Category: NetSuite
September 23rd, 2009
SaaS for your business in the cloud
Not to be smug, but SaaS is a great place to be in the software industry these days. I was talking to salespeople for several SaaS vendors and partners at a customer event a few weeks ago and there was a palpable sense of relief that they’d moved out of on-premise sales — one described to me a recent joiner’s event at his current employer where a dozen or so former Oracle high-fliers were coming on board. “These guys know all about following the money,” he commented.
Today, I’m at a NetSuite customer event in London and CEO Zach Nelson has just displayed a chart quoting IDC and Gartner data that shows on-demand ERP sales are growing at a rate four times faster than on-premise. OK, that’s from a lower base, but remember too that SaaS vendors book far less each year from each individual deal than their on-premise rivals, which makes their faster revenue growth even more impressive.
So I’m wondering, what’s driving this remarkable growth? Conventional wisdom says that it’s just lower upfront cost and faster time-to-live that’s driving businesses to adopt SaaS, especially in these straightened, cost-conscious times. But there’s another factor that I think is underrated and I’m interested to hear Nelson emphasize it in his presentation.
“So you’re going to build your business on software that was designed before the Internet existed?” he relates asking a customer in a recent sales call. Increasingly today, business is done in the cloud — with customers, suppliers, employees — and Nelson’s message is that, to participate fully in that medium, business systems have to be in the cloud, too. “Your company is in the cloud,” his presentation concludes.
The message is reinforced by Peter Bauer, CEO of Mimecast, which adopted NetSuite to manage its growth providing email management services as a multinational business. “You have to increasingly think of customers visiting your organization as an online experience,” he said, speaking on a customer panel at the event.
Perhaps more SaaS vendors should take a leaf out of NetSuite’s book. Instead of going on about the lower cost and faster time-to-live of their solutions compared to conventional software, they should just point out that operating in the cloud is how business is done these days, and anyone whose business systems operate anywhere else is going to get left behind. It’s as simple as that.
April 2nd, 2009
SaaS channel models morph into shape
Mark down NetSuite’s announcement today of SuiteCloud Connect for Salesforce.com (all Techmeme coverage) as a victory for the cloud over individual vendors. Sure, this is still about who owns the biggest slice of the cloud (did you notice the resemblance between NetSuite’s SuiteCloud diagram and a pie-chart? Guess who got the lion’s share). But it represents a blow for Salesforce.com’s own-the-whole-ecosystem AppExchange model, just as much as it’s a step back from NetSuite’s former rhetoric about standardizing on a single vendor’s suite for all your needs. [Disclosure: NetSuite is a current client and I've also done work recently for Salesforce.com and Intacct].
It signals that intermediaries are going to have more power in the cloud and we’re not going to end up having to choose between just a handful of mega-vendors. Instead, interoperability (dictated by the cloud, not a self-appointed elite) is going to be the dominant meme and vendors will have to empower third parties to link their application platforms wherever customers can find the most value. The open cloud wins the day.
There’s a strong message emerging too about the importance of channels in delivering cloud and SaaS solutions to customers. While NetSuite is clearly motivated by being able to market its ERP and ecommerce platform to Salesforce.com’s SaaS-savvy customer base (and who in this market doesn’t covet a slice of that action?), it’s increasingly relying on a number of different kinds of channel partners to reach the market. At first glance, the partner ecosystem for SaaS doesn’t look that much different from the channel partners that traditional software vendors have worked with. But the detail of how they execute is much changed. Read the rest of this entry »
February 18th, 2009
Weaving the real-time web into brick-and-mortar retail
When I walked into Circuit City in San Mateo last September to buy a Flip Mino pocket camcorder, the visit summed up the clash of the old and the new that retailers are facing in the digital age. The manufacturer’s website had referred the chain as a stockist, and my iPhone had helped me find my way to the nearest store. But I nearly walked out of there empty-handed because the assistant was having trouble finding the item on the shelves.
