NetSuite, ex-reseller locked in ugly legal battle

In colorful evidence of the competitive atmosphere SaaS (software as a service) poses for vendors and resellers, NetSuite and a Miami company named Skyytek -- a former NetSuite "partner of the year" -- are embroiled in a legal battle, with both sides claiming the other used disparaging remarks to convince customers to switch allegiances.

There has always been some tension between channel partners and software vendors over who "owns" the direct customer relationship, since it can lead to lucrative, ongoing services revenue. And the emergence of SaaS, wherein vendors host the software themselves, has heightened the stakes, with partners worrying they'll be cut out of the loop.

So far that hasn't happened, but NetSuite, for one, has made clear moves toward capturing more services revenue. Last year, it rolled out a new set of implementation methodologies, training courses and support services.

Meanwhile, NetSuite and Skyytek had already ended their relationship several months before Skyytek filed its breach of contract suit in February, issuing a public statement that provided little detail about the reasons for the split, according to published reports. Neither company could be reached for comment.

But now, court documents filed by the parties in U.S. District Court-Northern District of California provide a detailed account of what allegedly led to the breakup.

Skyytek and NetSuite signed a deal in September 2005 that dictated NetSuite would give the reseller 30 percent of the gross revenues from software subscription sales or renewals, according to Skyytek's original complaint. The pact also specified that if the agreement was terminated, NetSuite would continue paying Skyytek for three years, Skyytek alleges.

But the seemingly amicable agreement was only a mirage, according to court documents.

NetSuite made disparaging remarks about Skyytek from 2005 through 2008 to "numerous customers and prospective customers" in the U.S., both "via telephone and in person" and tried to get them to work directly with NetSuite, according to Skyytek's complaint.

NetSuite also failed to approve Skyytek ads in a timely manner and refused or was slow to issue Skyytek-related press releases, according to Skyytek.

In addition, NetSuite has not paid Skyytek in full, and has been late in making payments, Skyytek says.

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