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NetSuite-HP deal brings partners closer to cloud computing

Barb Darrow
Hewlett-Packard (HP) partners can now sell NetSuite's hosted business applications and other services into their accounts.

Both vendors said the NetSuite-HP deal, announced today, will help bring traditional

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channel players into cloud-based computing. NetSuite executives also hope the deal will give their company better traction into small and medium-sized business (SMB) accounts -- HP's bread and butter.

"This is a way for a hardware vendor to offer its resellers another revenue stream they can mix with hardware sales," said Mini Peiris, vice president of product marketing for NetSuite.

NetSuite helped pioneer the Software as a Service (SaaS) craze with its hosted enterprise resource planning (ERP) and customer relationship management (CRM) services. The vendor has long offered its partners a piece of the ongoing revenue stream, as long as the account is active and the reseller remains the partner of record.

The typical margin works out to be 30% on the deal value when it closes and another 30% per year for the length of the subscription. Partners also reap higher margins if they sell into a lot of new accounts and hit volume targets. Executives from NetSuite and HP would not say what the margins will be for HP partners participating in this deal.

In addition, NetSuite is running the bulk of its infrastructure on HP ProLiant servers and StorageWorks storage in its data center, Peiris said.

Janet Pretti, HP's vice president of channels, said many of the company's Elite partners will be interested in selling NetSuite. The target customers are SMBs with 10 to 999 employees.

AMI Research estimates that 64% of midmarket companies view CRM as a strategic application, but just 16% have implemented the technology.

"That's the big opportunity we're looking at," Pretti said.

The single biggest question for the channel, especially in this economic climate, is what function traditional value-added resellers (VARs) or plain-old resellers will have in the SaaS or cloud computing world.

Software resellers have been forced to shift toward more value-added specializations. The few remaining large account resellers (LARs) tout their expertise in helping big companies manage and track software from many vendors. And other VARs play up their application development and customization expertise.

But as the vendors that reigned in the shrink-wrapped software world -- Microsoft, Symantec and others -- are rushing to the cloud, VARs fear a loss of customer control. Still other VARs are offering hosted services on their own.

Whether or not a VAR will view the addition of NetSuite services to the product arsenal as a plus or minus depends on the type of partner it is. "If you're just selling hardware, you'll take anything you can get. You basically hook the vendor up to the customer, walk away and get some revenue stream. If, on the other hand, you're a partner who does ERP or CRM implementations yourself, this might be a bad thing for you," said George Brown, CEO of Database Solutions, a King of Prussia, Pa.-based solution provider.

NetSuite has been creative in trying to recruit new partner types but has seen mixed success. A pilot program it inaugurated with CompUSA's small business tech reps two years ago pretty much folded when CompUSA closed the relevant locations.

The NetSuite-HP deal is the first of its type for either company, although it will likely not be exclusive. Both Pretti and Peiris said to stay tuned about future alliances.


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