There are a lot of lessons from the sudden death this week of Sage Software’s largest channel partner, Dallas-based MIS Group.
First and foremost, the MIS Group tale is a classic example of why it’s just plain stupid for a solution provider to bet too heavily on one vendor. And by the way, Sage itself openly and aggressively encouraged that type of bet with a channel strategy that placed a premium on Sage-centric partners.
That strategy has left Sage with a black eye and could very well cause customers to reconsider their commitment to the Sage product line.
So how does the Sage partner of the year, achieving the highest total sales of Sage products in both 2007 and 2008, suddenly post a note on its Web site that it was for all practical purposes insolvent and unable to continue as a viable business?
Just like AIG bet beyond reason on credit default swaps and watched its balance sheet crumble through a $600 billion bet on credit derivatives, MIS Group made the same kind of foolhardy bet, only this one on scaling its Sage business beyond all reason. It’s no surprise that acquisitions that put a boatload of debt on the balance sheet are part of the story.
For an incisive look at just how much hubris was at the heart of the MIS Group meltdown, check out this article from WebCPA on the state of the VAR market from April 2008. MIS Group CEO Robert Muir, who founded MIS Group 13 years ago, actually boasts in the WebCPA piece that while many solution providers have either sales or technical people, MIS Group has “veteran businesspeople who are applying largely a scale business concept to a traditionally smaller business. It’s a different way.”
Different indeed. What’s so interesting about the MIS Group story is that Sage itself was caught off-guard by the death of its largest solution provider. In a ChannelWeb followup, Sage Vice President of Marketing Dennis Frahmann says the vendor was unaware that MIS Group would close up shop on July 6. What’s wrong with this picture? He then goes on to say that it’s obviously a difficult market out there. A difficult market is one thing. Your largest partner going out of business is plain and simply a sign of a faulty channel strategy.
Sage is also telling MIS Group customers that it will work with them to identify a new solution provider they can work with. How would you like to be a Sage customer, depending on the company’s software for your most mission-critical business applications, and get that e-mail?
There’s a lot of blame to go around in this channel story. MIS Group made a foolish bet to scale its Sage business beyond all reason. And Sage was more interested in keeping other vendors out than in making sure it was cultivating a strong and stable channel force based on solutions breadth and depth.
In the end, MIS Group didn’t get a bailout from the vendor or the federal government. That may be the only difference between AIG and MIS Group. What lessons are you taking away from MIS Group’s demise? Let me know what you think is the REAL channel story here.
