OEM versus VAR partnerships, the royalty and ownership terms to negotiate, and how an ERP shortened Hotel Investor Apps' time to market
Charlie Fritsch · Hotel Investor Apps
Published September 1, 2022In 20 minutes, you’ll learn:
- How to structure your ERP partnership
- 3 impacts on profitability (Contribution value vs cost)
- How to drive more sales & profits adding apps Off ERP
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Charlie Fritsch explains why Hotel Investor Apps built on an ERP rather than creating an accounting platform from scratch. He compares OEM and VAR partnership models, outlines royalty and ownership terms to negotiate, and describes how ERP capabilities, integrations, and adjacent business-intelligence products can improve time to market and profitability.
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“who's a successful serial software entrepreneur he sold us his first company to Cisco in 99 for 175 million and so he was our software and Tech business advisor from the beginning and he said well don't you know an accounting platform is is daunting to build from scratch so look at building on top of an”
“it actually a value-added reseller may only get 40 percent of the revenue whereas a original equipment manufacturer can get oh uh 70 to 80 percent uh depending on volumes so this is the structure of the Erp partnership and important considerations development time excluded from royalty”
“can negotiate uh we were not able to to get it immediately but we have a trigger to be able to do that and some control over if somebody else was going to enter using accumatica into the hotel space so we became the solution on the accumatica platform for the hospitality industry”
“and that's what we're experiencing far more functionality and integrated isv community so we had lower startup costs quicker to revenue royalty for Erp replaces the internal development and support costs so it's not like we're just paying a royalty were were getting something back for the royalty payments in uh support and continued research and development from”
“developers in-house so we'd use them on a part-time basis uh and flexible basis more initially but now we're accelerating the development uh and again we can operate a little bit leaner because we are built on top of an Erp and then we host on AWS”
“Typical Royalty/ Revenue Split for OEM vs VAR”
“250+ Independent Software Vendors”
“ERP Partnership Impact on Profitability”
“Hotel Investor Apps Revenue Growth”
Video
How we are using ERP partners to create a billion dollar company - Slide Deck
Charlie Fritsch is President and Founder of MBA Hotel Brokers since it’s incorporation in 1997, as well as President and Founder of MBA Capital Funding, Inc., incorporated in 2004. Charlie Fritsch earned the designation of Certified Hotel Broker (C.H.B.) in 2001 and brings 22 years of experience in commercial real estate development, management, financing, and brokerage to the company. He began his real estate career in 1984 with the purchase and rehab of two historic hotel properties.
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Each slide with a short explanation of what it shows. Open the slide text for its exact wording.
21 passages
Charlie Fritsch Founder, Hotel Investor Apps How we are using ERP partners to create a billion dollar company Founder500, Sept 2022 … and the deals terms we used to structure the partnership
The talk moves from choosing an ERP and comparing OEM with VAR models to structuring terms and managing profitability.
Over the next 20 minutes: Choosing an ERP I’m going to show you OEM VS VAR ERP DEAL TERMS MANAGING PROFITABILITY Advantages of OEM and VAR Typical Royalty/ Revenue Split for OEM vs VAR Minimum Royalty Fee Splits Ownership & Rights Costs ERP Contributions Results
The framework weighs ERP functionality, integrations, and ongoing investment, then compares OEM and VAR ownership and revenue terms. An OEM keeps more revenue but pays a royalty on ERP revenue.
Building on an ERP? Look for broad Excellent general Functionality ISV Community Commitment to R&D-staying current Open API Automations Integrations Why, what, cost CHOOSING AN ERP OEM VS VAR REVENUE SPLIT OEM: Original Product Creation (from vertical knowledge & expertise) OEM own your code VAR provides configuration, training and support of ERP VAR-no code to own OEM: Minimum Royalty, plus percentage royalty on considered revenue. OEM=keep more of revenue Only pay royalty on ERP SAAS revenues Can also build apps on other platforms w/no revenue share
The G2 mid-market usability chart ranks Acumatica first at 8.83, narrowly ahead of SAP Business One at 8.81. The stacked bars break each score into administration, ease of use, requirements, and other factors.
Highest Rated ERP in Usability G2 Summer Mid-Market Usability Index
The award grid highlights recognition across ERP reviews, usability, relationships, construction software, and partner programs. The slide frames these awards as evidence behind six years of reported growth.
Fastest Growing Global ERP 6 Years and Counting, 2022 There’s a reason Acumatica is the fastest growing Cloud ERP company for 6 years and counting: we put our customers first
A logo wall groups 250+ independent software vendors by product-centric, service-centric, automation, and productivity categories, illustrating the breadth of the ERP ecosystem.
