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GP for $195 per month


It is amazing how industries change, and change quickly. I have always held a view that this change is good, and business impacted by this change have to evolve, find new ways of doing things and get creative to fit with the new business environment.

Recently in Australia many of our large bulky goods and electronic retailers have been complaining about online retailers taking large chunks of their market share. I was the first to say “stop complaining, deal with the issues and change your business model!”

It is one thing to have a passionate theory for other businesses, but it is a little different when it happens to me. Software is changing. You can now buy Microsoft Dynamics GP for as little as $135 per user per month. What happened to the $100K, $200K and $300K software and services deals I used to be able to sell?

So what does the SAAS and Hosting models mean for traditional implementers and ISV’s? One thing I have always praised about the mature GP reseller community is that we had a good business model. Resellers knew how to make money in this business. There was software with good margins. There was consulting revenue with new deals. There was ongoing consulting and upgrade revenue. There was annual maintenance to collect. There we good chunky ISV products to sell.

The bad news is that right now this business model is changing and will likely disappear over the next few years. There will be no more big chunky software sale margins. Implementations time frames will be significantly reduced. Upgrades will be handled centrally. Aunnual maintenance will disappear as a concept. The relationship between reseller and customer may change dramatically.

For an ISV like eOne the change is also significant. If a customer is paying $30 per month for CRM – how can I justify $4,500 up front for SmartConnect? Are they going to pay $200 per month for integration? How much time can I put into presales if the return is a small monthly payment? How do I pay salaries for the next few years without upfront software revenue?

Lets look at how things may look (hypothetically) in the next 2-5 years. As a customer I go to www.microsoft.com/erpgp and sign up for a 5 user GP subscription for $150 per user per month. I run through the rapid deployment wizard and have a new database to log into within 15 minutes. I click on a box called the GP marketplace and see some 500+ ISV solutions that I really do not understand – so I just move on. The next box is a list of services vendors who will help me ‘get the most out of my new purchase’. They all profess to provide online config and support, with technicians I see and talk to online – so they need not be in the same geographical location as me. In fact there is a real good deal $65p/hr listed by a Canadian company or $70p/hr from companies in Bermuda, Mexico and New Zealand. We are based in Detroit and the partner there wants $130p/hr so we choose Bermuda.
The sales manager feels left out and says he wants a system too – so we go back online and add MSCRM to our subscription. Back in marketplace we tick the SmartConnect box to integrate these two apps which adds another $50 per month. While in the marketplace we also get the SmartView iPhone app for $4 for the CEO.

There are many variations of the above scenario – but the one thing we know for sure is that a customers relationship with software and partners are changing. Software is changing.

There is only one answer and that is we are all going to have to evolve. Resellers and ISV’s will hold onto the best parts of the old ways for as long as we can – but we also need to evolve at the same time and rework our business models. Over the next few weeks I will revisit this topic and talk about some of the things that we can all do to start the change, and how we hold onto the best bits of what we have.

3 Comments

  1. Steve Chapman on March 20, 2011 at 10:04 am

    You are correct, and I would say your vision of the future is fairly accurate. Developers and resellers are feeling a lot of pressure on their current business models. They will have to change. The change is being driven by end users; it's what they want.

    Steve Chapman
    http://www.mygpcloud.com

  2. Martin on March 21, 2011 at 6:43 pm

    Thanks Steve. The big thing for us to do as a group is determine what the 'new' business model looks like.

  3. Mariano Gomez on March 24, 2011 at 7:37 am

    You are leaving out one thing… ERP is not Excel. Perhaps the software sales model may change, but the challenges faced by company are not going to go away. To me SaaS is only changing the deployment model (on premise vs in the cloud), but it's not changing a company's need for understanding where cost is coming from in their supply chain operations, or what makes up a perfect invoice,

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