The VAR 100 Face a Tough Year
The best way to summarize the market's view of Tribridge emergence in the market came from attendees at Convergence, the Microsoft Dynamics user conference held last month in New Orleans.
One attendee, who had left a rival reselling firm, said he had nothing against his former employer. "But Tribridge is on fire," he said. And that phrase "on fire," was volunteered by another reselling veteran.
At $75 million in annual revenue, the firm will leap up the list of the 2009 VAR 100 through its merger with Rochester, N.Y.-based Navint Consulting, although since the deal occurred in January, the two companies are listed separately on the 2008 list.
"The merger with Navint was so strategic; they shared the same view we did. There was a lot of opportunity to take market share," says Tony DiBenedetto, the CEO of Tribridge.
The Tribridge view stems from the background of its management, its cofounder, DiBenedetto and president Brian Deming both have Big Five consulting backgrounds.
In fact, Tribridge was founded in September 1998 as a consulting business that focused on implementations of high-level products such as SAP and Seybold. But late in 2003, it opted to become a Microsoft CRM reseller.
From that point, growth had come organically as well as from small acquisitions. But in the last two years, growth has accelerated dramatically.
DiBenedetto says the company had 50 percent organic growth in 2008. With the current market conditions, he still expects organic growth of 10 to 15 percent for 2009. He adds, "I would be surprised if we did not pull off an acquisition."
The Big Five background comes into play in Tribridge's approach to the market.
"We do not have a product focus. We have a customer focus," says DiBenedetto.
The foundation also shows up in the company's ability to handle several industry segments.
"People cannot believe we can handle as many industries as we do," says DiBenedetto, who learned that market view when he worked at Arthur Andersen. He notes that Navint's management also had Big Five backgrounds, including Price Waterhouse and Coopers & Lybrand.
For 2008, both Navint with $33.8 million in revenue and Tribridge with $31.9 million easily made the VAR 100 list. Combined at $65.7 million, the company would have come in fourth.
Tribridge isn't typical of the top 100 reselling firms. But then, it wasn't a typical year as the economy dove in the fourth quarter. And yet, while many VARs showed declines in revenue and staff for the year, not surprising given the general economy, many also had strong years through the fourth quarter.
In fact, more than one reseller was of the opinion that the current market isn't as bad as the one experienced in 2001, when buying stopped after the binge that had been stimulated by Year 2000 fears.
Still, there were firms whose results were grim and a many jobs were shed, even among those doing well.
Among the biggest drops was that reported by Houston-based MIS Group, whose revenue dropped to $25.3 million from $30 million for 2007, and which cut staff to 150 from 180. The company's major lines are the Sage Timberline and Master Builder construction software. New York's Interdyn AKA, a consistent Microsoft award winner, fell to $12 million, down from $13 million for 2007.
It was clear that VARs focused on manufacturing had very difficult years. Two large Syspro dealers, Orion Group Software Engineering and Edgeware had sharp declines with Edgeware falling off the list. And all resellers of Exact Software products, whose Macola line is strong in manufacturing, were looking to add other products.
There were equally notable increases.
The Rand Group of Houston continued its upward pace, hitting $10.8 million in revenue, up from $7.3 million. New York's MIG Group, which said it was one of the top three resellers in growth, had $7.75 million in sales, an increase from 2007's $5.75 million. Sunrise Technologies of Winston-Salem, N.C., had $11.9 million in revenue for 2008, up from $6.3 million.
Boston accounting firm Vitale Caturano, which had been on a hiring spree in 2008, saw revenue rise to $14 million from $9.5 million. That included building up the firm's business intelligence practice.
Another CPA firm that did well was Wausau, Wis.-based Wipfli. Partner Jeff Greeneway says there were several reasons behind the increase in revenue to $23 million, which compared to $17.8 million reported for 2007.
"We used to operate in more service and product line silos and have worked to integrate our go-to-market approach and various offerings. We also have a couple of large projects where we are providing business transformation consulting and subsequent software development and integration," he says. "Our ERP software group has been successful in getting some nice manufacturing wins, even in this down economy. We are beginning to get better traction in our Minneapolis office."
The firm also operates a managed technology practice, and like many others in that category, Wipfli's unit has been busy. Managed IT services have benefited from the economy because as companies shed IT staff, they turn to outsourcing. Wipfli also used its offices in India to provide technical talent while offering better prices.
A New Line Up
There was a significant change in product offerings among the Top 100, part of that stemming from aggressive recruiting by Deltek, a Herndon, Va.-based company that markets software to the architectural and engineering market, and Intuit, with its QuickBooks Enterprise Solutions software.
The Deltek gains may be temporary-the recruits were plunged into a market for its Vision software that has been hit hard by the economic slump. The QBES gains are likely to be longer lasting as the Intuit midmarket product puts pressure on Sage's MAS 90 line and the bottom of the Microsoft Dynamics GP market.
QBES has done well for many organizations, but requires a different approach because of its lower price point.
"Leads continue to come from QBES, but it's pretty critical to qualify them before spending a whole lot of time with them," says David Faye, owner of Faye, Pollack & Associates of Encino, Calif. "Companies looking at QBES have tended to be exceptionally frugal and not interested in paying our standard hourly rates."
The other trend was for Dynamics VARs to add one of the four accounting packages from the ERP line that they weren't already carrying, while Sage resellers that handled the MAS line were picking up the company's Accpac accounting software.
VAR 100 members did their share of mergers and acquisitions last year.
Blytheco picked up some non-VAR 100 firms: Baker Consulting and Allied Systems, and a previous member of the 100 list, Automated Business Solutions of Minneapolis. Information Systems Management of Phoenix and Barsa Consulting merged. JMT Consulting, a nonprofit specialist based in Patterson, N.Y., purchased Nonprofit Consulting, making JMT one of the larger players in that segment.
DSD Software, a Sage reseller based in San Diego, acquired Horizon Information Systems in January, expanding its efforts with Sage's Accpac line. While DSD has historically been a MAS VAR, Deane notes, "We believe that Accpac ERP has more upside than any other product in Sage's portfolio and we are going to ride it hard."
While size isn't everything, it's becoming more important in the reselling game. And that was made apparent by the message Microsoft delivered at the Convergence conference.
Although Microsoft won't cater exclusively to big dealers, the cream of the crop will be receive more resources, including marketing dollars, according to Jeff Edwards, director of channel strategy for the Dynamics line. The emphasis will be on those organizations with 50 and more employees.
"We are not trying to build more Tecturas [the No. 1 Top 100 reseller]. We are not trying to encourage roll- ups," Edwards cautions. However, he continues that he wants the companies that have 30 to 50 employees to grow. These comments come as Microsoft readies a July partner program rollout.
Still, it's clear that VARs in the target areas will also get more leads and more marketing dollars. "We will try to make money available to people driving demand and less to the people who are filling orders," he says.
Microsoft will also focus on developing target markets. It has hired four or five industry managers in the United States to work with resellers who work in the five target areas: manufacturing, distribution, financial services, retail and public sector.
Companies that were picked for inclusion in the VAR 100 list sold mid-level accounting software packages and were selected based on their status on Dec. 31, 2008, unless otherwise noted. In a few cases, pro forma results were used.
Virtually all companies listed here are privately held and they provided revenue figures. If they declined to disclose this information, Accounting Technology made estimates based on staff size, adjusted for such factors as the price range of products offered.
Companies that did not respond to requests for information were not considered for selection.
This year's list was affected by an unusually large number of VARs not responding, or opting out of consideration, which lowered the selection threshold
Robert W. Scott is Editor of Accounting Technology and can be reached at Robert.firstname.lastname@example.org.