1Mby1M Deal Radar 2011: Acumatica, Bethesda, Maryland

According to CIO.com, enterprise resource planning software (ERP) is designed to integrate the functions of a company’s various departments into a single unified software program running off of one database to facilitate the sharing of information. Such integration cuts down on errors and saves time, particularly in regards to patients’ medical histories. Since the advent of the cloud, SaaS ERP companies like Acumatica have found a market discontinuity against which to sell their products.

Acumatica is a company that boasts just under $10 million in annual revenue and develops Web-based ERP software that delivers the benefits of SaaS (software as a service) and cloud without sacrificing customization, control, security, or speed for its customers. It can be deployed on-premise, hosted at a data center, or run on a cloud computing platform. The company’s developers and ISV partners use its software platform to develop integrated modules with built-in security and reporting. One of the cloud software’s greatest selling points is that it adapts to each customer’s business. Acumatica offers a choice of deployment (licensed on-premise, licensed hosted, or SaaS) and allows customers to switch between the offerings as their requirements change.

Co-founders Mike Chtchelkonogov and John S. Howell, the company’s CTO and board co-director, respectively, founded Acumatica in 2006. Chtchelkonogov and Howell believed that existing ERP products were too inflexible to be converted to the cloud, and existing resellers were running into more competition from cloud-based systems. What was needed was a reseller-friendly solution that offered standard features (the commodity) with new technology (cloud).

Acumatica entered the market by using over 100 resellers that it enrolled in the first year. Many of those companies sold solutions to customers who were asking about Web-based solutions but only had on-premise solutions to offer. Many other customer wins come against SaaS-only providers, such as NetSuite, that the founders thought limited their customers’ access to data and that did not offer an on-premise option. In addition, unlike NetSuite, Acumatica offers unlimited user pricing so that customers can take advantage of the network effect.

Some of the options available are a financial suite (GL, AP, AR, cash, currency, tax, time sheets); a distribution suite (inventory, sales orders, purchase orders); a customer relationship management (CRM) suite; and a project management suite. Partners market a manufacturing suite (MRP, BOM, capacity planning, configurator), EDI, payroll, retail POS, barcode scanning and warehouse management, among other things.

In addition to SaaS-only vendors like NetSuite, Acumatica competes  with legacy vendors that typically have client-server solutions to provide ERP functionality. Acumatica’s solution can be accessed from anywhere using only a Web browser, which saves customers money on deployment and ongoing maintenance. Customers with multiple locations benefit from Acumatica because they only need one server that can serve all offices and employees. Its software is optimized for Internet communication, whereas legacy software assumes co-location with a server.

SaaS-only vendors lock customers into ongoing contacts without the option of where to install their data. Where Acumatica believes it trumps these solutions is in its adaptability. It can be deployed as multi-tenant (for cost savings) or single-tenant for compliance, data control, and deployment flexibility.

The company’s horizontal application can be adapted by other companies. The solution is targeted to mid-sized businesses – $5 million to $500 million – with complex financial needs and distributed offices. The company’s current target market is wholesale distributors, accounting firms, nonprofits, software companies, hosting providers, and technology companies. With its 3.0 release that contains project accounting, Acumatica  believes it will be able to direct its marketing efforts to professional services companies such as consultants, engineers or service companies that need to track project profitability.

The company has 120 resellers around the world as well as affiliates that help it to market services outside the US, and it predicts that its current roster of 100 plus companies will “change” for the better thanks to a new agreement signed in the last quarter of 2011. Seventy-five percent of the company’s customers select the license model, and the remaining 25% choose SaaS.

Most deals are between $30, 000 and $90,000. For example, pricing for the departmental edition of the Acumatica Financial Suite, which allows an unlimited number of users but provides a finite amount of resources, starts at $15,000. Other modules such as distribution, CRM, payroll, project accounting, manufacturing, EDI etc cost extra. Companies with more than 50 users have the option to upgrade their resources.

Part of the company’s growth strategy includes a desire to expand into more vertical markets and partner with other software companies that require backend accounting for their applications. “The partnership model works well and provides other software companies with a source of additional revenue and value for their customers,” says Acumatica spokesman, Douglas Johnson.

Angels funded the initial development of Acumatica. Later, Almaz Capital funded the market rollout. In September 2011, the company will announce a new strategic investment. The team hopes the company will reach profitability in one or two years.

Recommended Reading:

Building an Open Source ERP Company From Pamplona, Spain: OpenBravo CEO Paolo Juvara (Part 1)

This segment is a part in the series : 1Mby1M Deal Radar 2011