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Hosted software gives small resellers much greater reach
(Microscope Via Thomson Dialog NewsEdge)
Mid-market equivalents of systems integrators Accenture and Delloite could be on the horizon as hosted software takes away the need for wide geographical coverage for end-to-end business software providers, according to Netsuite CEO Zak Nelson.
On-demand software does not require a supplier presence in many localities, but it does need reliable Internet connections. Technology can therefore make smaller resellers bigger, claimed Nelson.
As speculation mounts that Netsuite, which is 60 per cent owned by Oracles Larry Ellison, is on the verge of an initial public offering (IPO), Nelson claimed there would be big winners in the hosted software channel.
We have been giving the channel a lot of thought, he said. People always talk about the channel not being involved with software as a service, but we have always thought it has an important role. Traditionally, resellers have been restricted by geography, but with on-demand software there is no reason to be restricted by this. VARs are usually seen as small, but they do not have to be.
These resellers will be focused on implementing applications to fit a business need and will have skills to support this rather than a focus on technology skills, he claimed.
Similarly to small VARs becoming the Accentures of the mid-market, Netsuite wants to be the SAP of the mid-market, emulating the German software giants success in the high end.
Nelson denied that the company was currently looking for an IPO but suggested this could be on the cards in the future.
Six months from now, who knows what the market is going to be like, but if we do our job right an IPO will happen naturally, he said.
If Netsuite continues in its current vein this could be sooner rather than later. Citing the companys leads in the first quarter of this year compared with the previous quarter, Nelson said there had been a 30 per cent increase. This is very significant when you consider that demand was already strong, he added. We are just beginning to see the power of the hosted software market and the beginning of demand for hosted software.
Netsuite currently runs a single-tier channel with no distribution layer, but could soon introduce a two-tier channel as the hosted software market sees the real beginning of demand. We have been getting some interesting enquiries from distributors so we might see this change in the future, said Nelson.
Clive Longbottom, services director at analyst firm Quocirca, said demand was rising in the mid-market.
There is going to be growth in hosted software in the mid-market because they cannot keep up with the pace of technology change and are spending too much money, he added. They are looking for ways of getting off this merry-go-round.
He said there would be companies that focus on providing integration in the mid-market, but the high costs of such a service would be off-putting for customers in this sector.
On the speculation of an IPO at Netsuite, Longbottom said this could hold back the development of the business. At the moment it can focus on a long play and be more courageous because it does not have to look at quarterly figures.
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