In the midmarket, the cloud ERP Game of Thrones is in heavy sword and sorcery mode. Those vendors without a 'pure' cloud solution are using the SaaSquerade model. As long as there is a data center somewhere and a web log-in to get there, voila - you have a cloud solution. Depending on your view that's either great for customer choice, or utterly confusing.
Enter Acumatica, a firm young in years (founded 2007) but determined to make hay in a suddenly crowded market. This week, Acumatica hosted their 2nd annual Partner Summit, but the first one with a media program for folks like yours truly. The end result was the inevitable Twitter punditry, with (hopefully) some deeper analysis is on its way.
After the trek to Leesburg, Virginia, I now have a slew of yet-to-be posted video footage and some semi-formed views on how Acumatica could make noise in midmarket ERP. During his second day keynote, Acumatica Chairman and Founder Serguei Beloussov stated his goal: $1 billion in annual Acumatica revenue within 10 years, generating $5 billion annual in revenue for channel partners.
Holding Acumatica to its own aspirations, can they pull it off? What will they have to overcome to seize their intended place? As it turns out, Acumatica has some unexpected strengths that should help them, but a few obstacles as well.
1. Energized partners - Acumatica's partner community is clearly energized by the ground floor opportunities Acumatica is providing (at a healthy 40 percent commission). This year's conference had 282 attendees from 12 countries and 98 partners represented - up from 135 attendees at initial 2012 event. Acumatica claimed their partner numbers have been bolstered from disaffected partners from other vendors.
Sage and SAP were specifically mentioned as examples from the keynote stage. On the airport shuttle, I spoke with an Acumatica partner who was eagerly plotting her break from a partnership with Microsoft, disillusioned by the impersonal experience. Acumatica Chairman and Co-Founder Serguei Beloussov echoed those points in his Tuesday keynote and in conversation with me.
Beloussov believes that Acumatica has a fertile midmarket opportunity due to vendors that have neglected their midmarket partner channel. With no direct sales force, Acumatica is 'all in' with their partners, to quote a favorite phrase of Chief Sales and Marketing Officer Stijn Hendrikse.
2. Flexible deployment, pricing and user licensing - Acumatica prides itself on giving customers a range of deployment options (on-premise, hosted, and cloud), with options to switch at a later point. At the show, a new perpetual subscription license model was announced. During my video interview with the AIM Solutions, Acumatica's two-time partner of the year award winner, Ava and Audrey Idom raved about how Acumatica's licensing gives them the ability to drive the cloud product deeper into organizations.
I haven't dug into all the details about the licensing announcements yet, but here's the bottom line: not being tied to a per user license gives customers a great deal of flexibility, including the ability to extend Acumatica access to external portals for customers and partners. This is made possible due to the CPU-based pricing models. As Acumatica puts it:
Acumatica costs are linked to system usage, not the number of users. When a new user wants access to Acumatica, you grant the appropriate permissions and distribute the user login information - you do not have to purchase another license or install client software.
Though I didn't find the pricing model simple, easy access for casual users is a huge edge - a sentiment echoed by partners and by the customer testimonials displayed at the show.
As for those who might argue that holding onto an on-premise version holds Acumatica back, that doesn't seem to be the case currently. I spoke to several Acumatica partners who told me (surprisingly) that about half their customers still opt for the on-premise option for a variety of reasons, data security being the most common reason.
My interview with JAAS systems, makers of the JAMS manufacturing software for Acumatica, reinforced that point. JAAS' Fred Szumlic and John Schlemmer told me they chose Acumatica as the platform to build their solution precisely because they could offer both on-premise or cloud manufacturing options.
Given that manufacturing has not shifted to the cloud as aggressively as CRM or HCM, it makes sense not to force the issue and risk getting too far in front of customers - though most partners I talked with advocated cloud deployments, not the least of which is that it's the most profitable option for Acumatica partners.
