Yesterday Exact announced its full year results for 2011. Departing Exact CEO Max Timmer said: ”I am happy, but not satisfied”. Especially the results for the Benelux region have been disappointing, with a 13% decline in license revenues.
Exact explains that there are several reasons for the disappointing growth (or rather, unexpected decline). Increased customer cautiousness, increased price competition, but above all, Exact blames the decrease in license sales to a disappointing performance of the Dutch channel.
Does this come as a surprise? Not really, anyone can do the math.
Exact Online now has 72.000 administrations on board (Benelux). Exact Online revenues increased 46% to € 11.6 million (from € 7.9 million at year end 2010). Overall Benelux license revenue declined by 13.1% to € 15.0 million (FY 2010: € 17.3 million). This means that Exact Online now counts for 77% of the Benelux license revenues, compared to 45% in FY 2010. Exact Online is sold mostly direct, meaning that Exact’s partner base sees its slice of the cake diminishing by the minute.
Exact Online is a direct play for Exact, though supported by accountants as influencers. The traditional IT reseller does not play a role here. Exact’s high-end product offering (Globe and Synergy) is a dual play, covered by both Exact and partners. This actually implies that partners have access to only a fourth of Exact license revenues.
Add to that, most of the recent buzz is around Exact Online. Exact places great emphasis on migrating existing customers to Exact Online, R&D is heavily focused on Exact Online and recent marketing changes have not worked out for the partner base. So not surprisingly, a dissatisfied channel is the result.
Though Exact is addressing the problems by reestablishing their lead generation system, and joint marketing initiatives with their partners, this will not cut it. Exact is one of the many (AFAS is another example of an ERP vendor who saw its license revenue fall in 2011 – though less drastic than Exact) traditional ERP vendors who will run into channel conflicts when offering SaaS direct. Traditional channel partners who’s main activity is to resell, with limited service capability around this, are not aboard the Exact SaaS boat.
So, what are the options? Should Exact increase the pie and let its channel partners share in the license revenue of Exact Online? Or should Exact make some tough calls and terminate a part of its existing partner base who are focused exclusively on license sales? METISfiles believes that Exact should offer transformation routes to partners originally focused on license sales to add services for the SaaS offering. This does require investments from both vendor and partner, and still only applies for a selection of partners who actually are willing and have the capacity to go down this route. In addition Exact should consider the following actions – as should any other ERP vendor offering a SaaS solution direct:
Establish clear rules of engagement. If a software vendor decides to offer a SaaS solution direct, the vendor needs to set clear guidelines on who does what. Partners focused on license revenue should know in advance, what to expect. If these resellers cannot add any value to the SaaS offering, the logic consequence is a termination with these partners, and maintaining only high-end Exact Globe and Synergy partners.
Rationalize the number of partners they work with. A recent look at the site indicates that Exact has over 70 partners in the Benelux. Again, the math speaks for itself. No partner will run very hard for a potential 50k Euro.
Address the opportunity. Exact Online still offers plenty of service opportunity for Exact partners, if they are able to address this. Salesforce.com, a pure play SaaS vendor, still has a large number of loyal partners who make enough money not reselling licenses, but offering dedicated cloud services or system integration services. In addition Salesforce.com has its development platform, Exact also offers software integration possibilities.
Is this bad news? Not for Exact. Exact has a vibrant Online offering, and adoption is going above and beyond expectation. Exact’s close connection with the accountancy world only increases the chances for Exact Online adoption. The product integrates with Microsoft Office 365, is available as an app and add-on functionality is released regularly (Bookkeeping, Trade & Billing). This means they are making all the right moves for easy adoption & deployment of Exact Online. For the partners, the ones who are able to create service opportunity around cloud services, this is also good news.
Partners focused on reselling Exact licenses should look for other business opportunities.