December 23, 2004

Software Companies: Direct Sales Channels vs Reseller Channels

Icode makes a feature rich and comprehensive ERP (e-business) application which competes directly with SAP's Business One, Quickbooks Enterprise, NetSuite and other applications.

Icode started out focusing on two sales channels - direct sales and an independent partner (IP) program. It's IP program included sales reps, who were independent contractors who established leads and closed sales, and engineers who provided support or installation. Both of these functions were also provided directly by Icode. One problem with IP's was that they were not dedicated to Icode and were not as committed to sales to make the IP program work. On the other hand, Icode did not nurture the program to the degree expected by the IPs.

The keys to a successful software company are building a great product (as Icode is doing) and supporting dedicated resellers and consultants who can handle the complete sales, installation and support of the product - as Microsoft is doing.

Consulting company Pavey Associates www.paveyassociates.com, a successful full-service Icode VAR based in Vancouver and now with offices in Toronto, NYC, and Kansas, with over 30 Icode installations and growing is an Icode success story. By taking Icode's full featured ERP product combined with Pavey's selling, installing and supporting services, Pavey is building a base of customers.

This is not to say that direct can not work. But you'll find that companies that work best with direct sales like Quickbooks, NetSuite, SalesForce.com and others, however, do not have complex installations or training. In Quickbooks case - the program is designed to be installed by the business owner. The other products I mentioned are hosted applications and require minimal hardware installation and programming.

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