Skip to main content

Cloud ERPs' impact on Partner business models

Having carried out some recent work with the cloud based version of Microsoft's Dynamics AX ERP offering (now called Dynamics 365 for Operations), it strikes me that the business model being followed by the application developers for their cloud hosted solution is going to have a disruptive effect on the businesses of their partners. 

The traditional model was typified by the Application Developers (SAP, Oracle, Microsoft etc.) selling, implementing and supporting their products through a network of independent partner companies. These partners typically cover a region or a country. In this relationship the Application Developer gets a local salesforce and local implementation resources to help their customers get the software working.  The Partner gets a cut of the license fee income as well as implementation consulting income and then ongoing support income.

Generally, the relationship is not exclusive, on either side, but the Application Developer requires some semblance of assurance that the Partner is capable of selling and implementing their product in return for which the Partner gets formal accreditation that they can parade to potential customers, investors and employees.

The Cloud introduces a new commercial model for software sales.  The customer no longer lays out a large slug of cash in return for which they get the software installed on their hardware.  Instead they pay a (usually) monthly subscription, based on number and type of users, for which they get access to the application and their data in the cloud.  There is no longer any need for the users of ERP systems to have their own servers as that is all managed by the Application Developers cloud hosting service.

What this means for Partners is that the original large slug of income they got from their cut of the licence fee is no longer there.  In fact, it seems Application Developers see the Cloud as a way of taking over more of management of the customer relationship and reducing the rewards to Partners to match.

Therefore, Partners will need to focus more on their consulting income. This throws up some strategic questions:
  • is the sales force and sales approach optimised for selling teams of people rather than product?
  • should alliances with general management consulting firms or big four accounting firms be pursued or strengthened to participate in larger transformation projects that are underpinned by ERP applications?
  • should Partners' industry specific process knowledge be deepened to be able to provide customers with more than just application configuration expertise?

Comments

Post a Comment

Popular posts from this blog

Brown paper bag accounting

I recently had cause to recall a type of work I did whilst studying to become a chartered accountant and in the period just after I qualified - brown paper bag accounts .  This is not some kind of under the table tax evasion scheme but a phrase used to describe the accounts preparation work for the smallest of small businesses. It describes what the client would provide in terms of records from which to draw-up accounts, submit their VAT returns and produce their tax returns.  It would be a bag (ok, sometimes and folder or a box) of expense receipts of various types, from shop tills and handwritten chits to vellum fee notes from solicitors.  There would also be a bunch of bank statements and credit card bills.  If you were lucky there would be a cash book which may record the client's drawings (money taken from the business for personal use) but often not. This was at first a huge struggle for a new trainee, but with guidance from senior colleagues a...
Post a Comment
Read more

What I learnt...managing a high pressure technology project

Our team were engaged to take over the management of a core system development project for a telecoms operator.  The project had been started with the intention of replacing core customer management, billing, fault management and service provisioning systems for the B2B division in time to launch a new product that would be supported by the new systems. The CEO was concerned that the project was drifting.  A sizeable team (40+) of independent contractors had been brought on board but as the CEO said "contractors were hiring contractors" and there seemed to be a lack of accountability.  Our role was to provide that accountability and manage the project to meet the deadline, a mere five months away. There were some specific challenges that increased the pressure on the programme manager (me): a sizeable portion of our fees were contingent on the product being able to be launched as planned in five months the new B2B product was not fully confirmed so system and produ...
Post a Comment
Read more

What I learnt...as Finance Director of a small UK motor car manufacturer

I was reminded recently of one of the more interesting episodes in my career when, for about twelve months, I was fortunate to be seconded to a small car manufacturer as Finance Director (both the cars and the company were small!).  It presented an exciting departure from my normal way of working but was also an opportunity to learn.  Here are the major takeaways for me from this experience: Collective executive responsibility Being part of the executive team meant that we plotted the course for the company and that we all bought into the strategy and the plan to deliver it.  We were making significant changes to the products, to the manufacturing process and to the supply chain and we all had to be clear about what we were doing, why we were doing it and how we were going about it.  Employees, shareholders, bankers, auditors and the press would be asking questions and we had to be consistent and clear in answering those questions but then in the actions and decis...
Post a Comment
Read more