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Acumatica -- Living the Channel Challenge in the Midmarket
Josh Greenbaum
SEP 01, 2014 12:44 PM
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I’ve followed the enterprise software market for decades now, and the sad/ironic/bitter truth is that, when it comes to the large enterprise, all the great technology and marketing prowess goes to the field to die. It’s the same story in the midmarket: the best strategy, technology, and products don’t mean a thing if the channel can’t tell a story that connects prospective customers to the software vendor.

This is the essence of the challenge facing Acumatica, a pure cloud, mid-market ERP vendor based in Seattle. (Well, not really pure cloud –there’s an on-premise version as well, more on that issue soon.) I spent two days at Acumatica’s partner conference this week, and the channel problem was in full evidence at every turn. To be fair, building, priming, and maintaining a midmarket channel is a challenge for everyone in the industry: every time I meet with Microsoft Dynamics, Infor, SAP, and the many other vendors servicing this market, the most important story is actually how they’ve tweaked the channel yet again to optimize their sales opportunities and minimize channel conflict, technology and functionality notwithstanding.

Acumatica’s channel problem is actually a two-fer: as a (kind of) pure play, all channel cloud ERP vendor, Acumatica needs mid-market partners who understand not just cloud ERP, but the host of ancillary technologies and next-gen business practices that come with a move to the cloud: the horizontal shifts in e-commerce, mobile, and collaboration, and the more vertical shifts in areas such as advanced supply chain, distribution, manufacturing, and warehouse management. At the same time, those partners need to find mid-market customers who get these shifts in technology and business process and are ready to take the plunge.

This, again, is the innovator’s dilemma across the totality of the vendor community. But, for Acumatica, there’s the added twist of pushing a pure-play cloud imperative. SAP, Microsoft, Infor, and the rest of the on-premise vendors who have moved to the cloud talk a more hybrid story that offers fence-sitters the opportunity to start with good-old on-premise ERP today and move, with varying degrees of ease, to the cloud.

Acumatica has chosen not to emphasize that opportunity for its partners and their customers, eschewing a hybrid approach in favor of pushing a pure-cloud focus and promising never to go direct to a customer like everyone else in the mid-market – adding a pure channel approach to the pure-cloud message. To be sure, the different private and public cloud offerings that Acumatica can provide should be enough to assuage the misgivings of any customer who hasn’t bought into the pure-cloud story. But should be isn’t a strategy – cloud ERP, unlike CRM, time and expense, payroll, marketing, and other well-established cloud domains, is still a relatively hard sell, Netsuite’s relative success notwithstanding.

But moving from should be to must have may not be as hard as it seems for Acumatica and its partners, despite the impression that the manufacturing and distribution mid-market is still wallowing in 20th century sensibilities when it comes to the new technologies and business practices that come with moving to the cloud. In an analyst Q&A panel at the Acumatica partner conference this week, my friend and colleague Brian Sommer asked the audience, with a show of hands, how many had smart phones, cloud storage, and a social account like LinkedIn. Each of the three categories elicited a near unanimous response: The very vast majority of partners in the room raised their hands.

Brian then asked the number one money question of the conference: why, if mobile, social, and cloud are good for you, can’t they be good for your prospects and customers too? Light bulbs went on all over the room.

What my two days with Acumatica brought home to me was that the battleground for cloud ERP, and all that comes with it, is more cultural than technological in nature. In fact, the irony of the painful choice that everyone assumes customers must face when they decide between on-premise and cloud ERP is that, for most mid-market ERP customers, is that it’s not really that painful at all. The phase of the overall implementation process in which an SMB ERP instance is set up and switched on – whether as an on-premise or cloud deployment – is relatively small compared to the rest of the implementation. What’s hard is figuring out the business blueprint and process re-engineering priorities, working on data cleansing and migration strategy, defining the new user experiences and always much-needed e-commerce upgrade, setting testing and training regimes for the new functionality, and on and on. All of these tasks take many more cycles for a typical SMB – and put more risk – than the effort needed to stand up a relatively simple on-premise or cloud ERP instance.

In fact, my conversations with Acumatica partners and customers confirmed what I’ve seen elsewhere in the SMB market: by the time an SMB company has decided to make the move to an Acumatica, its business practices and processes have been stagnant for long enough that a whole pile of problems need to be solved first and foremost. Of which, “do we deploy in the cloud or on-premise?” turns out to be a relatively easy problem to solve.

I don’t want to trivialize the cloud vs. on-prem decision, except to emphasize that it’s really not an if but a when and a what question. But, to put some color into Brian’s point, for partners and customers to agonize over the deployment issues when there are bigger, much bigger, fish to fry is to miss the real opportunity. The mid-market has to change, dramatically so, and that means adopting new ways to do business first, and then diving into the broad technology shift taking place across the entire business landscape that will enable these new practices to see the light of day.

I firmly believe that putting ERP in the cloud is a sound foundation for this shift, and I recommend it to any mid-market company looking to get in the game and stay ahead. But – and I say this to all vendors, resellers, VARs, and SIs serving the midmarket – just being in the cloud isn’t enough, because the SMB market needs more than just a new deployment model. (Note to Netsuite: I said when you started that you’d need another hook for your marketing, because the day when cloud ERP would be a commodity will soon be upon us – and from my perspective that day is here now.)

And with that in mind, maybe the way around the simultaneous need for companies like Acumatica to find partners and customers who understand the cloud is to stop talking about the cloud as a deployment model and talk about it as a business change agent. Acumatica CEO Jon Roskill gets that, and joked from the stage that he had heard of one customer who called a partner and asked “for some of that cloud stuff.” The line got the laugh that it deserved. But the fact is that asking for some of that cloud stuff is a punchline is exactly why it matters less than getting customers to ask for the business change that can be enabled by using modern technology to overhaul a stagnating mid-market company.

In the end, I can’t decide whether Acumatica is more archetype or petri dish for cloud ERP, more bellwether or test bed. But it’s important to remember that going to the cloud isn’t just a matter of what and when, it’s also a matter of how. How companies like Acumatica fare in the dual quest for tech and cloud savvy partners and innovation-hungry customers is worth watching: it’s a battle that’s going to be fought by every mid-market vendor for years to come.

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