NetSuite takes aim at Sage resellers

Later today, NetSuite will announce that it is bringing Sage dealers into its growing network of resellers. From the blurbs:

Blytheco will focus on selling, implementing and supporting NetSuite cloud ERP /financials, CRM, Ecommerce and supply chain solutions to a growing new prospect base that is increasingly interested in moving to cloud-based business management solutions from on-premise software. The partnership extends Blytheco’s offerings beyond its traditional focus of on-premise Sage applications. Having built best practices for extending on-premise software to meet industry-specific needs for its clients, Blytheco is planning to leverage that domain knowledge to build SuiteApps using NetSuite’s SuiteCloud Computing Platform to leverage their NetSuite cloud offerings to meet vertical needs.

I would not normally cover this type of announcement but it is important for several reasons.

• Over the last few years, Sage has lurched from one management crisis to another as it sought to disentangle itself from a disastrous adventure into the healthcare market.
• Sage had not been able to offer its resellers much new to sell in the last few years. That changed last year but it hasn't stopped the steady stream of grumbles among a reseller base that is itself aging.
• Sage's business model is under threat for which the company does not have a solid response.
• Sage's attempts to get into the cloud have been a string of repeated failures.

Last week, the company reported what I consider a weak first half. In my analysis on my personal weblog I said:

...despite the talk about organic growth, Sage is achieving more per customer than it was in the past but there are less of them. This is not sustainable in a market where cloud pricing is stable. An 81% renewal rate on support contracts bolsters that theory as customers move to cloud solutions. In fact, an effective loss of business means that year over year from 2010, Sage’s business when measured on volume has shrunk by a third, offset by price hikes in some places and additional subscription revenues coming in at lower prices elsewhere.

One senior investment banker I bumped into asked: "What does (CEO) Berruyer think he's doing? The current strategy makes no sense especially when there is so little available for real innovation across the whole portfolio."

All of which plays perfectly to NetSuite that really needs to ramp the reseller network if it is to accelerate growth. During a conversation with Craig West who runs NetSuite's reseller program, I said that while the Blytheco deal may not of itself be terribly significant, the fact that a died in the wool Sage reseller has taken the plunge out to be a signal to the whole of the Sage reseller market both in the US and elsewhere.

I asked if Blythco will likely drop Sage any time soon. West said: "That's not likely - they have a lot of customers to continue supporting. But for replacement business, we're well positioned. Sage 100 and 200 are going nowhere and NetSuite can fit in nicely in those upgrade situations."

I'm not going to disagree. For the last few years, Sage has had a very difficult time in the UK for example moving it Sage 50 customers up to 100 and beyond. In many deals it often loses out to either a cloud offering or (mostly) Microsoft.

Of course NetSuite hasn't cracked the SME market just yet. It still has to figure out what to do about Intuit which remains a powerful and important incumbent.