https://youtu.be/5n6g3xVFV88
Steve Preda discusses several examples of successful value-added resellers and how the practice of customization of mainstream software packages expanded their profits and helped grow their companies.
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Value-Added Reseller
Today's episode is about a topic that came up in a conversation yesterday with one of my entrepreneurial operating system client. This is a software developer. They have a slate of dealers around the world that help distribute their software to their customers, OEMs and end users. And we had a conversation about how to motivate these dealers to have them be more committed, to be able to make more money with that software. And I remembered one of my clients who was a value-added reseller and they did a really great job with that.
And so I thought that maybe it's worth spending some time talking about value-added resellers and what they do. So this concept emanated from the early 90s when major software companies started to step ahead of the competition, SAP, Microsoft, obviously, also Oracle. And they basically started dominating the field. And all those other companies that were smaller software developers, they found that it was harder and harder to sell their software because everyone wanted to go with the source, sure solutions, the big boys.
And then what happened was some of these companies and also other companies, consulting firms, they started making money by actually integrating these softwares. These companies were called system integrators. They helped companies implement these softwares in their businesses, customize it to their particular company. And also these companies provided training. They provided ongoing consultation services to help the introduction of something like SAP. It can be could be a major job to customize and introduce it in a company. So this is where the value-added reseller concept was created.
Motivating dealers to be more committed is not just about selling software; it's about understanding the power of value-added resellers in creating true partnerships.Share on X
These companies were basically resellers of the software, the SAP software or the Microsoft software. They made a small margin on that software, and they sold all their bundled services together with the software. So what I was wondering about, whether this concept, we can drill a little bit deep into it. And then I remembered my client from back in 2007. It was a software company, was started by an entrepreneur. This was back in Hungary. The entrepreneur's name was Zoltan Schvarcz, and he had been a software entrepreneur in the 90s. He had a partner and he had a company which was moderately successful at best. They grew the business, but they got over leveraged.
Their margins were laser thin. And then he had the falling out with his partner. So they parted ways around the year 2000. And that's when Zoltan started his new company called XAPT or XAPT. They called this company XAPT, I guess, because they were implementing the Xceptor software, which is an ERP software from Microsoft. And the business was growing fast. Then around the year 2006, they stumbled upon an opportunity. They implemented, I think it was Navision or Axapta for a Caterpillar dealer.
Actually, they created a customized solution and they were referred to another Caterpillar dealer and they started getting into customizing Navision for Caterpillar dealers, and from then on, heavy equipment dealers and it really caught on and Microsoft started to embrace them. They got some engagements in the US, then in Australia, Canada. They were on stage with Steve Ballmer and the business was starting to grow really leaps and bounds. And I remember they were high margin business.
We worked for them in the year 2007 on a capital raising project, which they eventually turned it down and they went with someone else. But, you know, I looked them up just yesterday and I was shocked.