3. Industry verticals a priority - Acumatica is not under the illusion that a generic ERP solution, cloudy or not, is going to fly in the midmarket. They have made verticals a priority, some of which is provided by Acumatica out of the box. CEO Yury Larichev told me that he believes Acumatica now covers five vertical areas without any need for partner add-ons: distribution, project accounting, professional services, software developers, and non-profits.
Acumatica knows it can't build rich solutions for all industries themselves, so they are turning to partners like JAAS to fill in the gaps. Though there was very little talk of PaaS at the conference, Acumatica is convinced it has built a partner-friendly platform. Acumatica's Microsoft-based toolkit and Java front end is certainly familiar territory to developers.
Where the challenge comes in: only a small percentage of Acumatica's partners are ISVs (around 10 percent). While Acumatica's partners seem to grok the cloud business model, developing applications is not in the comfort zone for most. That will have to change. Which brings us to:
1. Brand awareness is an uphill battle. Acumatica has a good story, but that doesn't necessarily translate into brand awareness. ERP installs are not the multi-year sinkholes they once were (usually), but that doesn't mean customers will entrust their ERP business to upstart firms they have never heard of.
Branding matters, and it matters early in the buying cycle. I heard several anecdotes at the summit about the new breed of ERP buyer. This buyer does plenty of their own research and narrowing before they ever contact you. If they don't stumble on you during their initial search and screening, you are likely to miss out on plenty of viable deals.
Some important news from the summit helps Acumatica financially - but without addressing the branding problem. At the partner summit, Acumatica announced a multi-million dollar OEM deal with MYOB, Timed with the summit, Visma, a leading SMB provider in northern Europe with a financial stake in Acumatica, announced Visma.net, cloud ERP provided by Acumatica. In both cases, Acumatica's products will likely be white labelled. The revenue streams provide Acumatica with stability, but white labeling doesn't help the brand and market awareness challenge.
2. Partners are confronted by the services disruption vortex. Yes, I just made that ridiculous phrase up - maybe I do have a future at a big analyst shop after all. Point is: Acumatica partners have a better grip on cloud than most, but services business are no longer about selling cool software - not matter how great that software might be. Customers want to buy from business advisors they trust - real industry experts, not just folks with good bedside manners. Making life tougher is you can't just spend your way to lead generation anymore. Good marketing means sharing great content and building terrific apps.
To his credit, Hendrikse realizes what his partners are confronted with. In our conversation, he referred to this hairball of challenges as 'relevance' - you may not need to excel in all of them, but you need to be relevant to your customers, not just sales facilitators. Acumatica can't just focus on their own branding mission, they have to find a way to help partners transform into advisors.
The good news, as Hendrikse pointed out in his keynote, is that the technical barriers to entry have never been lower. A slide of two women on laptops in Starbucks working on their business plans illustrated the point (I am posting this in a Starbucks now with an identical scene to the slide he shared yesterday). But you still have to have intimate knowledge of your customers - that bar remains high.
3. Mobile, HR, analytics still pending. 4.1, the release announced at the conference, was meant to be a minor release and ended up being a major one. However, release 5.0, scheduled for early next year, is the target release for significant features such as a mobile applications framework, payroll, and enhanced analytics. Those features can't arrive soon enough. Acumatica has gotten away with some delays on the mobile side because their software is easy to access via browsers on most devices, but mobile apps is another hill to conquer.
Buoyed by the 300 percent growth rate announced at the partner summit, Acumatica is doing enough things right to buy themselves time to sort the thornier stuff (another example would be multi-tenancy, supposedly announced with version 4.1 but a topic that even the partners I spoke with were confused about).
It will be interesting to see if competitors respond to the licensing flexibility that has energized Acumatica's partners and customers. If Acumatica's competitors sit around on old license models while Acumatica helps their partners build out needed verticals, look out. There are surely twists ahead, but this a story that bears watching.
Photo credit: CEO Yury Larichev by Jon Reed, Thron des Kaiser Karl © davis - Fotolia.com
Updated 08/22/2013 8AM CET with clarifications to first and third paragraph that were unclear in original version.
Disclosure: Acumatica is a diginomica partner, and paid for Jon's travel and accommodations to the Acumatica Partner Summit.