Is Altara’s growth model a sign of the times for VARs?

Read this article at Accounting Today 

by Seth Fineberg

Irving, Texas (February 2004) – It may be no surprise to find large accounting and business application product resellers like Altara getting larger, but many in the industry see it as a sign of things to come for smaller firms.

Resellers are realizing that just being a small accounting software reseller is not conducive to long-term growth, and are under increased pressure to get big, get bought or grow within a niche if they want to stay in business.

McKena Group, a small computer consultancy serving the greater Dallas/Ft. Worth area, recently merged its Microsoft Business Solutions practice with the Southwest operations of Altara — a global MBS partner. McKena Group’s business solutions practice will now be doing business as Altara and will be represented by key personnel from McKena and Altara. In turn, Altara will continue to provide MBS products including Great Plains, Solo­mon, Axapta and Microsoft CRM to middle-market companies in the Dallas/Ft. Worth area and throughout the South Central region.

The McKena buy is just one of five that Altara plans to make in the region within the coming weeks as part of its overall growth strategy.

“We had been talking to Mc­Kena for about six months. They are much smaller and saw eroding margins, they were under 10 people, but they had a good customer base,” said Duane Connor, president of Altara Southwest. “You can either stay very small or become a market player, but you aren’t just going to drive business on software sales alone. We are trying to raise the bar, not eliminate competition.”

Nationwide, Altara now has over 90 professionals in nine office locations and over 800 custo­mers, but they are not the only firm that believes that growth or diversification is important for a reseller’s survival.

Alex Solomon, co-founder of New York-based Net at Work, has grown his firm organically over the past several years, and it is now a $6.9 million operation with a staff of 48. His firm is also a top Best Software and Accpac International reseller, which — due to Best’s recent acquisitions of Softline Software, Timberline Software and Accpac — has put his firm in a unique position to offer more and grow accordingly.

“We’ve changed our sales from product-driven to solutions-driven, and we look at what clients want. It’s hard for me to see how smaller dealers [six to 12 person firms] can survive. They need resources, and small shops can’t do it,” Sol­omon said. “Now that most consolidations in the publisher world are finished, you will see it in the reseller world. VARs either need to specialize or have critical mass to support ‘x’ amount of clients and have ‘x’ amount of products.”

So where do the smaller resellers fit in? That depends on their specialty focus or, in some cases, their geography. If a small reseller doesn’t have to compete, it is likely that it will survive and grow at its own pace, much like Canfield, Ohio-based Neo3. The firm has about 13 employees and earns approximately $1 to $2 million per year reselling MAS 90 and BusinessWorks accounting software for Best.

Neo3 sales manager Jim Rosenberg doesn’t see a problem with his firm’s business strategy, mostly because he is faced with little competition; but he realizes that could change if the firm grows.

“Our target is $5 million to $15 million companies, and that’s bread and butter for us. We have partnerships for SalesLogix [customer relationship management] or any specialty item, where if we get into that situation we refer out,” Rosenberg said. “We are growing but in our same market space; though, at some point we may reach out to larger areas and, if that’s the case, we may be more ‘acquireable.’”