Posts Tagged ‘netsuite’


This week Zach Nelson, CEO of NetSuite, a.k.a. Larry’s other company, took over the Marc Benioff chair as guest antagonist but given the relationship between the companies the vibe was more sedate.  For instance, no one went to the talk at the Lam Theater in Yerba Buena Gardens wondering if Nelson would be controversial or if he would utter the words, “We come in peace,” as Benioff once had.  That much was a given.

Nonetheless, Nelson served roughly the same purpose as Benioff; he was the emissary from the cloud.  He functioned as a third party thought leader pointing off in a future direction that Oracle itself could not for various reasons.  Nelson’s direction and his talk cemented one of the key elements of cloud computing for large enterprises contemplating — what to do about the growth of increasingly expensive and hard to maintain ERP systems.  In an era where data and decision-making are continuously being pushed down the chain of command conventional on premise ERP has a flexibility problem and that was the subject of Nelson’s talk.

For at least the last year various vendors have been talking about their two tier strategies in which they provide a second layer of ERP support or they cooperate with other vendors to do so.  Nelson used his time to describe the advantages of using a product like NetSuite in a variety of ways that demanded a second tier of ERP.

For instance, a large multi-national company might use a second tier of ERP systems to capture local or regional data, convert currencies and adhere to local regulations before rolling the results up to corporate in a more tidy bundle.  The two tiers could in practice be all NetSuite but Nelson’s point was to also support heterogeneous environments in which Oracle or SAP might be the corporate standard.

Finally, an question that is on lots of minds during a merger, acquisition or sale of a division is what to do about the financials.  I have to confess that this is not top of mind for me but I can understand how it can be for the principals.  Nelson’s point is that his product, by virtue of its cloud residency, can spin up a company very quickly and enable the separation or merger as the case may be.

The two tier strategy is a happening thing and I expect that we will hear more about it over time and not just from ERP vendors.  Much the same argument could be made for front office conversions.  As multiple conventional CRM systems begin to age out we might see SaaS CRM vendors trying to ease the transition for their own products.

Finally, two tier provides other benefits to companies such as limiting the growth of conventional ERP and initiating a transition that will move some to the cloud eventually and away from big ERP systems.  That’s what Oracle can’t say on its own because as much as it would like to surround SAP systems with NetSuite and eventually convert them, it would not like to see the same thing happen with, say, Microsoft ERP surrounding and ultimately ejecting Oracle from an account.  NetSuite has an inside track right now because it runs a complete Oracle stack which will make conversion easier while keeping it all in the family.

Zach Nelson’s talk was a success.  He presented an appealing vision of ERP in the cloud and for that I think it’s a lock that he’ll be invited back.


I honestly thought I was going to have to wait longer to hear anyone from Oracle talk about seriously focusing the company’s hardware and software lines on the Cloud.  True, they’ve been saying cloud-like things for a couple of years but the pronouncements were features and functions that added something to the cloud discussion without going “all in” as some others in the industry have said.  But last night CEO Larry Ellison did what I’d forecasted last week in a way that is uniquely Oracle but nevertheless a good, defensible (and somewhat debatable) position.

Here’s what I said last week in my forecast,

It seems this family of hardware (Exa-hardware) is built and optimized for very big jobs involving terabytes of data and gazillions of users.  That’s exactly the kind of stuff the growing cloud computing movement might gobble up.  Currently data centers are masses of commodity servers in racks running feverishly but without a layer of sophisticated management that would optimize their utilization and reduce costs…

And,

The next logical step would be to endorse the Exa-hardware as a sustainability tool for a power hungry planet.  I’m looking for some sustainability messaging from Oracle and it could even happen…

And,

Sustainability is not alien to ideas like mobility, cloud, social and analytics, you can’t separate them.  I think if Oracle wants to maintain its leadership position with many of the largest companies in the world, it needs to put a stake in the ground and become a thought leader here…

So last night, Ellison took aim at the cloud and announced Oracle 12c a database for the cloud that supports multitenancy, if you want it, and he announced the Oracle Private Cloud running on Exa-hardware and delivered as a tight bundle to customers who want to get to the cloud, simplify their lives, and not fret about managing all that stuff.  He also announced Exadata 3, which can hold up to 26 TB of data – “All your databases.” The cool thing about Exadata 3 is that the 26 TB is all silicone based memory, it doesn’t count the spindles that are rapidly becoming secondary in a high performance enterprise environment.