Circuit City has since gone out of business, along with a lengthening list of other familiar retail names. Another factor in many of these closures, according to one commentator writing about the demise of fitted kitchen and furniture chain MFI in the UK, is a focus on cost-cutting at the expense of staff skills and customer service. So long as consumers were flush with cash and almost limitless credit, retailers only had to open up shop and the takings would roll in. In today’s changed climate, I believe the retailers that have continued to invest in providing a good customer experience (provided they didn’t overextend their borrowings to do so) are the ones that will be best placed to survive.
Trouble is, the Web complicates the picture for retailers. For many purchases, consumers get a better customer experience from a well-automated website than they do from most retail stores. They can search easily, instantly see what’s in stock, look up product specifications and discover personalized suggestions and offers based on their browsing and buying history. Few retailers hook up their online presence to take advantage of the one clear benefit of a brick-and-mortar presence — the possibility for a consumer to drive a few blocks and pick up their purchase today — and the minority that do rarely manage to match the quality of the online customer experience with the service levels their staff are equipped to offer in store.
This is difficult enough for large retail chains — even those with deep pockets — but it’s a real challenge for the smaller retailers that often have the best record of personalized customer service in-store. How do they replicate that customer experience online without Read the rest of this entry »
January 5th, 2009
Debunking myths about the SaaS partner channel
There are a couple of widely-held myths about the SaaS partner channel that I saw being debunked in the closing months of 2008. No, neither of them were the hoary old myth that SaaS vendors don’t need partners because they can use the Web to sell direct — the dot-com bust proved that one wrong. Solution providers are still alive and well on the Internet, but to succeed they have to ignore some common preconceptions. Here are two statements I often hear from vendors and other experts when talking about SaaS:
- SaaS vendors need channel partners because customers will only buy business solutions face-to-face
- SaaS partners have to run lean operations because their margins are slimmer
Both of these assertions are just plain wrong — and I have to confess, that’s not something I would have expected until I heard the evidence.
First up is the assertion that SaaS business solutions have to be sold face-to-face. I heard this point made very firmly by SAP last year talking about its experiences with its Business ByDesign offering. It had originally hoped this would be bought self-service via the Web, but later found it required at least a day’s face-to-face requirements discovery. This led SAP to conclude that it would have to rely on partners with specialist vertical expertise or existing local trust relationships. It seemed a logical conclusion, knowing that another SaaS business suite vendor, NetSuite, operates a network of regional sales offices precisely so that it can be close to its customers.
But then in November I moderated a solution provider discussion at the SIIA OnDemand conference in San Jose, in which four solution providers who work with, respectively, Intacct, Intuit, NetSuite and Microsoft, spoke from their own extensive experience. There’s a very good video of the complete session online now. The most surprising insight of this very informative panel discussion was that SaaS solution providers are getting smart at using the Web to sell, close and deliver solutions remotely — often without any face-to-face contact at all. What this tells us Read the rest of this entry »
December 9th, 2008
NetSuite rises in land of the sun
On-demand ERP vendor NetSuite continued its march round the Pacific Rim with its launch in Japan today. NetSuite Release J has been fully localized for Japan’s accounting rules and oonventions, regulations and taxation — as well as language, of course. Developed over the past 18 months in partnership with two local joint venture partners, NetSuite is claiming the release is the first SaaS offering to provide full support for Japanese accounting rules and consumption tax.
When integrated with NetSuite’s One World offering (launched earlier this year), businesses running on the Japanese version can be consolidated into multi-national, multi-company business systems giving real-time visibility across a global enterprise. Unsurprisingly, some of the first customers for the Japanese version announced at launch are subsidiaries of companies headquartered elsewhere, such as Atlanta Georgia-based Premiere Global Services and Switzerland’s Sensirion. But there are also indigenous customers, including Sinsouki, a car parking management firm, and Columbia Music Entertainment, Inc.
The Japan launch follows September’s opening of a NetSuite sales office in Hong Kong to serve the Chinese market, along with expansion of existing activities in Singapore and Australia. The moves across the Pacific Rim signal the company’s determination to expand international sales as a proportion of its overall business.
