The small business CRM VAR is dead

Friday, 20 March 2009

Been a little tardy about new posts to this blog, but we’re all busy here at Really Simple Systems closing out yet another record quarter, to finish a record year. But this subject has been around my mind for two years now, and I think we’re cracked it at last.

In the old days (1990’s) you could make money selling accounting systems to small businesses. You’d get a 35% margin on the product (SunSystems, Tetra, Multisoft, Omicron –ah! those names from the past!). You’d charge £4k for the software, about the same again for installation, set up and training, and then (if you had a nice vendor) get a decent margin on the annual maintenance contract, plus upgrades, add-ons and the occasional bit of extra consultancy.

In the old days (2000) you could make money selling CRM systems to small business. You’d get a 40% margin on the product (Pivotal, Onyx, Maximizer – ah! those names from the past!), about the same again for training…. you know the rest.

Heck, back in the really old days (1980’s, showing my age here), you could make money selling word processing and spreadsheets to small businesses, and you could sell the PC too. And a printer, floppy disks, old fashioned paper with holes in the sides of it, the list was endless.

The point I’m trying to make here is that one decade’s nice little business for a VAR is the next decades’ commodity. People buy accounting software off eBay, and kids are taught how to use Word and Excel at school. So now the turn has come for small business CRM systems.

It all started when I was trying to pitch Really Simple Systems to a Maximizer reseller. “Instead of selling Maximizer for £5k plus £5k consultancy, you could be selling Really Simple Systems for £4k and £0 consultancy – your customers will be ecstatic!” I burbled. “And what’s more, they don’t have to pay you all up front but by subscription!” Well, maybe the customers would be ecstatic, but the VAR wasn’t, I’d just destroyed his business model. We gave up trying to recruit existing CRM VARs.

After a while though, other organisations started approaching us. Marketing companies who ran lead generation campaigns for their customers. Outsourced IT companies that had customers paying by subscription. These people didn’t know how to install a CRM system that needed SQLServer as a backend, or how to synchronise laptops to the central server. They didn’t need to. What they knew was how a CRM system would add value to their existing services, not be their service.

So, the old small business CRM VAR is dying, squeezed by the new SaaS systems and by the recession. The savvy ones will move upmarket and install expensive and complex products like NetSuite and Oracle/Siebel. But there is a new breed of CRM VAR waiting to take their places, people who have sales, marketing and business skills instead of IT skills.

Long live the new small business CRM VAR!

(right, that’s enough for this month, I’m off skiing in St Anton!)