He made some traditional arguments about the cloud being more efficient and economic and at some points came close to claiming credit for inventing it.  Truth is he did have a hand in inventing modern cloud computing as a very early investor in Salesforce and NetSuite and as the Zen master for Benioff and Nelson.  But his skin in the game had been relatively minimal.

Now, while there is plenty to like from a sustainability perspective, it should be acknowledged that what got announced is a bunch of half steps designed to get enterprise data centers into the cloud without much disruption.  I think this means that Oracle, for the moment (which will be about a decade) will not be aggressively selling the virtualization that comes with multitenancy and as a result there will still be a great deal of wasted power and underutilization in some cloud data centers.

But in a decade we could see a switch flip and everyone will get religion about power consumption and pollution and the switch to virtualization will happen very quickly because some very large companies will have been prepositioned for the change.

Actually a decade might be a long time and 6 or 7 years might be more like it simply because Oracle has many competitors going to the cloud, most notably Salesforce, and that will accelerate the timetable.

The next step, which has to come this week, will be for the company to shift gears to software – cloud based software – that makes the cloud even more attractive.  Look for this to happen especially in the CX Summit or whatever they are calling it, on Wednesday.  That will be the day that Anthony Lye talks a lot about how the companies he bought last year – like RightNow and ATG and others – are making the Oracle cloud a serious competitor.

Achilles’ heel is still Fusion.  What’s up with Fusion?

Finally, many, if not most of the big cloud computing companies are running fault tolerant data centers using conventional racks of blade servers and disks.  That’s giving us 3 to 4 9’s of reliability but I think before we can hope to get to the 7 to 9 9’s that will make cloud truly ubiquitous and universal utility grade computing we’re going to need some re-architecting.  Regardless of what you might think of Oracle’s approach to the cloud, the hardware is an appealing approach for that alone.

Oracle likes to message that 20 out of 20 of the top banks/pharmaceutical companies/whatever, use Oracle and it wouldn’t surprise me if they’re going for 10 of the 10 biggest cloud companies.  That will take some work and given the multiple levels of competitiveness and lack of love between the players, that might take even more than a decade to happen.

NetSuite’s Big Moment

Posted: May 18, 2012 in CRM, ERP
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This spring has seen a raft of software company events and announcements and they’ve been good meetings full of real news and important new developments.  It is as if these companies bided their time during the worst of the recession building new product, thinking about the future and how customers will use their technologies.  It was time well spent.

This week SAP, NetSuite and others have held meetings and more good news seems to be emanating from their conferences.  I attended the NetSuite SuiteWorld event in San Francisco and that’s what I want to write about here.

For at least two years most ERP vendors have been championing the idea of a two tier ERP strategy.  I’ve heard messaging from Microsoft, Oracle, SAP and NetSuite and, plus or minus a few wrinkles, the idea is that conventional ERP built for the late twentieth century is tired.  But rather than scrapping the huge investment in blood sweat, toil, tears and a not inconsiderable number of dollars, most companies deploying new ERP will be doing so in ways that surround the original deployments rather than replacing them.

That was the story up to last year and it was a good and logical one.  Vendors loved it.  Two tiers made the old system with its high maintenance charges a fixture for at least another decade while giving everyone a chance at new business.  For customers, few thought ERP was broke and even fewer had an appetite for fixing it.  But many did have serious needs to fill in what old ERP lacked — the social, mobile, cloud, big data issues that won’t go away.  To this you should add commerce, which will bring us current.

One of the hidden themes running throughout the software industry today — a theme that no one other than me, I sometimes think, ruminates on — is the high cost of energy required for doing business.  Escalating transportation costs factor into the social, mobile, cloud etc. alluded to above as well as what I’m going into next.

So back to the present, San Francisco and SuiteWorld.  In his keynote today CEO Zach Nelson unveiled a comprehensive approach to ecommerce running off NetSuite’s financials called SuiteCommerce.  Now, NetSuite has been offering ecommerce solutions for many years and they already have successful customers running commerce sites (about 2,800) off their financials and integrating other important modules like their warehouse system.

The difference today is in emphasis, partners and application development tools from NetSuite that brings everything together in a solution set that aims the company at being a significant player in a new generation of integrated and flexible back to front office systems.  Parenthetically, this is how disruptive innovations take root which should provide no comfort to the major ERP players basking in their apparent good luck.

In announcing SuiteCommerce, NetSuite has added a third tier to the conventional ERP wisdom.  The major difference between two and three tiers is the emphasis on reaching customers through the commerce solution and the recognition that NetSuite, at least, owns two out of three levels.

