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Stephen Blythe is one of the leading U.S. VARs, and he has some cautionary words for BPOs/FAOs contemplating a run at the mid-market through software like that offered by Sage Software. Blytheco, Laguna Hills, Calif., specializes in streamlining customer business operations through Sage applications, support and consulting services. A perennial Accounting Today Magazine Top 100 VAR, Blytheco became one of Sage's top three partners this spring when it merged with Macdonald Consulting Group (MCG). With the merger, they boast a combined 2006 sales of $16.5 million.
Blytheco has its primary offices in Southern California and satellite offices in nine states through the midwest and northeast. MCB serves the southeast U.S. through offices in Atlanta, Nashville and Tampa. Blythe said one of the reasons the companies decided to merge was to be able to service larger national accounts. “We were partnering together anyway, so it seemed a logical step,” he said.
The market also faces a shortage of available talent, according to Blythe. Vendors such as Sage and Microsoft have expanded their product lines, which has put pressure on enterprise resource planning (ERP) VARs to get larger and expand their capabilities or join larger companies, he said.
“If you're doing this for two or three sales a year, it doesn't make sense anymore,” he said.
He said traditional VARs that just focus on Sage MAS 90 have not been able to grow or have gone out of business, while those that have expanded and taken advantage of cross-selling opportunities have grown. “For the larger resellers and VARs that have invested in their staff, the market is growing (30 percent for us in just organic growth) but for a lot of the smaller VARs, the market is shrinking,” Blythe said.
I asked him if it makes sense for a BPO vendor to build a mid-market sales and marketing strategy around supporting popular mid-market accounting software packages.
“Today, most of the ‘break & fix’ support is done by the software publishers,” he said. “The traditional VAR is responsible for sales, design, implementation, integration and training. From an ERP point of view, it has been a very slow move to an ASP or BPO model. While I think the models would and will work, there is sensitivity on security ownership, location and control of the ERP applications and related data. If the sales process moves to a rental model, then the ASP and BPO models will be viable. Until then, the cost savings are not justified by the inconveniences and risks. The EPR model is a 5-10 year commitment to a product. The costs to train, convert and implement are too great to change on a regular basis, thus the rental or outsourced model becomes more expensive over the average life of product use. Many vendors have tried the ASP/BPO model and have quit or have yet to receive a return on their investment.”
Would such a BPO vendor need to work with a reseller like Blytheco?
“Based upon the structure of today’s mid-market software publishers,” he explained, “the BPO would either need to become a VAR or work with a VAR like Blytheco.”
So, outsourcing may be all about the money, but knowledge and expertise are critically important, too. When it comes to finance and accounting, many mid-market firms emulate the corporate giants in seeking services that enable them to reduce labor costs, optimize payables and improve cash flow and productivity. They just have to partner with knowledgeable organizations that can do the job properly and correctly.
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