New leads are a source of sleepless nights and consternation for any sales organization. But Jim Newman, president and CEO of HRIZONS, a Minneapolis-based SAP gold partner that sells human resources (HR) software solutions, sleeps pretty well these days.
Five years ago, Newman’s company was a typical partner, with all of its revenue coming from project-based services sales as a systems integrator.
But then SAP acquired and Newman’s leadership team saw an opportunity to transform their business model into a more balanced and strategic company almost immediately.
“When SAP acquired SuccessFactors, we learned SAP’s segmented go-to-market strategy, and we realized, ‘Geez, it has this whole reseller go-to-market opportunity. Let’s see if we can leverage that and help drive more services sales and develop longer-term account relationships as opposed to project-based relationships with customers,’” said Newman, while attending and presenting at the SAP Partner Business Forum last month. “That opened the door for us to learn about the possibility for us to develop and bring our own innovative HCM software solutions to market.”
There was one problem, of course. HRIZONS did not have an in-house application development team. But it invested in a strong technology leader who built a solid team with both international and domestic employees, and it got to work on solving issues in the industry that hadn’t been addressed yet.
After signing an agreement with SAP to deploy applications using SAP Cloud Platform, HRIZONS worked on what it saw as the largest problem in the industry: job description pain.
“Customers around the globe, no matter what industry they are in, have to build a job description library,” Newman said. “The problem with job descriptions is they never got the attention of the big software vendors. But, if you look at all the content that is built into a job description and the many use cases HR has for job content in HR technology, it became an obvious focus. So, we took that age-old HR problem and built a new-age application to address myriad job description challenges, such as the lack of governance for job description management. We helped customers improve the quality and harmonization of job content and then integrated our solution to support the different HR processes that job content supports in HR technology.”
“What we have now is a fully integrated solution to SAP SuccessFactors Employee Central, SAP SuccessFactors Recruiting, SAP SuccessFactors Performance & Goals, and SAP SuccessFactors Succession & Development,” Newman shared. “There is a use case for almost every SAP SuccessFactors solution because job descriptions are a foundational HR element. We knew this problem existed. We knew that if we solved this the right way, this could be a really long-term play for us. It has turned out to be just that. It is our number one selling product.”
SAP benefits from HRIZONS’ IP by placing it in SAP App Center.
“SAP App Center allows us to market directly to the SAP marketplace with our innovative applications designed for SAP customers,” said Newman. “But SAP has also incented its sales force to earn commission from the revenue that SAP App Center generates from partner application sales. SAP is driving home the message that we need to solve customer problems, so it is motivating its sales team to work on deals with partners, whether it be an SAP product or a partner product on SAP App Center. If it solves a customer problem that ultimately drives revenue to SAP and its partners, then we are all partnering and everybody wins.”
Newman estimates that revenue from application sales and post go-live services exceeds 50 percent of HRIZONS’ overall revenue, with the other 50 percent coming from project-based, professional services engagements. But, as it continues to develop more solutions and managed services to support its solutions, he expects the new IP will grow to 75 percent of revenue.
“Our new approach did a few things,” Newman said. “It obviously gave us a new subscription-based, recurring revenue stream, which improved our cash flow. But, it also gave us an account base to sell into, which started to give us opportunities to upsell and cross-sell other solutions and services. From a growth perspective, because subscription-based revenue has a stepladder effect, by year two revenue increases dramatically as you add new subscription-based customers year after year.”
Like HRIZONS, Newman sees other partners beginning to develop their own IP. More will follow the model, Newman predicts, in whatever industry they specialize. He, for one, recommends the investment. He has slept much better since.
“I think we are pushing the envelope more than the traditional partner, but when you are a pioneer others will follow,” Newman said. “It just takes time to identify something that you can productize. And that is not as easy as people think. How do you identify something that customers are really going to want to buy and in volume? It is not easy to do. But, in the end, it is worth it.”
Frank Hughes is a Silicon Valley-based freelance writer and editor covering the tech industry for SAP.