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Finance & Accounting, Budget management, Contract management | 4 Min Read

The challenges ERP vendors & resellers face due to COVID-19

Written by:
Neil Robertson on May 5, 2020

    

ERP vendors and resellers – evolving to survive and prosper in tough times

On the 6th April 2020, the Sage Group issued a notice on their trading prior to the release of their interim results (due 13th May 2020) for six months to the end of March 2020, and every accounting software / ERP vendor, reseller and author should take notice.

The copy below is a direct extract from their trading update: (https://www.sage.com/investors/)

However, the sharp downturn in global economic activity caused by the spread of COVID-19 is expected to have a broad impact on businesses generally, and as a result Sage anticipates being affected in the following areas:

  • customers deferring purchase decisions, leading to a slowdown in new customer acquisition, licence sales and professional services implementations; and
  • a higher business failure rate leading to an increase in churn

Bottom line: many businesses will defer their plans to change or upgrade their accounting and ERP solutions, preferring to retain cash in such uncertain times.

Adjusting plans in light of COVID-19

All resellers of accounting and ERP solutions should now be planning for a significant reduction in new business sales, the loss of the associated consulting revenue and existing customer upgrades. For those of us that have been through numerous recessions, this is nothing new – but the challenges this time are radically different as a result of COVID-19.

Recessions are historically caused by market sentiment. Businesses (but predominantly CFOs) believe things are going to get worse and so reduce investment and expenditure to stockpile cash. It is a self-fulfilling prophecy; everyone now sees a real downturn and all take similar actions and the recession is born. However, as sentiment improves and businesses start to invest again, the market recovers.

With the current situation, no one knows when we will come out of lockdown or how many businesses will survive. The most heavily hit sectors will generate a cascade effect, where their suppliers will suffer customer attrition, topped up by bad debts. This impacts their cashflows and the cascade effect ripples deep into every other sector. Until CFOs have a clearer understanding of the potential impact on their businesses, they will opt to stop all unnecessary spend, look to get better pricing on everything they do buy and increase staff productivity everywhere they can to conserve cash and the accounting and ERP sector is going to feel the impact.

In every recession and associated recovery, two things always hold true:

  • As businesses recover, they will almost always invest in technology to deliver productivity gains in preference to hiring additional headcount.
  • The “value” of every purchase is scrutinised more carefully as businesses try to squeeze the maximum value out the money they spend.

Today, the global tragedy taking place surpasses anything we have experienced in our lifetimes, but it will pass and hopefully we will be better prepared against future pandemics.

Every ERP vendor and reseller should now be focusing on their plans to ride the downturn in new business sales, consulting revenues, the inevitable customer churn and bad debt.

 

Or put another way, what could you offer your existing customers that will help them to weather their own storms as a result of COVID-19, deal with remote working and ensure they maximise their productivity and make every $ work harder? And, in helping them, help your own business to survive and prosper?

 

At Compleat, we’ve been helping businesses to digitise their accounting and AP in light of COVID-19 – to meet the CFO’s priorities – taking control over all spend, increase AP productivity by up to 90% and reducing costs on what they already buy . If you’re wondering how best to successfully engage with existing and new clients by addressing their immediate priorities– we can help. Just follow this link.

    

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