Netsuite offers channel 100 per cent margins

In what is an unprecedented move by Netsuite, (NYSE: N) the cloud computing business management software vendor, has launched a new program that will offer new and existing partners 100 per cent margins.

Called the NetSuite SP100, the program will include technical training, marketing support and 100 per cent margin off of first year licenses subscriptions on new customer contracts. Channel partners must sign these customers to a minimum 24 month commitment. This offer does expire in 12 month’s time.“We feel strongly that 2010 is the year where on-premise VARs from Microsoft and Sage and the like stop waiting for Microsoft and Sage cloud solutions. They are tired of losing deals to cloud solutions,” said Craig West, Netsuite channel chief.

West cited a recent <a href="" target="_Gartner Research study that found that customers are five times more often to look for a cloud solution over an on-premise one.

He added that Netsuite wanted to be aggressive with this program to help push solution providers into cloud services by helping them recoup costs faster. These SP100 deals will pay out 10 per cent of margin on all renewals.

For Netsuite the business strategy behind SP100 is to grow the company’s influence with the channel. “We are pioneers in the channel with cloud and our programs have been great for them since 2002 paying partners 50 per cent margins on first year deals and then 30 per cent after that in renewals. Vendors in this space are creating are saying that cloud needs investment and that it breaks the VAR business model. We are saying it is not and we will give you a lot of licenses revenue up front,” West said.

He also believes that SP100 will increase NetSuite’s partner ecosystem, but that they are not looking to have thousands of partner spread everywhere.

Paul Doucet, president EnabledSuccess Inc. of Ottawa, welcomes the SP100 program saying it makes sense to legacy VARs who have build their business on one-time commissions.

“This might be the incentive they need to venture into the could. Without this type of program, it would be hard for legacy system VARs to get into the cloud. As for cloud VARs who have build their businesses on the cloud pricing model of recurring revenues, changing to the new program might not make as much sense,” Doucet said.

However, Doucet added that if the SP100 program makes more people understand the cloud, even larger VARs, that it can remove consumer doubt and fear around cloud services and start to support it.

For EnabledSuccess, a Netsuite partner, they will not be using the SP100 program because they wish to place clients in three-year deals or longer. Doucet said on rare occasions he can opt into SP100 when a customer is only looking for a one or two year deal or only has funding for an interim arrangement.

The SP100 program comes on the heels of SAP lowering its prices in an attempt to build its channel partner network.

West said that in no way is the SP100 program in response to that.Doucet agreed saying Netsuite and SAP customers are “a different kettle of fish”.

Joel Martin, principal analyst, of Business Software Strategies of Toronto also does not see any correlation. But, Martin said Netsuite continues to struggle with customer churn. “Financial Force and Intuit are putting more pressure on them as they try to boost customer counts for the current financial quarter. They are also attempting to lock people in for two years rather than the typical SAAS model of buy what you need for as long as you need. Honestly, it sounds like Netsuite is moving towards traditional ERP licensing versus being true to the cloud ecosystem,” Martin said of the SP100 program.

West countered by saying the demand is there and mid-market VARs are slow to embrace the cloud. “We want to clearly say we are the gold standard from a products and partnership standpoint for the cloud and we feel they will partner with us because this program makes sense for them. We want to knock down barriers for folks who are sitting on the fence with cloud,” West said.

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Jim Love, Chief Content Officer, IT World Canada
Paolo Del Nibletto
Paolo Del Nibletto
Editor of Computer Dealer News, covering Canada's IT channel community.

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