FIVE MOST UNREALISTIC BELIEFS OF AN ERP PUBLISHER (Part 3)
This is the third of a three part blog series in which we highlight what we feel are the most unrealistic expectations and beliefs of ERP buyers, ERP providers, and ERP publishers. We do this in order to shine some light on some of the most common weaknesses in our industry, so that they may be recognized and corrected or avoided.
1. “We have the resources and manpower to provide much better product support than our channel partners”.
ERP publishers desperately want their end-users to believe this, and they want to believe it themselves. Publishers who sell direct are forced to sell this Kool-Aid, because they have no channel to provide support. ERP publishers who have channel partners are forced to sell this idea by the economics of their business. A typical publisher makes as much as 70% of their revenues on support plans, NOT on new software sales. Significantly reduce that 70%, and their shareholders would replace the executive management team.
One of the ways that ERP publishers rationalize their phone support as being superior is by believing that the quality of phone support depends on fast response times. And they back that claim up with fancy metrics, provided by their phone support software. How can you possibly beat being able to talk to a support person in just 2.3 minutes? By their calculus, support received in 2.3 minutes is twice as good as support received in five minutes.
Well, that’s pretty easy to debunk. Talking to a support person in one hour, who is deeply familiar with your ERP system and your business processes, is light years more valuable than speaking to a factory-trained support technician who has nothing to offer but thousands of standard answers. One of the greatest misconceptions in the service world is that customers value fast service above all. That couldn’t be less true. Customers want high quality service, and they will wait much longer for it, if they must.
So, do channel partners provide better service than the publisher? Most do, but admittedly, a few do not. There will always be partners in any channel who only care about selling a system, and don’t really have the skill or the inclination to support it. For their end-users, factory support may be a step up. But those end-users would be better served by switching to a channel partner who really cares.
Most channel partners are dedicated professionals who can provide you with support that is far better than an ERP publisher’s. But factory support serves its purpose. It’s great for quick answers regarding software functionality, or for problems that are suspected to be the result of a bug. But, if the problem or question is more closely intertwined with the end-users business processes or in-house standards, then a publisher’s help desk can‘t hold a candle to a dedicated channel partner or consultant.
2. “Our fiercest competition comes from the other ERP publishers, particularly the <insert one: cloud or on-premises> publishers”.
That’s not true for any ERP publisher. Their fiercest competition comes from their own shareholders. They put great pressure on an ERP publisher to report positive earnings and to pay dividends at levels that are commensurate with other technology companies. And do you know where those earnings and dividends come from? They come right out of the R&D budget, out of infrastructure improvements, and out of channel and marketing programs. Looking for those who are making it more difficult than anybody for an ERP publisher to sell its products and services? Look no further than their own shareholders.
3. “Channel partners should concentrate on adding value to their implementation services and to their vertical industry knowledge”.
What publishers are really saying is that they want to share as little of their sales revenues as possible with their channel partners. They would prefer that the channel concentrate on making a living by billing for their services, and not depend so much on “taking revenues away from the publisher”.
The truth is that making a living by selling slices of your life is not really a great model. One of the few places that most channel partners have any “leverage” in their practices, is in the sales of software, and in the margins on maintenance and subscription renewals. Pressure on ERP publishers from their shareholders (see item #2 above) is causing many publishers to reduce margins, particularly on maintenance renewals and subscriptions. They are trying to sell that to their channel partners by selling the idea that product margins are an unfair entitlement.
Publishers say that the channel should be working on doing a better job of differentiating themselves from their competition, and pursuing a “value pricing” billing model in order to increase service billings.
Should channel partners do a better job of differentiating themselves? Yes, absolutely. Should channel partners develop a vertical industry orientation? No doubt. Should channel partners look at a fixed price implementation billing model? Sure. But please don’t push all of this as a rationalization for lowering product and renewal margins. That’s disingenuous, and it will cause your channel partners to look elsewhere. The channel needs sales and renewal margins to stay in business. That’s why channel partners are migrating to those publishers who are doing a better job of carving out a fair piece of the ERP sales pie.
4. “We have the primary relationship with our end-users.”
That’s true for some of the publishers’ end-users, but certainly not for most. The channel partner has the primary relationship with the end-user. As previously described it’s the channel partner who understands the end-user’s business processes and standards, and it was the channel partner who made sure that the new ERP system supported the end-user’s “special sauce”, not the publisher. Nevertheless, publishers continue to marginalize the partner’s importance in the relationship, by barraging the end-user with direct solicitations for renewals, and even for add-on product sales. This becomes confusing for the end-users, and works against the idea that the publisher and the channel partner are a team.
That’s not good for anybody’s business.
5. “Our primary mission is to create satisfied customers.”
Most publishers will make this claim, but again, it’s not entirely true. Actually, it’s the channel partner’s primary goal, but it’s only Goal #2 for the publishers. Goal #1 is to sell the most number of new software licenses they can in any given measurement period. That helps their sales staff “make their numbers”, which keeps the executive management team off their staff’s backs, which satisfies the stock analysts, which keeps the shareholders off the executive management team’s back.
Stock analysts know that there’s revenue, and there’s revenue. The only way to increase shareholder value is to grow your company, and the only honest way to do that is to increase your customer base via new license sales. Some publishers, whose products are in need of a makeover, have engaged in acquisition activity which makes it look like the number of customers is increasing organically, but it really isn’t.
I’m not saying that publishers don’t love satisfied customers. They do. But they occasionally work against themselves by trying to meet Goal #1. There are few channel partners with a deal in the sales pipeline who have not been asked, at the end of the month “Is there anything that you can do to help your prospect make a decision before the end of the period?”
Trying to cajole a prospect into making a faster decision undercuts the prospect’s decision-making process, which could conceivably result in a bad match or an undiscovered need. This request from the publisher will almost always be accompanied by a discount of some sort, or with the threat of expiration of a discount which has already been offered. A high quality channel partner will pass this information along to their prospect, but they will also let their prospect know that no discount is worth the risk of having made a hasty purchase decision.
Understanding these misconceptions will help ERP buyers and providers to make the best possible purchase, implementation and support decisions, and will result in a system and a provider that is most likely able to solve all your key business issues and support needs.
About the Author
Doug Deane is President of DSD Business Systems, an international provider of on-demand (cloud) and on-premises ERP and CRM software, specializing in wholesale distribution, manufacturing, warehouse management, inventory, business intelligence and eCommerce software. DSD offers NetSuite Cloud ERP, NetSuite CRM, NetSuite eCommerce, Sage 100 ERP (formerly MAS 90), Sage 300 ERP (formerly Accpac), Sage 500 ERP (formerly MAS 500), Sage FAS, Sage HRMS (formerly Abra), Sage CRM, Sage SalesLogix, Sage Add-Ons (Extended Solutions), and Custom Programming. DSD has been a multi-time Sage President’s Circle award winner, a two-time Sage Gold Development Partner of the Year recipient, has been recognized by the San Diego Better Business Bureau (BBB) as a Torch Award Finalist (2009) and Torch Award Winner (2010) for Marketplace Ethics, and has been recognized by the Council of Better Business Bureaus as a 2012 International BBB Torch Award Finalist for Marketplace Excellence.