September 16th, 2008
NetSuite parts ways with largest reseller
Skyytek, three-times winner of NetSuite’s partner of the year award and the SaaS business systems vendor’s largest reseller by revenue, will cease to be a NetSuite Solution Provider from the end of this month, customers have been told. In an official statement (quoted in full below), Skyytek said that it will “continue to develop and support … NetSuite implementation services and vertical product initiatives” but that customers’ “product subscription transactions, such as adding users and modules” will be processed directly by NetSuite in future.
Although Skyytek’s current customer numbers are not public, several hundred active NetSuite customers may be affected by the move. Skyytek’s website claims more than 600 NetSuite implementations in total, but it is not known how many of these are current, active accounts. Both Skyytek and NetSuite declined to comment further when contacted yesterday.
According to a “joint public statement” issued to customers by NetSuite, the move is “the outcome of a decision by NetSuite and Skyytek to take our respective businesses in different directions.” Skyytek was one of NetSuite’s earliest reseller partners but, according to Mick Gallagher, CEO of LST, another longstanding NetSuite reseller, the problem was Skyytek’s model of appointing third-party consultants and local solution providers as sub-partners.
“The Skyytek model works well for small companies who are building a channel from infancy, [who] lack market locations and are trying to gain name recognition,” Gallagher told me yesterday by email. “However, when the channel matures, it is confusing for the partner community as well as the end users.”
It’s not clear how long tensions have existed in the relationship between NetSuite and Skyytech, but last week’s launch of the vendor’s own SuiteSuccess professional services offering may have played a big part in crystallizing the separation. NetSuite now operates Read the rest of this entry »
June 2nd, 2008
NetSuite cuddles up with OpenAir buy
NetSuite made its first ever acquisition today, buying Boston-based professional services automation vendor OpenAir, which I once described as “one of the most consistent performers of the on-demand applications sector.” I had a joint call this morning with OpenAir CEO Morris Panner and NetSuite CEO Zach Nelson, both of whom I’ve known for the best part of a decade now. Here are my takeaways about why this deal was done and what it means for NetSuite.
There will be more acquisitions. Nelson made the expected noises about how “we’re going to have our hands full now” and how “very unique” the OpenAir deal is. But at the same time he admitted it had “opened our eyes to the opportunity” for growth through acquisition. I’m not expecting a sudden flurry of M&A activity, but I’m certain that NetSuite is keeping a watchful eye for other potential candidates.
NetSuite needs more than organic growth. On-demand financials are a tough sell, the cost of which is reflected in NetSuite’s consistently high spend on sales and marketing. Adding OpenAir allows it to have something else to sell instead, benefitting from what Panner describes as “the rising trend for services businesses.” Then, when those customers reach a point where they’re ready to upgrade their financials or their CRM system, NetSuite will be in the right place at the right time. “This enables us to get toeholds in accounts that aren’t ready to change their ERP system yet,” explained Nelson. This is at the core of why I believe there will be more acquisitions. Sure, there are some unique reasons for buying OpenAir, such as acquiring a substantive East Coast presence, but there are plenty of other potential targets that could further expand NetSuite’s customer footprint.
NetSuite’s strategy is pure Ellison. I say this on two counts. Read the rest of this entry »
May 2nd, 2008
SAP's SaaS pull-out will help rivals in Europe
The news that SAP has pushed back the roll-out of Business ByDesign by twelve to eighteen months should be music to the ears of its SaaS competitors, especially on SAP’s home turf in Europe. By announcing its own SaaS product for the midmarket late last year, SAP put its stamp of approval on the on-demand model. Now that it has said customers will have to wait another year or more before they can buy it (due to scaling problems, no less), the company has created the worst of all worlds: it has validated a market and then vacated it, giving competitors a free run. Even SAP can’t spin FUD (fear, uncertainty and doubt) for as long as 18 months — especially not in the on-demand market, where customers can be up-and-running within weeks of placing an order.
Whereas prospective customers and partners might have taken a wait-and-see approach if Business ByDesign were due later this year, delaying it until late 2009 or into 2010 will drive both camps into the arms of competitors (perhaps we should rename the product ‘Business ByTwoTen’). I suspect this will especially help smaller local players whose marketing and partnering efforts in the European market would previously have been overshadowed by SAP’s looming presence.
