Resellers feeling stung

Resellers feeling stung

It is remarkable what happens when people actually read their contracts. If enough of them do so, in fact, they might even manage to get the contract changed.

Computer Associates International subsidiary ACCPAC International seems to have stirred up a hornet's nest among the VARs it inherited from last year's acquisition of SBT Accounting Systems. That people are upset about their treatment in a CA acquisition is certainly nothing new, but what is novel is the volume of noise being generated about it by the reseller community.

Unlike most of ACCPAC's other accounting lines, the SBT products provide source code for resellers and end users to customise applications. "For almost 20 years, SBT has provided a good niche opportunity for VARs willing and able to develop skills in its customisation and deployment," wrote one VAR recently. "The channel is tight-knit and [VARs] routinely share tips and tools of the trade among themselves. But since the acquisition, ACCPAC has unleashed a barrage of directives and restrictions at the channel, alienating dealers and end users alike by raising prices four times and changing detail after detail so frequently that it finally had to create a pricing calculator on its Web site so that dealers knew what to quote. The latest move was a "recertification" for all dealers that required new contracts to be signed by July 1.

What finally galvanised some VARs to rebel, however, was the reseller agreement ACCPAC distributed for them to sign by July 1 if they wished to keep selling ACCPAC products. The VARs that studied it found a number of things they did not like. For one thing, ACCPAC claimed the right to terminate their reseller status with or without cause and keep all of the annual fees dealers are now required to pay. ACCPAC was also establishing minimum requirements for dealers in terms of having office space and staff - a requirement many of the source-code customisers could not meet.

The biggest red flag of all, however, was that extensive language in the contract related to ownership of the "derivative modifications" - namely, the customisation code that resellers developed for their clients. The intellectual property rights in all derivative modifications were to be assigned to ACCPAC, which could sell the modifications to others without compensation to the VAR that wrote the code. The contract even appeared to bar resellers from licensing derivative modifications to one another, which would eliminate a significant source of revenue for many of them.

"ACCPAC is serving notice that they plan to take over our businesses," writes another former SBT VAR. "Already they try to steal our clients by forcing them to deal with ACCPAC directly whenever they can, and now they are going to steal our code too."

As emotions raged, accusations and threats from both sides mounted. A meeting was finally held between a representative group of former SBT VARs and ACCPAC officials in which ACCPAC offered to make modifications to the contract. The new contract acknowledged the VARs continuing rights to their derivative modifications, and former SBT VARs were grandfathered in from having to meet the minimum office space and staffing requirements.

Suspicions of ACCPAC's motives ran so high at this point, however, that not all the VARs were satisfied. An ad hoc group formed to seek legal counsel of its own to advise whether or not the new contract needed additional modifications, with each VAR contributing $US100 to the legal fund. As the July 1 deadline for signing ACCPAC's agreement approached, the group's lawyer produced a revised agreement that the VARs felt was more balanced - one that required ACCPAC, for example, to refund the appropriate proportion of the annual fee if it terminated a reseller's status without cause.

For its part, ACCPAC says it is done making changes to the contract for the time being. "We'll look at their proposed changes, and any that make sense will be incorporated in the future," says ACCPAC CEO David Hood. "But we're certainly not going to give up our right to terminate VARs. Our rights there are no different than what SBT had."

Hood acknowledges that the original contract's claims to derivative modifications was a mistake and promises that similar language that still exists in the end-user licence agreement for the ACCPAC Pro Series will also be eliminated in the next release.

Hood believes that the current agreement ACCPAC is offering is as good as or better than the industry standard for reseller contracts, and I wouldn't be surprised if he's right. Some of the former SBT VARs will refuse to sign it, however, either because they don't trust ACCPAC or because they just don't like the business proposition under the new rules.

It will be a while before the final results of this battle are known, but one lesson is clear: If you're going to fight a contract, you first have to read it.

Ed Foster is a reader advocate with ARN's US-based sister publication InfoWorld. Contact him at

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