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.
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
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
Still not convinced that it's time to put these misconceptions
behind you? Our Three Myths white paper
delves into greater detail. Better yet, talk to your peers who are already
succeeding and thriving in the Cloud with NetSuite.
Posted on Wed, August 29, 2012
by NetSuite filed under