How we are using ERP partners to create a billion dollar company

give it up for Charlie fridge [Applause] thank you I figured this might not be the most popular topic but um glad you you guys could uh could join a little bit of background uh I started in the hotel industry long before we started our software business in the hotel industry um I've owned a hotel real estate brokerage firm that's lists and sells

hotels and I've had that company for 25 years we also owned a hotel we had done Capital markets advisory for hotels arranging mortgages for hotels oh great thank you so uh that was how I got started in the industry and uh analyzing Hotel profit and loss statements and all of the reporting for hotels

we've basically looking at the output of the accounting systems and all the software we felt there was a need in the industry and an opportunity to create a more modern web-based robust integrated accounting and business intelligence platform so that's how we got started and I was fortunate to have a longtime friend

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

existing Erp and so we my son chip and I interviewed a number of different platforms Salesforce intact others and then decided on the Erp that we would build on top of so what we'll talk about in the next few minutes is choosing an Erp advantages of

being an or OEM versus a regular VAR so um and does everybody familiar with those acronyms uh original equipment manufacturer writes original code the equipment evaluated reseller just takes the product configures it but without writing any additional code or creating anything new for any specific

vertical so we've we looked for an Erp that wanted to partner with us was one of the the key things uh and we found one but so some of the factors you know there's a typical royalty Revenue split and with an oem status versus just evaluated reseller status you can get a higher split of the revenue

some Erp deal terms we'll look at minimum royalty fee splits ownership and rights and then managing that the profitability how that impacts the costs what the Erp is contributing to your business and the results so building on top of an Erp why would you do that well first of all as I said it you know an Erp is a

massive project right now the major erps as uh Shaz just showed there you know oracle netsuite sap Microsoft Dynamics they're all big companies uh we didn't choose any of those but I'll I'll show you in a second who we who we chose um but uh these are the points we wanted to

look for uh broad excellent General functionality not necessarily specific functionality for our vertical an isv Community independent software vendors that are already integrated into that Erp that provide functionality that you can't get from just a standalone software like an accounting program so in our world in the hotel space we compete with Hotel specific accounting

programs but they're not erps and so they don't have a broad integration with lots of other software that you can take advantage of uh on an Erp so the independent software vendor Community was a factor commitment to research and development staying current having an open API structure automations and Integrations and then as a original equipment

manufacturer the original product creation basically came from our vertical knowledge of the industry and so our broad Knowledge from uh listing and selling hotels from the real estate the capital side arranging the capital the debt and Equity side as well as operations and having owned a hotel um gave us the knowledge

and then where we lacked we just uh hired to fill in some of our weak spots so with an 08 being an oem you own your own code you own what you create but obviously you don't own the Erp platform product uh evaluated reseller provides configuration and training and support on an Erp but they don't generally write any original code and don't own anything

and usually and I'll show you in a second the split um with being an original equipment manufacturer uh there is a minimum royalty as opposed to being a VAR it's usually just a percentage split so they don't have that risk of a minimum payment but they also don't get as high of a split so there we have a minimum royalty and then also a percentage royalty on considered

Revenue with you keep more of the revenue and you only pay royalty on the products built on top of the Erp and but you can build outside of that Erp as well which is what we've done also so these are some of the Erp systems this is a usability index for mid-market Erp platforms uh we chose the top one on

the list there Attica they have a strategy of growing through Partnerships um and they liked our depth of knowledge in this vertical and so it's been a good fit uh again just acumaticas fastest growing Global Erp and this is the isv ecosystem with acumatica so it just shows you there's a

lot of them uh in all four of those categories not all of those are anywhere near uh applicable to our vertical to the hotel industry but uh half a dozen of them are and we've we've have partnership agreements and we can make Revenue off of those this is just a little snippet from our OEM software license agreement the Highlight basically what we do we

adapted the acumatica solution to develop additional modules um so we developed hotel-specific functionality and built that on top of accumatica then we resell it as a private label so our uh our platform is labeled as Hotel investor apps uh typical VAR split is 50 50 up to that

