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NetSuite, Skyytek rift highlights vendor-partner tensions in SaaS

Barb Darrow

The official end of the NetSuite and Skyytek relationship this month illustrates the inherent tension between vendors and partners in the Software as a Service (SaaS) world.

Skyytek

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was NetSuite's business partner of the year in 2005, 2006 and 2007. NetSuite even lauded the Miami-based VAR for moving more than a million dollars' worth of licenses for NetSuite's hosted ERP software during a couple of those years.

So, what happened? No one's talking.

Officially, both companies said they will terminate their NetSuite Solution Provider Agreement as of Sept. 30, according to tersely worded statements. Skyytek will "most certainly continue to develop and support NetSuite implementations," according to Skyytek's statement. It will focus on SaaS, ERP/CRM, management consulting and SaaS ERP/CRM business process engineering.

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Skyytek CEO Ray Tetlow would not comment much beyond that. He would not say if Skyytek is about to sign with another vendor.

One thing Skyytek will no longer do is sell NetSuite licenses. That means it will forego residual margins on the active licenses it's already sold. The real multi-million-dollar question now is: Who owns the joint customer? The solution provider who found the business and implemented the solution, or the vendor who hosts the solution on its own infrastructure?

What is the partner role in SaaS?

This is the question of the SaaS era for solution providers. One thing is certain: Neither NetSuite nor Skyytek will walk away from those accounts easily.

"Ultimately, all customers are NetSuite customers as they have signed a subscription license agreement directly with NetSuite, and of course NetSuite provides them with the actual on-line product service. So there is no impact to the customers accessing their subscription and the NetSuite application," said Craig West, vice president of channel sales for NetSuite via email.

As for service, support, training and consulting, NetSuite recommends that customers engage an authorized partner or NetSuite itself. "The choice is theirs," West said. NetSuite has extended to Skyytek customers free Gold Support, although it was unclear how long that would last.

"We are driven as value-added resellers to go find net new business, because if it's not net new business [the vendor will] want to take it direct. So we go find it and we win it and take it to NetSuite, or whoever the vendor might be, only to find out a year later that the vendor claims it to be their account," said Scott Jenkins, CEO of The EBS Group, a Kansas City-based NetSuite partner.

Vendor direct sales reps are relentless in opening up talks with clients. "They communicate directly and pretty soon the reseller is pushed out of the way with comments [like] ''Wouldn't you really rather work with the vendor?'" Jenkins said.

The contention over account control, already evident in the world of on-premise software, is heightened in the SaaS realm where the vendor runs the application and stores the data on its own infrastructure. That is one reason thousands of Microsoft solution providers are watching that company's embrace of SaaS very, very carefully. Even as SaaS pioneers Saleforce.com and NetSuite sweet-talk partners, many of those partners see the SaaS model as a route to disintermediation.

And that's why the Skyytek-NetSuite story is so compelling to solution providers testing this model.

"The manufacturer believes they own the account, and the partner attitude is whoever services the customer owns it. So you can bet your sweet bippy that Ray [Tetlow] will go to his install list and try to switch those customers out [of NetSuite]. And, NetSuite will bang that list significantly as well," said Mick Gallagher, managing director for LS Technologies, a Fallbrook, Calif., NetSuite partner.

The real danger, specifics of the current case aside, is that the channel-generated business will most likely flow to the vendor's direct sales force, causing more aggravation among remaining partners. "That business won't stay in the channel unless the customer wants a local presence -- which may be the case. If the customer doesn't have another local advisor for NetSuite, that customer may end up going with Skyytek to another vendor," Gallagher added.

There have long been signs of angst in NetSuite's channel. Partners in the past few years have said the San Mateo, Calif., vendor changed the rules on its "30% now and forever" margin payments to partners, paying out less than had been promised. NetSuite said it was merely enforcing rules that may not have been mandated in the past. Partners also say the vendor is difficult to work with and has a direct sales focus that puts them at a disadvantage. NetSuite says its infrastructure gives small VARs with a vertical focus a larger stage to display their wares and a way to deploy their vertical applications to customers around the world.

That channel agita has not gone unnoticed by NetSuite rivals. San Jose-based Intacct, for example, has pursued NetSuite partners ardently for months. One NetSuite partner said he was tempted by Intacct's reseller terms and conditions, but will stick with NetSuite and Oracle CRM OnDemand because it's too hard to sell and support multiple vendors. "You've got to focus," he said.

This story was updated Tuesday night with NetSuite comments.


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