VARs Discover "Micro" Verticals

Memo to all vendors and VARs:

It’s time to stop promoting “vertical market” partner strategies or “small/midsize” business strategies unless you truly have something unique to offer. To paraphrase Yogi Berra: “Nobody targets those markets anymore. They’re too crowded.”

How can you differentiate? The VAR Guy gathered some interesting ideas from Craig West, director of channel sales at NetSuite, the software-as-a-service specialist.

During a chat earlier today, West described how NetSuite is working with solutions providers to develop “micro” verticals. For instance, VARs can build custom extensions to NetSuite’s hosted accounting software to serve niche markets. Instead of targeting the manufacturing vertical, a VAR could extend NetSuite’s software for flooring manufacturers or textile manufacturers, noted West.

Based on a sliding revenue scale, VARs earn 30 percent to 50 percent margin on the business they bring to NetSuite. Then, they earn 30 percent margin on annual customer renewals. Plus, they can charge customers additional fees for the micro vertical code they write. NetSuite, meanwhile, hosts the entire system.

NetSuite hopes the move to micro verticals and hosted applications will convince VARs to break out of their local geographies. The company also thinks VARs will sell code extensions to each other within the hosted NetSuite ecosystem.

West made a convincing case for NetSuite’s business model. And he sounded like an energetic successor to former channel leader Kristen Brown, who left the company earlier this year.

Always eager for a second or third opinion, The VAR Guy will ping a few NetSuite partners for their thoughts in the days ahead.