It’s certainly welcome news for UK-based CODA, which next week at Dreamforce Europe releases phase I of its on-demand CODA2go application, built on Salesforce’s Force.com platform. “Of course we’re not looking to deliver as broad a portfolio as SAP, but we have designed a truly international, sophisticated accounting system that will support not just small and mid-sized companies but also enterprises. That space is going to be a lot clearer without SAP in the market yet,” commented group marketing director David Turner by email yesterday.
Andre Kwakernaat, CEO of Netherlands-based Twinfield, probably Europe’s most established on-demand financials vendor, was more cautious, but saw SAP’s move as Read the rest of this entry »
April 17th, 2008
Business systems for a faster, flatter world
One of the biggest problems facing enterprises today is that the world is communicating faster than their IT systems can keep up with. This is particularly obvious in businesses that operate multinationally. Their managers collaborate and communicate daily across timezones and geographies by phone, email and Web conference, but their business applications don’t. Those applications were designed for an older, slower-paced world, in which business metrics were rolled up on a monthly schedule and it was quite an innovation to actually analyze last month’s data to look for emerging trends.
In today’s faster, flatter, world, that kind of monthly batch reporting style seems distinctly old-fashioned, but it’s quite a challenge to graft new real-time reporting capabilities onto the older generation of software applications. It’s even more of a challenge in organizations that operate internationally.
This is an opportunity that on-demand application vendors seem to be realizing is tailor-made for them. Today, NetSuite launches its OneWorld edition, describing it as the company’s most biggest announcement since it introduced its first release in 1999. Dan Farber on CNet appropriately headlines his coverage NetSuite finds a sweet spot.
What struck me when VP of product management Craig Sullivan outlined the concept to me on a visit to London last week was how similar it sounded to the pitch delivered by another ERP cloud vendor, Workday. Intriguingly, one of NetSuite’s announced charter customers is online customer service vendor Kana, which Workday also announced as a charter customer at its launch in November 2006. It seems Kana is using Workday for people management and now NetSuite for financials and sales force automation.
Business decision-makers in today’s highly connected world feel a pressing need to have access to accurate, real-time data when they make decisions, and conventional midmarket business software doesn’t give them that, especially if they operate internationally or across multiple business units. Only the largest multinationals have the resources to fix those integration challenges with costly consolidations of their SAP or Oracle infrastructures. Move down a tier into mid-size companies that still have to operate across multiple locations, and you’ll find that Read the rest of this entry »
March 24th, 2008
Customization: curse or blessing?
At the high end of the platform-as-a-service spectrum, there’s a cluster of vendors that offer fully templated but still highly customizable business applications, targeting small to mid-size businesses and departmental managers in larger organizations. Interestingly, in a poll of ZDNet readers I ran earlier in the month asking where you’d prefer to develop SaaS applications, this class of platform was the most popular choice, beating out cloud hosting alternatives such as Amazon EC2, and leaving hosted development platforms such as Salesforce.com’s Force.com and the impressive startup Bungee Labs well behind in fourth place. True, the poll was no more scientific than the infamous show-of-hands I orchestrated at last month’s SaaS Summit, but perhaps the results shouldn’t be dismissed too lightly. As computing shifts to the cloud, the way in which vendors enable customization may become the key determinant of success or failure. It all revolves around what kind of platform for customization the market really wants.
I had an interesting couple of meetings last week relating to this theme. One was with NetSuite’s Zach Nelson, who has reappeared after the company’s recent IPO sporting a beard (see picture). More on that below.
The other meeting was a pre-briefing with Pankaj Malviya, CEO and founder of Relationals, the company behind the LongJump PaaS offering, which today takes a major step forward with the addition of a visual workflow designer (partial screenshot follows).
I warmed to LongJump for two reasons. Firstly, the company is bootstrapped, not venture funded. That means it has had to prove the worth of its offering by selling to real businesses, not just a bunch of VCs. “The platform has been proven with real customers and real money.” Malviya told me. “We are a fully bootstrapped, profitable company.” Secondly (and perhaps because of this history), Read the rest of this entry »
Phil Wainewright is a commentator and strategist on emerging software industry trends. See his full profile and disclosure of his industry affiliations.
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