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

when you're starting it's going to take more time than you think so try to get as much time prior to starting minimum royalty payments monthly or quarterly payments Revenue share split uh negotiating that and percent that Revenue share um you may be able to negotiate a declining percentage as you scale up with higher volumes uh fee splits

uh the we don't pay uh any Revenue to the Erp uh from our implementation and training fees we only pay on the monthly SAS fee uh we own our code vertical exclusivity is something you

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

uh and we own 100 of what we built uh so this is an example also um you want to avoid paying minimum royalties uh and have a flat minimum royalty of course um and as as men as low as you can go but uh all depends on the market and and what you're looking at um costs of partnering with an Erp

of course the minimum royalty as a OEM partner Revenue split on the Erp Revenue but the contribution from the Erp and one of the key things that we we felt was it would give us a lot faster uh time to Market and shorter development time of course an Erp generally has very low churn rate

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

the Erp we also can drive more internal growth with applications built off of the Erp so we also are developing on AWS quick site a business intelligence platform like uh Tableau or power bi so we have some business intelligence tools that were now just beginning to sell to our same customer base

to double potentially triple the annual contract value that we have from each hotel that we sell this is the complicated mess that one customer sent us that they were using um which has it's really about 13 different providers but um even more higher number than that as far as applications and functionality so

they had an accounting program our competitor in the middle uh they were using a business intelligence tool called profit sword a couple of their applications they were using a bi platform called psisense they're using a payroll human Capital management software purchasing software a vendra I buy um and then they were using other programs for some of the other accounting functions

uh like uh fixed assets purchase orders uh Inventory management contract management so instead this is what we can offer and we've built uh functionality on top of the Erp in here and then we're building on quicksite um tools for operational anomalies labor intelligence Pace reporting uh which is

comparing future revenues to where the hotel was same time last year and we're building some other applications in business intelligence tools again off the Erp and then we're using the Integrations these are four categories of isvs that we have agreements with that also Drive some

revenue for us and then we pull data from these Force sources from the hotel property management system from purchase from a point of sale systems and Smith travel research is a data provider in the hotel industry and then from purchasing applications so uh this is our current and projected Revenue growth and it may look like a

crazy acceleration of growth but there's a very long sales cycle for Enterprise level companies particularly in the hotel industry and we've been working on a lot of the larger companies for a couple of years now and we have a significant pipeline of those companies where we'll be adding you know 100 hotels some have 100 200 250 hotels so that will enable

us to scale up more quickly and next year and the year after the revenue from our business intelligence applications are going to equal or exceed the the accounting piece so that's our projection that's why uh it's not just pie in the sky but based on our our sales pipeline right now

this is a just a a screenshot from the quick site business intelligence tool we've built a labor Analytics tool so we're pulling data from a payroll time and attendance provider and then pulling that into quicksite and then we're we're using our financial data to

create key performance indicators on with the labor data uh in quicksite

so uh anybody have any any questions yeah what one minute or two two all right cool uh so that was that's been our experience of partnering with an Erp um you commit to the Erp with a minimum royalty but it with in doing that and creating your own product vertical on

top of the Erp uh you have a much higher split of the revenue on that Erp uh you can Leverage The Erp capabilities and and within Erp there are many modules and so we have sort of a base product and then we can upsell additional modules like uh purchase orders fixed assets uh inventory um control and contract management

structure of the deal um obviously get as much development time as you can only pay percentage on the Erp based recurring Revenue negotiated rights um the impact on Revenue some people asked well do you think this is going to impact your you know an exit strategy will somebody an investor pay less for uh uh your company because you're built on another platform uh so far all of the

investor companies I've spoken to that hasn't been a factor um you know obviously the bottom line will be a factor so only to the extent that it would impinge on your bottom line but again because it's replacing some resources you otherwise have to pay for um I don't think it's going to impact our profitability

so that's it any questions yes Cody how many people do you have in technology right right we started off actually with an outsourced team uh and then uh they and we hit it off and uh Ricardo's here with me but they've basically now we're bringing their team of uh about six

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

thank you very much