BSI’s TOP 100 VAR List Deep Dive – What the numbers reveal and what will change in 2018

As everyone is planning for a profitable 2018, learning from the past isalways insightful.  Therefore relooking at 2017 numbers can give us some helpful insights into the coming year.  I have always found Bob’s Scotts Top 100 VAR list to be worthy of more than a quick glance.  Having spent 25 years as an ERP VAR, I used this list to see if my company rank went up or down and to see what my competition posted as their revenues. I also paid attention to which VARs were added who weren’t listed in the previous year, and who decided to drop off (possibly due to a reduction in revenue or acquisition?).   I am pretty sure I wasn’t alone in that quest.  But as a serious “numbers” person*, I also used the TOP 100 VAR list as a guide to see who was truly “profitable” in my eyes and who wasn’t. Now that I am a retired Dynamics Partner and spend my time working with companies to increase their valuation, I can share my analysis of this year’s current list and give you a quick look at some trends over the last four years by comparing the 2013 and 2017 lists.  Here is what I see.


The “Cloud” message seems to be finally resonating.  83% appear to represent a cloud product – Up 44% from 2013.

A big gainer was Acumatica, up 10%. Microsoft D365 clearly was up the most with 37%, but I could not tell if that was because people were just referring to it as the new name or if they really were selling it as a product. Regardless it was the most dominant on this list.


Partners have decided to diversify a little more  as the number of partners who carry more than one vendor increased by 5%.

Partners that carried only Microsoft products dropped by 12% from 2013. This could be just a function of the list expanding more to other partners outside of the Microsoft eco-space or possibly that partners have chosen to represent other products.  I suspect it is more the former than the later.

Profitability:  (Here is the real surprise)

While there were some partners who clearly have increased their revenue significantly (acquisition or organically), revenue growth in general on this list was rather paltry.   Here are some of the numbers:

Revenue Growth was up by only 26% over a 4 year period – that’s an increase of only 6.5% per year!

Revenue per Employee increased by only $8,159 over the four year period – that’s only a 4% increase in 4 years!  ($204,752 in 2013 to $212,911 in 2017.)

Further, 23% of the Partners on the Top 100 VAR list had what I would say is “less than healthy” or sustainable revenue per employee.  Sustainable revenue per employee was 150K in 2013 and 168K in 2017 (adjusted for a 3% non-compounded inflation factor).  As an accountant, this is the most conservative amount that I would consider as a break-even  for an employee (salary + taxes+ benefits + overhead).  Anything less than that and you are losing money, if you aren’t already at that number.  If you live in a high wage area such as California, New York, Florida and Washington, the revenue per employee number needs to be even higher.   Currently only 24% of ERP Channel Partners generate 250K+ in revenue/per employee. This is what I would consider to be a somewhat healthy number and a number that would generate a decent double digit EBITDA multiple.  Conversely, this means 76% aren’t in healthy EBITDA digits, scary!

What does all this mean for the ERP Channel in 2018?

  • You will see more consolidation at the lower profitable partner levels – but don’t necessarily equate this with size. One of the top partners this year and in 2013 had dismal revenue per employee (according to the numbers they reported.) The least profitable by employee were partners in the $6M – $10M revenue range.
  • Lower profitability per person due to shrinking product margins will force partners to look at their vendors closely and determine who can give them the best margins for their efforts. With the rising cost of talent acquisition in this space, partners must achieve at least 30% margin on their software sales efforts to keep talented sales people in place. But even at 30% margins many vendors are dropping their prices to stay competitive which then lowers the revenue per seat partners can earn.
  • Partners need to create their own IP for their services and products. Charging by the hour for services is a bygone era.  It seems a few, but very few have figured this out.
  • As cloud margins continue to erode so will revenue per employee unless partners find their own way to monetize their cloud services. And moving to that new monetization will only cause a continued downward trend on revenue per employee, at least in the short-term while partners figure out what works. The best partners will figure it out, I have no doubt. It just may take more than the year 2018 to come to fruition.

I welcome your thoughts.  If you want to have a more accurate read on the numbers, take the Microsoft Benchmark Survey at All participants will receive the survey results.

* I have never been under any illusion that these numbers posted on the Top 100 VAR list are completely accurate. Some actually seem darn right unbelievable and I have removed the obvious outliers from my analysis. Bob Scott is not responsible for the accuracy of any number represented on this list.  The most recent Top 100 VAR list can be found at:

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