The following is a blog post written by Terry Petrzelka, founder and past CEO of Tectura Corporation.
Today, Microsoft announced the technology preview of Project Madeira, a true, on-demand SaaS business solution incorporating Office 365 and comprehensive ERP capabilities based on the Dynamics NAV platform. This announcement, coupled with the launch of NAV Managed Services for Partners and the inclusion of Dynamics into the Cloud Solution Provider (CSP) program, demonstrates that the Dynamics channel is at a major crossroads. Additionally, it brings into clear view that the existing Dynamics Channel Partner’s business model is on the path of extinction. Yes, we are not in Kansas anymore Toto…
Let me begin by stating that these offerings respond to market forces and, although one might perceive a negative impact to the channel, they really, if taken seriously, provide an opportunity for the channel to secure its relevance in today’s and tomorrow’s world. The SaaS competitors – NetSuite, Salesforce, Intacct, SAP, etc. are strong competitors as we all too well know. The key & essential differentiator is Microsoft’s commitment to selling exclusively through partners.
With the above in mind, there are significant challenges impending for the Dynamics VARs as these new solution platforms alter the way Dynamics VARs go to market, how they sell, and how they support their clients. For example, moving from perpetual to recurring revenue can have a significant impact on the VAR’s cash flow, compensation models, etc. It most definitely will impact the channel partner’s business valuation.
The New Paradigm:
A major digital presence is required in order to find more and more prospects in today’s world. The new SaaS model extends that to require a digital marketplace where SaaS buyers can manage their subscriptions, browse content and initiate transactions. These online assets can require significant investment in time and money for most VARs.
With efficiency a key driver in the SaaS buying cycle, the need to develop new compensation models for salespeople is also critical. There is no large up-front purchase to fund commissions and margins can be lower as well. On the delivery side, traditional, commodity-level services (installation, basic configuration) will no longer produce revenue and must be replaced with value-added services or add-on solutions. New competencies and products must be added to the partner’s skill set. Most of all, vertical or functional specialization and domain expertise is required to differentiate and add value.
Finally, the finances need to be reworked and back office systems reconfigured to adapt to a recurring revenue model which can produce great variation in monthly invoices as users are scaled up and down on demand. On top of all of this, is the need to understand the licensing and revenue models, payment procedures, and the requirements and responsibilities of the new CSP and Managed Service programs, along with the coming Project Madeira program (which is expected later this year).
These are major changes that will require significant investments in time, money, and resources, not to mention the massive emotional effort that is needed to effect this kind of transformation in a company. Dynamics VARs will have to make clear choices about how they will transition their business.
One available option, which I think is more relevant than ever for Dynamics VARs, is Microsoft’s Master VAR program. At least one Master VAR, SBS Group, has been working for the past several years on its cloud transition. SBS Group’s nearly 100 VARs now have a full complement of cloud solutions, a digital marketplace, recurring billing systems, and help desk to support a cloud first business model. As a 1-Tier CSP, they also give partners the ability to improve their cloud margins. They have been taking the lead in NAV Managed Services as well to drive vertical solutions requiring little to no investment by their Partners. As a member of the SBS Group Partner Network, all of these are available on Day 1 of joining – there for the Dynamics Channel Partner to leverage.
With Project Madeira and the CSP program, there are a lot of factors for Dynamics VARs to consider. The good news is there is more than one way to transition to this exciting new world of opportunity, and SBS Group can get you there today.
If you would like to learn more, I am offering a complimentary half-hour consulting session to hear about your challenges and share some of the insights I’ve learned from talking to, and working with, scores of partners. Click here to learn more and contact us to set up a time to talk. You’ve got nothing to lose and everything to gain. I hope to hear from you soon.