This has big implications for all businesses.  As Nelson correctly pointed out, the demand for some of this new commerce approach will not come from you and me but from the devices we use to run our lives.  The fridge is out of beer so it signals the store or at least my personal device to remind me to pick some up.  The car needs service — already a cliché but nonetheless an important reality — so it negotiates a service appointment.  On and on it goes.

The Internet of things will be much bigger than the Internet of people and the Internet of things will be a major acquisition portal for business and consumers as well as a major user of automated commerce technologies.  Commerce solutions that make it easier for people to buy and receive products through efficient channels is a great first step.

Back to transportation costs.  The Internet of things will be instrumental at consolidating demand and ensuring that supply arrives in the most efficient way, easing the transport issue all the way up the supply chain.  Of course, the Internet of things will also enable actions that have no commerce involvement and it’s important to recognize but not to delve into here.

What makes SuiteCommerce appealing is the “something for everyone” approach.  NetSuite’s financials can act as a data hub funneling necessary product and pricing data to user interfaces including their own as well as third parties.  The financials, shipping and invoicing technologies provide the critical single source of the truth that has become a NetSuite mantra.  And powerful tools make it possible for developers and business users to make or modify commerce systems at, well, the speed of business.

So there’s a lot to like coming from NetSuite today.  Earlier, the company announced revenues of nearly $70 million for the last quarter and the CEO repeated his guidance that the company would generate $300 million in the coming fiscal year.  While he was at it, Nelson also announced new partnerships with Grant Thornton, and Deloitte’s sprawling digital business group.  So there will be plenty of help on the implementation side, which is most important in the two or three tier approach in dealing with the very large companies that are beginning to flock to NetSuite.

I can’t say that three or even two tier solutions were on my radar when I first contemplated SaaS for ERP.  Honestly, I thought ERP for the cloud was an exercise in squaring a circle.  But it seems like the industry has a plan at last and innovation continues at the margin where NetSuite is carving out quite a position for itself.


A door closed this quarter and another opened.  We’re now oriented on a new computing paradigm that will serve us for the rest of the decade.  There is now broad agreement on the big IT issues of our time and they can be summarized in the Four Big Buzzwords mobile, social, big data (and analytics) and real time.

We’ve been bantering these words around individually and in groups but in Q2 2012 most vendors came to a tacit agreement that these would be the issues around which marketing campaigns would orbit for the intermediate future.  Since Oracle’s CEO Larry Ellison is the original proponent of decadal cadence I will use his company as the measure of the short timeline that brought us to this moment.

April 2009.  Oracle buys Sun Microsystems.  The purchase of a failing Sun was seen as a retrograde effort.  The conventional software company buys a conventional hardware company and many of us expected them to fade into the sunset together.  It didn’t go that way.

September 2009.  In an interview at the Churchill Club Ellison said that cloud computing was a bunch of hot air.  Less sincere words have rarely left his mouth as subsequent events would prove.  No matter that by then, Ellison disciple Marc Benioff had already built a billion dollar business offering nothing but cloud computing as a delivery mechanism.  The prior decade bred an entire industry devoted to cloud computing and multi-tenancy but no matter.  Ellison had the database that drove these cloud companies and not much else.  He also had a huge installed base dedicated to conventional on-premise computing, so he was a late arriver intent on making up ground.  The first step might have been this bit of indirection.

OpenWorld 2009.  Oracle announced a new strategy and line of hardware starting with Exadata a huge database server with monster truck-like capabilities for serving data and crunching it into submission ten times faster than conventional technologies.  Exadata was followed by Exalogic, a compute server and Exalytics an analytics appliance.  There were other things too.  Before long little boys playing in sandboxes had traded their toy trucks, backhoes and other construction paraphernalia for Exatoys and Oracle had announced its engineered systems strategy.  Ok, I made that up just to see if you are still with me.

2011 Anthony Lye plus Oracle’s checkbook proved to be a potent combination as Lye developed a vision of Fusion driven applications and business processes of tomorrow.  Lye bought five companies proving that while you might not be able to buy love you can certainly buy R&D.  By the end of 2011 Lye had purchased ATG (ecommerce), RightNow (customer experience, service and support) Endeca (ecommerce and business intelligence), FatWire (web content and web experience management) and Inquira (service knowledge management software).  The combination, when knitted together positions Oracle as a contender in the Four Big Buzzword Categories.

