Three Myths Separate VARs from Cloud Opportunities

Since the NetSuite Solution Provider Partner Program began over ten years ago, we've noticed the same few misconceptions are frequently raised when we talk to VARs about cloud computing. We’ve regularly debunked these myths when speaking to new solution provider partners. But not everyone has reaped the benefits of these conversations. Here are the three most common myths separating VARs from a lucrative future in the cloud.

Myth #1: You can't make money selling Cloud based solutions

It's true that Cloud solutions are convenient and affordable for small to mid-size businesses. However, larger firms and multinational organizations have also shown tremendous demand for NetSuite’s Cloud based business management solutions now that they understand the security, availability, and upgrade advantages of the Cloud. This up-market demand means there are no limits on deal size for NetSuite solution providers.

Among the more than 12,000 companies that use NetSuite are Prudential, Olympus, Weyerhaeuser, Xerox, Isuzu, Johnson & Johnson, Smithsonian, Nationwide, Temple University, to name a few.

Even more important, NetSuite delivers industry-leading margins to our solution providers.

From a licensing and maintenance revenue perspective, within 18 to 24 months you’re poised to earn greater recurring revenue, over a long period of time, with Cloud solutions than with on-premise software. And there is no waiting. In our program, when we get paid, you get paid—and we collect license fees one year in advance, at bare minimum.

Beyond the software license aspects, some VARs believe the Cloud will kill their services business. This simply isn't the case. Customization, training, integration, data conversion and overall change management will still be part of your offering, and we see typical services attach rates between 1.5 and 3x the first-year license cost. There is plenty of money to be made in both license and service sales by VARs promoting Cloud based business management solutions from NetSuite.

Myth #2: All Clouds are created equal

Some people lost big time during the application service provider (ASP) era of the late 1990s. NetSuite learned from watching those mistakes and built a true multi-tenant infrastructure, with a uniform infrastructure, a single code base and the freedom to optimize our solution on an ongoing basis.

Unfortunately, other vendors have polluted the cloud discussion by dredging up the debunked hosted ASP approach of the past. These systems are costly to build, unreliable to operate, and inherently difficult to maintain—a poor value for both customers and VARs. Don’t be fooled by vendors telling you they have Cloud solutions you can sell, when it’s really their on-premise applications hosted in a public data center, delivered via thin-clients in a single-tenant model.  That’s not cloud, today’s savvy ERP buyers know better, and won’t settle for that. 

Myth #3: You need to reinvent your entire business because of deferred vs. upfront revenue

Cloud solutions do have a different payment flow than the licensing and revenue models for on-premise software, because channel partners do not receive top-line revenue for the upfront, perpetual software sale. However, with NetSuite’s Cloud ERP sales our solution providers earn industry-leading margins on both new business transactions and renewals, rivaling the margins of perpetual license.  Generally, by the 24 month mark, NetSuite subscription-based revenue sharing offers greater revenue than a similar on-premise software deal. Instead of collecting a small percentage of on-premise maintenance payments in later years, VARs continue to collect full margin on the ongoing cloud license fees.

Even in a "minimum"-sized deal, the three-year VAR revenue for NetSuite exceeds that of an on-premise competitor by more than 50%, and provides smoother, more predictable income. For VARs which absolutely need a big bang in Year One, NetSuite developed the SP100 program, which provides 100% margin in the first year in exchange for reduced rates in subsequent years.

Still not convinced that it's time to put these misconceptions behind you? Talk to your peers who are already succeeding and thriving in the Cloud with NetSuite.

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