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The CEO of NetSuite has urged partners to develop their software services proposition to ensure they can continue to carve out revenue in a SaaS model.
With the cloud causing massive disruption to business models and the drive by vendors like NetSuite to eliminate the costs of upgrading during the lifecycle of a product the opportunities for the channel to make money in the traditional way have reduced significantly.
Zach Nelson, CEO of NetSuite, said that the disruption caused by the cloud had forced everyone to adapt including vendors and resellers.
"Cloud disrupted our partners so they had to rethink and there is very little need for maintenance as we update it," he said.
"They have had to become services companies," he added that the skill was developing a service that could be replicated across certain verticals.
"They want to get out of the cost of having lots of humans deliver what they could replicate," he said that he thought SaaS should stand for Service as Software.
Nelson said that software providers had better margins and most of its partners wanted to head in that direction: "For large companies the strategy is clear but the challenges are because the business is shaped very differently."
Despite the move to a SaaS world NetSuite continues to need partners not just to get feet on the street but because customers customised their software and needed support.
Nelson said that 40% of the vendor's revenues now come from the channel and it was nearing the 50/50 level, which was almost a mythical achievement for a firm that had started life selling direct.
The firm is looking to expand its channel in the UK and Europe to ensure it can continue to put pressure on its rivals.
Martin Painter, director channel sales and development at NetSuite, said that it was keen to work with partners in the UK that had some knowledge of ERP and could take the product into vertical markets.
"We are prepared to invest and are putting in the resource so we can map onto the elements of their business and get them up and running," he said.
Speaking at an event in North London, Nelson revealed that the vendor has cut the ribbon on two new datacentres in Dublin and Amsterdam to provide greater support for its European customers.
The timing of the announcement coincides with the decision by the European Court of Justice that the EU-US Safe Harbour framework is invalid.
Evan Goldberg, CTO and chairman of NetSuite, said that it had been expecting some ruling from the EU and it was now in the position if a customer wanted it to make sure their data was firewalled in a European datacentre.
But with the ruling so fresh he added that there was still some working out likely to happen, particularly given the number of international firms that stored data in Europe.
The ERP specialist has also appointed Cap Gemini on an exclusive basis in France to act as a distributor but has ruled out making a smiliar move in the UK as no SI has an equivalent dominant position.