detail (all publicly received via their website here) :

No Certifications Required

Save the cost and time it takes to remain certified. Did you know that by March 2012, multiple certifications will be required for a reseller to provide support?

No Membership Fees

HighTower pays your $ 500 SAA Member Program fee and provides a safe haven for your customers. HighTower also has less stringent participation requirements

According to the public literature any qualifying PRO Partner could receive 25% margin for selling Sage product and 10% for Sage maintenance – with no certification requirements.

It remains to be seen whether Hightower Inc is fashioning this for CPA firms only – or whether they are also looking to gather Sage Partners. A quick reading of their Hightower PRO Partner Program brochure does seem as if this is an alternate partner program for Sage partners who don’t want to invest in certification.

Will 2012 be the year of the Sage buying group / master VAR ?

Full Disclosure: Wayne Schulz is a Senior Consultant at Schulz Consulting and also works for DSD Business Systems in their Connecticut office where he pursues sales opportunities.  As with all blog posts contained here, the views expressed on this web site are his personal opinions and do not reflect the ideas, opinons or policies of any other entity.