This week Netsuite and HP announced a partnership to provide the HP VAR channel the opportunity to sell Netsuite's SaaS based ERP solutions to the SMB market segment, defined by both vendors as businesses with 1-999 employees. The agreement applies to all 15,000+ HP US VAR channel partners. The agreement is groundbreaking on several points. From a business model perspective the VAR's will act as referral partners and for that referral they will be paid a portion of the monthly subscription fee from each deal. The sale will actually be handled by the Netsuite direct sales force based on the leads provided by the VAR's. According to Netsuite, the VAR's will have right of first refusal on any services component of any deal they refer.
For each of the stakeholders, Netsuite, HP, VAR and Customer, there is a great deal of value in this arrangement. For Netsuite it gains 15,000+ referral channel distribution partners that are specifically targeted at the SMB market where its solutions have been most successful. For HP it sells more hardware since Netsuite uses HP servers exclusively in its data centers plus it provides additional revenue opportunities to its VAR partners. This is particularly important because of the current financial crisis where hardware sales are likely to suffer and HP's VAR's could have a rough couple of years. This VAR channel, which HP has developed for over 30 years is a significant asset to HP and investing in that channel's continued health is paramount for HP.
For the HP VAR's this announcement provides several new business opportunities. Any VAR (even high volume VAR's) could refer its customers to Netsuite, whose direct sales force closes some portion of the referrals, while the VAR sits back and collects a new monthly annuity stream. For the more enterprising VAR's (most likely the solution focused VAR's and SI's) the agreement provides not only the recurring annuity but a significant services opportunity in delivering implementation and training services to the new Netsuite customer. In addition to the implementation and training services there is also the opportunity that some customers will need integration services for existing on premise solutions that would need to be integrated to the new Netsuite deployment and even potentially new hardware or hardware upgrades as a part of that deal.
From the customer perspective this new arrangement should also be very attractive. SMB customers in general tend to prefer purchasing from a local business where they have existing relationships. This agreement takes advantage of those local relationships while making a comprehensive ERP solution available to SMB customers. In addition, if the VAR chooses to offer them, the SMB customer can consume the necessary services from a local and trusted source. It will be interesting to watch as this relationship unfolds over the next year to see if this type of arrangement can be used effectively by other SaaS vendors.
