You know that a market segment for enterprise software is about to get really big when system integrators start developing dedicated practices for it, and BPM 2.0 is no exception to the rule. Problem is, discussions covering the BPM space are largely dominated by reconverted BPR consultants who don’t care much about system integration, while system integrators are usually careful not to talk too much about what they are doing for their clients. As a result, they go largely unnoticed. So let’s shed some light about what they are doing with Intalio.

First, some metrics about training: over the past two years, 171 system integrators sent at least one consultant to an Intalio training session — and paid for it. On average, they actually sent two, and the largest team was 16 strong. Before the end of the year, a team of 30 will have been trained — at Satyam — and similar groups will be found at firms like Capgemini and CSC. If you cannot tell whether 171 is a big number, just remember that a vendor like Pegasystems, which is the leader in the BPM pure-play category in terms of revenue, has just over 100 customers. If each system integration partner brings just one customer, we end up having more partner-originated new customers than Pegasystems has customers overall. 171 trained system integration firms is a lot…

Second, some other interesting metrics about new resellers and referral partners: of the 171 system integrators who received training about Intalio, 30 are official resellers or referral partners today, covering 42 countries, on all five continents. Of the dozen partners we signed in 2007, all renewed in 2008, even though none managed to sign a single customer back then, while membership in our partner program costs anywhere from $15,000/year to $25,000/year, depending on how many countries are covered by the program. This begs the following question: Why did they renew?

The answer is pretty simple: whether you sell your BPM product directly or indirectly, the end-to-end sale cycle is pretty long. On average, it’s about 9 months, but some customers took up to two years to make their mind up, from the very first interaction we had with them, to the day when they sent their first trainee to one of our classes. But no matter how long the sales process is, it eventually comes to an end, and more often than not, a happy one. Over the past quarter (Q3 ‘08), more than a dozen customer subscriptions where signed by partners. This is a new phenomenon for us, and a sure sign that things are only going to accelerate.

Another reason why existing partners are renewing their membership and new ones are signing up (at the rate of one every other week) is because they’re actually making quite a bit of money selling Intalio’s software and the services that usually go with it. Our standard agreements grant our resellers 35% to 45% of software sales, and 100% of services sales. Based on the data we have access to, for one dollar spent on software, customers end up spending $2 to $3 on services. As a result, whenever Intalio sells $1 worth of software, our partners eventually book $5 to $7. Not bad…

As mentioned above, our partners can be found all around the world, but Latin America and Japan are the two fastest-growing geographies right now, so much so that we recently hired Process Experts (our trainers) in Brazil and Venezuela (we already had one in Tokyo). Moving forward, we’re expecting Malaysia and Thailand to join the party, while France is finally taking off. But make no mistake, China and India are at the very top of my priority list right now, and you should find me there at least once a quarter next year.

Last but not least: Intalio’s business model, explained in details in this recent post. We’re all about selling software, and have no consultants on our payroll. We sell software, give some of the proceeds to our system integration partners, and let them sell a lot of services on top of it. We do not compete with them in any way, unlike most of our competitors, who generate a majority of their revenues form consulting and system integration services. We like this model, because it generates the highest profit margins, and scales the fastest, while requiring the least amount of capital. So, if you’re in the systems integration business and are looking for the next big enterprise software market opportunity, look no further: BPM 2.0 is it, and Intalio is the best partner you can get in the business. By a long shot…

Update: It looks like some of our SI partners are looking for Intalio developers…