Is the Independent Medical Software Reseller a
Dying Breed?
An Optimistic Look at our Future
As I hung up the phone with an old friend of mine currently at
Misys, I was concerned at one of his last statements to me.
When I asked him if Misys used resellers to sell their products,
he replied that they did not and that a lot of companies "were
moving away from using independent resellers." Could this
be true, I thought? There certainly is a lot of data to
support his claim. Millbrook, owned by GE, and Medical
Manager, owned by WebMD are probably two of the biggest examples
of major medical software companies moving away from their
reseller programs. The irony is that it was their reseller
programs that enabled them to become leaders in the medical
software industry in the first place.
In a recent interview with a former Millbrook Reseller, I
wondered how the 2002 GE buyout of Millbrook affected their
small but growing company. After selling Millbrook
faithfully for 6 years, they were notified (along with most of
the Millbrook resellers) that their reseller agreement would be
terminated effective May 2004. Furthermore, as of May 2007
they will no longer be able to support their current Millbrook
customer base. Slowly they began the arduous processes of
both finding another system to sell and switching their
customers one by one over to the new system.
Why, Why, Why: What would prompt a medical software
company to do this? What would make a corporation move
away from its resellers -- the men and women on the front lines
who had enabled them to experience solid sales growth for years
-- in exchange for a new sales philosophy? A quick
observation of the companies that have moved away from their
existing reseller program shows that it is generally publicly
owned companies that make this move, often (it seems) after a
merger or buy out has taken place. But why?
During my seven years in this industry, I had the opportunity to
work for a small and growing company in my earlier life as a
sales manager. This company was bought out by a publicly
traded large healthcare company who began making sweeping
changes. I was present during one meeting where a
high-level manager discussed their diminishing reseller program
in these terms. "Using resellers is too expensive."
A
Stock-Centric Company: The "expense of resellers"
mentality becomes more clear when you take into account what it
is a publicly owned company is trying to accomplish and how they
often do their accounting. Publicly traded companies are
concerned with the price of their stock and generally report
their reseller margins as an expense. This type of
reporting inflates revenue, but it also inflates expenses.
For example, if you are buying a $1000 product for the $600
reseller price, they will report $1000 in revenue and a $400
expense in the form of a reseller margin. When the board
is determining ways to increase revenue and cut expenses it is
often the reseller program that receives an enormous amount of
scrutiny. It is the resellers who literally get sold in
exchange for a potentially higher stock price. The
critical flaw in this thinking is that most times without the
reseller playing an important part in the sales process, the
company would not have seen any revenue from the sale, because
the customer would not have purchased their product.
Additional Reseller Issues: Another difficult issue
a vendor faces in running a reseller program is maintaining the
over-all quality of the resellers. One large reseller said
to me about one medical software company, "They'll let any yahoo
be a reseller." This issue may also be a factor in
leading some vendor's away from their reseller programs.
Because resellers are independent, a vendor may find that they
end up with a few resellers who turn customers off or don't do a
very good job supporting their clients. They may begin to
feel that it is easier to hire good sales people than it is to
find good independent resellers. However, it should be
noted that most reseller agreements give the vendor the right to
terminate a reseller unconditionally and for any reason.
In light of this, it is much easier to get rid of a "bad"
reseller than it is to get rid of a "bad" employee.
Furthermore, both a reseller and an employee who look great on
paper can turn out to be completely ineffective. And some
new resellers who might appear at first to be ineffective, end
up creating a large customer base who absolutely loves working
with them.
There a several things a vendor can do to help with this
process, however the idea of never signing up 'bad' reseller is
like saying "I will never hire a 'bad' employee." It's
bound to happen sooner or later. The main philosophy a
vendor needs to embrace in order to raise the bar for their
resellers is to set realistic standards for their VARs and then
regularly communicate those expectations to their reseller-base.
Regular trainings where resellers can meet face to face with
employees and a good vendor/reseller website with detailed
support are both critical. With solid communication and
training, a good set of independent VARs can become a great set
of seasoned professionals.
A
Reseller-Centric Company: Luckily there are many
companies in the healthcare technology market who are extremely
reseller savvy and who understand the value of working with
independent resellers. They don't see resellers as an
expense, but as a valuable asset. They realize that there
is no better, cost-effective way to generate a successful
national healthcare sales force than with qualified resellers.
Small and mid-sized privately owned medical software companies
generally understand this principle.
It should be noted that the healthcare technology industry is
not like a lot of other industries. A healthcare software
vendor can not simply sell its software at Best Buy and hope
that doctors will come in and purchase. The medical
industry doesn't work that way. Doctors are genuinely too
busy and too specialized. Doctors also understand the
important of outsourcing. In general, doctors realize that
they need to work with a reliable local company who aids them in
the support of the hardware and software - pieces critical to
their business.
Two-Choices: In not so many words, a medical
software vendor has two real choices in the healthcare industry
for sales and support. Virtually every healthcare software
vendor uses one or the other or a combination of both of these
two sales strategies.
Option One is to create a large employee sales force and either
fly them around the country or locate them in offices in the
major cities at a relatively high-cost. While this offers
its own set of difficulties, a number of companies have chosen
this very option in lieu of using resellers. This may give
them a feeling of more control over the sales process, while
keeping margins in-house.
Option Two is to work with qualified, professional resellers who
possess the organization and the infrastructure to sell,
install, support, and train local medical offices on the
vendor's software. This is both more efficient and
exceptionally more cost-effective. As well, a qualified
reseller who has a vested interest in a customer can be a
critical ally to a software vendor's goal of having a happy and
satisfied customer base.
The
Brightest Side: Vendors who decide to go away from
their reseller programs will learn the hard way never to
underestimate the power of the relationship between a good local
reseller and their customer base. New companies will
always emerge and will always have a place for qualified
professional resellers. Occasionally a reseller may find
themselves in a situation where they are scrambling to find a
new product because of the decision of their vendor, however,
there will always be cutting-edge medical software and hardware
companies who are excited at the opportunity of working with
you. As a reseller you are a powerful entity who commands
more respect than you know. You are an asset in this
industry and your company is a valuable partner not only to your
clients, but to the wise vendors who choose to back you.
If a vendor takes the time to create a respectable reseller
program and then invests some of the company resources in
training, communicating, and supporting their resellers, they
will be rewarded with exceptional growth.
While at AltaPoint for 2 1/2 years, we did just that. We
developed a unique reseller program, we focused on training and
communication, and we witnessed incredible results. Our
installation based tripled (3000 installations now according to
their website) and hundreds of resellers contacted us with a
desire to sell our products.
Optimism: Luckily for all of us, we run our
businesses in a free enterprise system where we find both
competition and opportunities. Companies who fail to
recognize the value of their resellers will learn a difficult
lesson, while their former resellers slowly move their
customer-base from the old system to a new system. This is
the way it has been for the last 15 years. This couldn't
have been more obvious than in the instance when one of
Microsoft's biggest competitors decided to move away from their
reseller program in the mid-90's. Many of their resellers
simply switched and began selling Microsoft's products.
This company has since gone back to a generous and successful
reseller program. In the end, reseller-centric companies
will always win.
-- Kevin Burdick,
InvestMedLLC.com
January 2005, TOP STORY: My New Year's Resolution --
Starting the New Year Off Right For Your Business
November 2004, TOP STORY: InvestMed's 2004 Medical Software
Comparison Matrix
