For two decades Accpac International has served the small-to-medium-sized business delivering products through its channel of resellers, claiming a 30 per cent share of the market according to IDC. During its recent Partnership 2003 conference
held in Quebec City, Accpac CEO David Hood sat down to discuss what it’s like to have the big ERP players tapping on the SMB arena door and why partners are critical in sealing the deal and keeping customers happy.
CDN: How do you view the acquisitions currently taking place in the industry, specifically the deals involving PeopleSoft, J.D. Edwards and Oracle and their interest in the SMB pie?
David Hood: It’s very interesting but not terribly distracting in terms of where we are going in the SMB space. At the PeopleSoft level it’s more just noise and somewhat of a distraction. The big players are trying to come down into the SMB market — whether it’s SAP or PeopleSoft — and I don’t know that (Oracle CEO) Larry Ellison is going to be delivering more value to PeopleSoft shareholders than they are already getting from the folks that currently govern that organization.
I think that Larry recognizes, just as Microsoft did, that he is selling something today that is increasingly becoming a commodity. When that happens you have to find a way to differentiate and I think business applications is the primary way to differentiate. Certainly Oracle Financials was the way to do that on the enterprise side of the market and I think the PeopleSoft acquisition would give them additional ability to drive their database business and it might help them drive down to the mid-market. We don’t find it terribly distracting because those large enterprise companies don’t have what it takes to be successful in the SMB market.
CDN: What does it take?
GH: Arguably one of the most important things for success is an SMB channel. You just can’t reach the vast expanse that represents the opportunity in the SMB market. You just can’t get out there without partners, for a couple of reasons: it’s a huge number of companies to represent and it is a different mind behaviour than the enterprise; they buy differently and they need that local handholding at your doorstep service. While channel partners can make a very good business servicing them, in a direct model, if you’re forced to go out to them directly the economics don’t make a heck of a lot of sense.
CDN: What companies do you view as your main competitors at this point?
GH: If you look at Sage, they are always on the acquisition trail and Microsoft — that becomes a little more than interesting for us. At some point (Microsoft) is going to have to figure it out or stop. Microsoft is coming from a somewhat tainted position because they think they know the SMB market and in some respects you have to admit they absolutely do. If you’re talking about selling databases or operating systems or office productivity solutions I think they do know the SMB market. I think they designed products that, with the help of the channel, have made them very accessible, whether two-tier or retail channel. But selling accounting software or selling CRM software — we’re not talking about word processing or spreadsheets. It’s a different proposition; it requires an increased duty of care and duty of loyalty to the SMB customer that you have to be able to provide for.
CDN: When Microsoft acquired Great Plains many thought they would have a definite lead in to the market. Are you confident you won’t lose customers to Microsoft?
GH: You can change your word processor if there was a decent alternative that was Windows-based, and you could change your spreadsheet if there was a decent alternative, but changing your accounting system or your business applications is a much different proposition. It takes something more than going out through traditional channels. What they’ve done is they have acquired these companies and said “”We’re Microsoft and we know how to do it better.”” They applied the methods they have used traditionally and I think they are starting to figure out that you need a channel that is business-applications smart and a channel that is SMB smart. You need someone who knows how to implement accounting software, CRM software and human resource software, warehouse management — any of those things requires a different skill set.
It’s a huge market and there is not going to be a single business applications provider, there is not. It’s so incredibly unlikely. I don’t know that we will be No. 1 — I don’t know that we care and if Microsoft wants to create a $10 billion company and if I get 20 per cent of that market I’ll be the ace of spades — I won’t have a lot of complaining partners or investors. But you can’t go acquire a channel, then cut their margins and make promises you will come out with a new CRM product and then tell their customers to wait, delay it a year, finally come out with it and it not be very good. The channel partners have long memories.
They could be a much bigger threat than they are but our technology is miles ahead of theirs. I know that’s a little self-serving but it’s true. Look at our CRM offering — Web and wireless today, our channel loves it, our customers love it, low implementation costs, designed for SMB market.
CDN: Do channel partners know how to sell into the SMB for today’s climate? Is it a harder market to crack these days?
GH: Our channel has been selling successfully to the SMB market for 20 years. We know that selling to the SMB is different and that’s what differentiates us. I do think the market has changed. I think there has been macro-economic and geopolitical changes that have caused people to re-evaluate how they do business. Whether it’s the war or the economic downturn or the crash of dot-coms, there have been a number of events that caused people to re-evaluate how they spend their money. Back in 1998/99 it was not hard to sell. Even after Y2K it wasn’t that hard to sell. It was in many cases taking orders. Our channel has had to adjust to that.
SMBs don’t always have resources on staff to make those buying decisions. There’s also a lot more coverage of things like botched Siebel implementations. We had a situation where a $17 million company invested north of a million dollars on a CRM system that was totally the wrong size that required tremendous amounts of customization. You need to give an SMB customer a packaged application that works out of the box. That’s not something you get with Siebel or SAP.
CDN: Is it harder for a partner to invest the kind of time needed with an SMB customer to know what they need to solve a specific problem?
GH: Maybe there’s a heightened level of sensitivity in the SMB market but that’s just the state of the market as it is today and for quite some time it won’t go back to where it was a few years ago, thank goodness. On the one hand it was nice to take orders, on the other hand, it was an irrational mess. While it was good in some regards, it was bad because you had people who should not be winning deals and it was creating huge misconceptions in the market and reality disconnects and people paid dearly for that.