ISV Ecosystem 250+ Independent Software Vendors
This section introduces OEM and value-added reseller arrangements, which can be used separately or together.
OEM & VAR One or Both
The pie chart splits revenue evenly between the value-added reseller and an ERP royalty, showing the basic tradeoff in a VAR arrangement.
VAR Value Added Reseller
The diagram shows an OEM retaining the larger share while paying the ERP provider a royalty and a smaller customer-support share. The stated royalty range is 20%-30% of considered revenue, replacing original product creation and support.
OEM Original Equipment Manufacturer ERP royalty for OEM VA is 20% - 30% of Considered Revenue (allows for OEM support to customers) ERP royalty replaces original product creation and support
The checklist separates recurring ERP revenue royalties from support and implementation fees, and calls for clear rules on code ownership, exclusivity, territory, and add-ons. It also recommends excluding non-ERP products and reducing the royalty rate as revenue scales.
Structure Your ERP Partnership Development time excluded from royalty Monthly or quarterly payments Revenue share split of recurring platform rev. % Declining as revenue scales up Important Considerations ROYALTY FEE SPLITS OWNERSHIP Support service fees Non-ERP products excluded Set-up, implementation, customization, training fees, etc. excluded Own your code Vertical Exclusivity? ERP add-ons Territory? Own 100% of all apps not built on the ERP
The contract example contrasts a steeply rising minimum royalty schedule with a flatter minimum after the initial ramp. The adjacent tiers show the royalty percentage falling as considered revenue increases.
Minimum Royalty As an OEM
The slide connects a minimum royalty and revenue share to faster development, quicker market entry, lower churn, and more functionality. Those contributions can reduce startup and internal support costs while creating room for additional products.
ERP Partnership Impact on Profitability Minimum Royalty as OEM Revenue split on ERP revenue Contribution value vs cost COSTS CONTRIBUTION RESULTS Faster Development Quicker to market Low Churn Far more functionality Integrated ISV community adds revenue opportunities Lower startup costs Quicker to Revenue Royalty for ERP replaces internal development and support costs Use ERP to capture & retain customer base Drive internal growth with more apps built OFF of the ERP
The sample customer diagram connects operational, finance, HR, reporting, and analytics tools across 14 providers. Its many handoffs illustrate the complexity of running a business with separate systems.
Non-ERP Software Structure Sample Corporate Enterprise Customer w/14 different providers
The diagram routes property, point-of-sale, and reporting data into one ERP platform, with accounting and operational modules connected to business intelligence and other apps. Separate integrations add payroll, HR, and automation capabilities.
ERP Software Structure Sample HIA Customer: Power of ERP functionality and integrations
The stacked chart shows total revenue rising over time, with a sharp acceleration in 2023 and 2024. Revenue from products outside the ERP becomes a substantial part of the total in those final years.
Hotel Investor Apps Revenue Growth
This build adds a direct value label to the rising revenue chart: total revenue reaches $18m in 2024.
Hotel Investor Apps Revenue Growth
A labor dashboard combines room revenue and wages tables with overtime metrics, cost and hours comparisons, department-level cost per occupied room, and cost trends. It presents hotel labor performance in one view.
A BI analytics product layers customer-facing dashboards and reports on top of ERP data. The slide presents these customer-driven products as an additional revenue stream outside the ERP revenue split.
BI App Built off the ERP on a BI Analytics Platform Adding customer driven products for more growth of revenues not subject to ERP split, sold to same customer base.
The recap links ERP capabilities and ownership of created products to faster development, recurring-revenue terms, and added products beyond the ERP. Together, those choices are presented as a way to improve growth and profitability.
Over the last 20 minutes, I showed you: OEM commits to ERP w/min. Royalty, keeps higher % How to drive growth and maximize profitability when partnering with an ERP. Partnering with an ERP Structure the Deal Impact on Profitability Leverage ERP capabilities Get as much dev. time as you can Only pay % on ERP based recurring rev Negotiate rights Revenue split replaces in house dev & support Build on ERP strengths Drive more sales & profits adding apps Off ERP Own what you create
The closing recap revisits ERP selection, OEM versus VAR, royalty and fee terms, ownership, costs, contributions, and results as the main components of a profitable partnership.
Over the last 20 minutes: Choosing an ERP I showed you how to drive growth and maximize profitability when partnering with an ERP OEM VS VAR ERP DEAL TERMS MANAGING PROFITABILITY Advantages of OEM and VAR Typical Royalty/ Revenue Split for OEM vs VAR Minimum Royalty Fee Splits Ownership & Rights Costs ERP Contributions Results
Charlie Fritsch closes the presentation with a thank-you to the audience.
September 2022 Charlie Fritsch Founder, Hotel Investor Apps