Has NetSuite got the best channel environment for SaaS enterprise software?

NetSuite has had a successful channel since near inception.  It is well thought out and has developed significantly over recent times.   

From 2003-2008 Skyytek was involved in the NetSuite channel as a solution provider; selling subscriptions to customers.

Over the last six months we have looked at several SaaS ERP offerings with a view to selling subscriptions to compliment our SaaS enterprise consulting initiatives.  Products looked at were:

• Workday
• Intacct
• Acumatica
• Salesforce.com/FinancialForce
• Some lower-end newer solutions
• Some commercial open source ERP products that now offer subscription alternatives
• Many point solutions - for CRM or Finance

From a partnering perspective, most of the these were lacking at many levels.

This indicates that the channel models are still very immature for SaaS and that publishers are having a hard time coming up with coherent partner models that work for all parties. 

Not including ISVs, there are two partner models in play when it comes to SaaS:

• Agent model.  Whereby you are paid a recurring commission on subscription deals sold.
• Reseller model. Whereby you bill the customer and pay the publisher at a discount.

For SaaS, experience has shown us that the agency model  works the best for the following reasons:

• Discounts are shared - obviously making partners highly flexible and competitive
• Partners don't have to handle the complexities of the subscription billing process
• Deal conflicts with direct sales teams can be carefully orchestrated
• Creative and parallel partner incentives can be easily created by the publisher. e.g. NetSuite's SP100 program

But wait a minute!  As a traditional reseller, I'd like to take down the deal on my paper to have control over the deal?

Well, unlike traditional software that involves up-front license fees and a more geo-centric focus;  SaaS publishers provide a service for customers to access their software from anywhere, on a continual basis.  Because of this, an agency or a reseller model is immaterial in SaaS.  The only difference is the payment process.

No matter which way you look at it, clients are "joint" customers in that the publisher is providing the software service and the partner is providing discretionary services such as management consulting, implementation, training et. al.  This has the effect of changing the dynamics and DNA of a traditional reseller.  

So why are most of these SaaS channels deficient?

In short:

Margins.  Some commercial open source publishers offer a "whopping" 15% margin on a low priced product.  This is hardly a value proposition when a partner (to grow and sustain) needs to build direct sales teams. 

Exclusivity.  Some programs demand that you only sell their product.  This is normally a result of having a deficient product value proposition and/or the publisher is scared to death they will lose deals to a competitor.  Exclusivity should be a choice - not a demand.

No infrastructure.  As with anything channel, publishers need an infrastructure in place.  This includes, but is not limited to:  partner portals, recruitment, on-boarding, enablement, lead registration, lead protection (both call in and web leads) and dedicated channel managers supporting the partners.

No policies in place.  We asked many publishers to show us their channel guidelines (for deal execution) and their rules of engagement (for conflicts).  Unfortunately, we received the "blank stare" response one too many times.  These policies are too important to be hidden, missing, or not followed.  

Product pricing.  Lets face it - if your product is "cheap", most experienced partners won't take it seriously and even if they do, it is not sustainable. 

Crappy product.  No hope with that one.

No channel model.  Outside of an ISV program, it's surprising how many publishers don't have a partner channel in place for selling subscription.  Hopefully, they will wake up soon.

Fake SaaS.  Fact is, traditional publishers are "faking" SaaS enterprise solutions because the market is driving SaaS and these traditional software players really have no choice.  A classic case of "smoke and mirrors" to try to get the last breath out of an ailing product line.  You can tell who they are:  the product will look dated, they offer multiple deployment options and let you upgrade when you like.  Who wants to be bothered with all of that? 

So back to the question:

Has NetSuite got the best channel environment for SaaS enterprise software?

Without a question, it is one of the best we have seen.

Here is why:

More mature channel.

NetSuite set up their initial channel with a lot of thought on infrastructure.  It is an agent type channel and was created at a time when SaaS was completely unknown (2001/2002).  This foundation has stood the test of time (over ten years).

The NetSuite product is high value for a partner and a customer.

The product is aimed at larger small businesses, mid-market and the large enterprise.  These are higher ticket sales with higher ticket benefits to customers.  This creates a large opportunity pool for discretional services.  NetSuite is a very horizontal solution (with a deep vertical focus) and it really does automate most processes in a business.  This is a factor Skyytek has always focused on and our customers do too.

NetSuite has adapted (more recently) to the needs of partners.

This shows maturity built on a strong foundation.  Creative (and more recent) programs such as the NetSuite SP100 program (whereby 100% of license revenue in year one is paid) is a very compelling offering that has not been matched by any competing channel.  It is pure genius in our opinion and for anyone that understands subscription and the billing model - it makes sense for new partners (coming from a traditional model) and the publisher alike.

Clear channel guidelines and rules of engagement.

This gets all partners (and direct teams) on the same page and everyone knows the rules and processes.  NetSuite did a good job on that front and has hopefully fine tuned it to the benefit of enabling customer choice.

Very competitive commission margins.

NetSuite has competitive margins in new sales, upsells and recurring. It also has one of the best programs on the market enabling partners to become profitable quickly and still have reserves to build a sales team that can drive new business year over year. 

Partner portals.

NetSuite partner portals, deal registration and marketing/sales collateral are very well thought out when compared with other channels.  This is something overlooked by a lot of publishers.  If a partner has to dedicate extra resources and time because of a clumsy or nonexistent admin process - they're not selling the product.  

Visibility.

NetSuite partners have visibility to booked deals, commissions schedules and payments.  This promotes a high-level of trust.

So if any prospective partner is looking at adopting a SaaS enterprise solution, NetSuite should be one of your first port of calls.

Disclaimer: Skyytek is not affiliated with NetSuite and does not sell NetSuite subscription licenses

Comments

[ERP Sales]

When we looked a NetSuite they had a direct sales force that competed with their channel - is that still true - do you know ?

[Ray Tetlow]

Yes they do have a direct sales force. Understandable. But at the same token they have channel rules of engagement policies which is good - unlike a lot of other channels. With regards to what these contain, I would ask Netsuite directly since they have more than likely been fine tuned and/or improved over the years. The main point being though is that they have clear guidelines on this.