OnSSI Rebuts Milestone 'False Claims'

Author: John Honovich, Published on Nov 16, 2015

The war rages.

Milestone's 'free' takeover of OnSSI accounts is, unsurprisingly, causing OnSSI to push back. And the former #1 Milestone partner is pulling no punches, charging Milestone with making false claims.

In this note, we examine the counterpoints of each side.

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Comments (13)

...but it is not healthy for anyone.

Except maybe the end-users?

Healthy for end users is when companies develop new technology or methods that actually lowers cost, not when companies cut costs in a frantic race to the bottom. I do think there are some short term benefits for end users but if companies cannot make money, it means they likely will scale back other things like new development or support.

While your statement is true, Milestone has no downside on this one. They've already been getting a low percentage (about 30-35% of MSRP probably) from their cut on these OnSSI customers, which weren't going to move over. This move means Milestone keeps getting paid on them instead of losing this revenue. If they do nothing, they lose the lower revenue that they were already getting before.

OnSSI on the other had has two choices -- either lower their prices to simply keep these customers (though their margins are higher now that they no longer pay Milestone), or lose them altogether.

In the end, both were already used to lower margins for these users and have the ability to capture a higher margin or lose it, so really, what is the risk of this behavior? Surely, neither will make this offer to new users that are either greenfield or users of other software platforms, so it really is just a race to KEEP these customers rather than see that revenue disappear.

To me, it seems like the right move, though I do agree that it's annoying for the rest of the industry to see it happen.

"This move means Milestone keeps getting paid on them instead of losing this revenue. If they do nothing, they lose the lower revenue that they were already getting before."

And in exchange, Milestone now needs to incur additional sales and support costs that did not exist when they OEMed through OnSSI. So, at best, revenue is neutral, but costs are much higher. It might look steady top line but will be worse bottom line.

"both were already used to lower margins for these users and have the ability to capture a higher margin or lose it, so really, what is the risk of this behavior"

The risk is that OnSSI just bought Seetec and their unit revenues will be higher now but they have (1) the cost of Seetec (whether its debt financing or new equity) and (2) the now ongoing Seetec development operational costs to pay. So, yes, they having savings from eliminating Milestone but now they have costs for paying for Seetec.

To your Milestone point, I'm willing to bet that Milestone already provided a certain level of tech support to OnSSI, so that might not be as much of a cost as you might think. And it's probably safe to assume that a decent percentage of those systems don't / won't need any real significant tech support, if any at all.

I do agree with your OnSSI point, though if the choice is lower price to keep customer or higher price to lose customer, I'd guess that they're willing to take every dollar they can get their hands on.

Good points on both, though...didn't really consider either of them.

Milestone now needs to incur additional sales and support costs that did not exist when they OEMed through OnSSI. So, at best, revenue is neutral, but costs are much higher.

How is revenue at best, neutral?

They had to split the revenue with ONSSI before, now they don't.

So before the breakup, OnSSI sold VMS licenses for 100 units (just call it units to show the trend). OnSSI paid 30 - 50 units (roughly, don't know, just guessing) to Milestone.

Now OnSSI is selling VMS licenses for 20 - 40 units (because Milestone is giving VMS licenses to their customers for free or at huge discounts). So costs are down (i.e. payments to Milestone) but revenue is down as much or more. Yes/no?

One thing that you're overlooking is that Milestone only gives free product for the life of your ONSSI SUP, assuming a natural distribution, we would expect 1/12 of the one year SUPs to expire in the first month, and 50% of them in 6 months.

When they expire and renew, Milestone now captures ALL the revenue that they used to split.

You can argue about the aging, or that not everyone will continue, but still this is added revenue.

"this is added revenue."

Low bar to set.

"When they expire and renew, Milestone now captures ALL the revenue that they used to split."

If that is such a fantastic business plan, why does not Milestone do it for everyone? Milestone is giving them brand new software. How many are going to be motivated to pay a premium when they just got new stuff for free?

I get that Milestone sees potential in future upgrades, expansions, maybe someone makes a mistake and adds a Husky appliance, etc. Basically what you are saying is this is a loss leader. Hopefully they make it up later.

Honestly - why are you even giving OnSSI the time of day in this - they need to learn that business is, to quote Hobbes, "Nasty, Brutish and Short". They are the prey in this cycle. The horror stories associated with their upgrades to 5.1 have been the thing of legend. Milestone saw an opportunity to turn customers to their product. Even if there was a small "fudge" on the upgrade path, in the end the Customers win. Additionally, if I were a customer, I'd want the company that was well financed, backed and had the technical means to survive the VMS wars. As far as I'm concerned, that's Milestone.

Just my two-bits.

"The horror stories associated with their upgrades to 5.1 have been the thing of legend."

Really? I had not heard of this legend.

Aside from the above hyperbole from someone obviously from the other camp, can any OnSSI dealers give us a real account of what they've experienced during the transition to the new recorder platform?

Where are they pulling the Milestone claims from?

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