Listen to my conversation with Ezequiel Steiner, CEO of Acumatica, which provides cloud-based ERP software.
In this podcast, find out how traditional solution providers are adapting to working with ERP delivered as-a-service and learn about the different contract options being offered to customers.
Listen to or download the 7:38 minute podcast below:
PW: Just to start off, Ezequiel, you offer your ERP software in the cloud. What are the pros and cons of that?
ES: Well, I think that given the market potential for cloud ERP today — I mean the forecast for growth — a vendor or a value-added reseller that does not offer a cloud ERP is passing on a huge opportunity. I think specifically for value-added resellers they just can’t. I mean, this is the growth area for the ERP market in the future. Also, they’re being asked by their customers about it. They know they need to add a cloud option to their portfolio — and they are. All of them will add it eventually.
Okay. So you’re offering your software through a partner channel of traditional value-added resellers, solution providers. These guys are not that experienced with SaaS. It’s a new business model for them. Do they have to do a lot — do you need to do a lot of re-education — to bring them up to speed?
That’s a great question. Actually, the most important assets we see in a value-added reseller are, its experience implementing ERP solutions, its knowledge of a particular vertical, and its knowledge of a local market. We actually thought about training a lot, and actually have a lot of material for training value-added resellers on the SaaS model. Actually, we don’t use it really that much. These are very smart guys and it comes very easy to them how to sell SaaS instead of traditional license.
Well, of course, one of the big shifts that they’ve had to make is to shift from a model where they basically get all their money upfront and there’s a lot of money that can be made from the technology implementation. That all goes away in the SaaS model. So does that — and, obviously, SaaS is very much a pay-as-you-go environment compared to the upfront payment — is that a big shift? Because it’s a big change, I guess, in business model and cash flow for them.
It is. It is really a significant change that they have adapted very well to. In general, it’s very important, when you’re talking about contracts and agreements with the customer, to have always the customer in mind and what really the customer is afraid of. And when the customer is moving into a SaaS solution, the customer is delegating to a third party activities that were done in-house — and where the customer had a set of carrots and sticks in order to make sure that those activities were achieving the company’s goals.
Now, when you move them to a third party, you need to address this loss-of-control feeling by the customer — by providing SLAs, set penalties for the vendor or the VAR in the contracts for failure of achieving those SLAs, and so on and so forth. And so that said, that’s a big change in the contract. Also, from the business model of the value-added reseller specifically, the move from license to pay-as-you-go model requires these value-added resellers to somehow find very creative ways to afford the sales of course that — the sales cost that is paid by them upfront — but they have. I mean they find financial ways or even by asking the customer to pay the full first year’s subscription upfront.
So typically, people are still paying upfront, rather than this concept that people have got — that people when they buy a SaaS solution are paying one month at a time, is a bit of a false impression. People are prepared to actually pay a longer period upfront are they?