But it wasn’t just Oracle that was making moves.  As early as late 2010 Microsoft and then others began preaching a gospel of multi-tier ERP, a strategy that would keep existing ERP systems and their pricy maintenance contracts in place while providing much of the new functionality required by the Four Big Buzzwords through a second tier of ERP from up and coming players like NetSuite and Zuora.

The approach ended a potentially disruptive moment for ERP vendors and their customers who were beginning to contemplate rip and replace on a scale not seen since four digit date formats were all the rage.  But beware ERP vendors, you are being surrounded and at some point you will be made irrelevant by the increasing functionality of the second tier and at some point there will be a bloodless coup d’état.

So what happened this quarter is that one ERP vendor after another admitted defeat of a sort.  No one any longer pooh-poohs cloud computing (even Ellison) or questions the validity of social technologies in business.  It’s all SOP today in what some are calling the post-digital era.  Post-digital doesn’t mean we’re beyond it, simply that it’s established fact and beyond debate just like evolution, global warming and a round earth are in most precincts today.  Yes, there are laggards who haven’t bought into the message yet but increasingly they are to be pitied, not argued with.

So, as they say in the reality shows, Who’s safe? And Who’s going home right now?

Well, as it happens very few need to go home provided they’re cloud oriented all ready and that they’re at least making noises about the other three Big Buzzwords.  Companies entering the market with anything that enhances the two-tier strategy will be welcome and some, like NetSuite, which has announced a defacto three-tier strategy should do fine.

In the years ahead look for the following ideas to gain primacy in business and enterprise computing as the post-digital era gains momentum.

Increasing use of the Four Big Buzzwords.  This will show up most obviously in mobility technologies but they will be supported by increasing use of centralized analytics crunching big data derived from social media.

Social will continue to be a big draw, not so much for what we know of social right now but for advances such as gamification that will become key drivers.

Multiple-tier solutions will continue to blur the distinction between on-premise, cloud and single vs. multi-tenant.

We will need to turn our attention to the internet of things later in the decade as machines increasingly talk to machines a la buy more milk, eggs and bread.

The key battleground will become platform and development tools.  Increasingly, the goal in business is to project agility through the capacity to change with customer demand.  Tools will be important but platform will be key.  Platform increasingly is the place where security, social, mobile and all the other Big Buzzwords have to be built in.  You can’t add any of them on after the fact.

Platform therefore is key and positions companies like Oracle (Fusion) and Salesforce (Force.com, Heroku, Sites.com, Database.com), NetSuite and others in the catbird seat.  Vendors with older platforms rejiggered for the cloud may not fare as well.

So there it is.  They’ve figured out what to do about cloud, as inelegant as it might seem, they’ve embraced the big Four Buzzwords and for the next several years, provided the economy holds up, we’ll see renewed competition as different vendors compete on slightly different permutations of a similar story.  We can already see Salesforce focusing on the social enterprise, Oracle the customer experience, NetSuite commerce, Microsoft catering to its large installed base with cloud versions of the things it used to sell in boxes.

SAP will do something but it’s still hard for me to figure out what.  They’re working with NetSuite according to Zach Nelson, CEO of NetSuite and Business by Design appears to be catching fire.  Never a strong marketing presence they need to get an elevator pitch for a small building.

Later in this cycle we’ll begin talking about video and voice embedded in the front office suite.  They’re about where social technologies were in 2006 and moving toward the center.


Moneyball is a good movie and I recommend it.  The tie in with the software industry is NetSuite whose logo is all over the dugout and prominent in several scenes.  The central character of the drama is Oakland A’s general manager Billy Bean and most of us know his story about actually using statistics in baseball to predict how a team will play.  Based on Michael Lewis’ true story book about the 2002 baseball season it’s a good way to spend a couple of hours and because Brad Pitt plays the lead I had no trouble dragging my wife to see it.

The point of this short post though is NetSuite.  This is a movie so devoid of product placement that the soda machine, which features prominently in two scenes, is called the soda machine and not the Coke machine.  Nonetheless, because the NetSuite logo is plastered on  the dugout in real life, it’s there in the movie too.  Zach Nelson and the team at NetSuite should get props for being lucky.


A company’s first user group meeting is a kind of coming out party.  It validates the faith its customers showed early on in going with a startup and marks an important statement in the company’s maturation process moving it from kid to adult, removing the training wheels and such.  So I was eager to see how NetSuite would pull off its first user group meeting in San Francisco this week and I was impressed with its success.

The company is on a two hundred million dollar run rate and has been public for several years so it cannot be termed small any more, though in the classic definition of SMB it belongs there.  What impressed me most was the quantity and quality of the announcements its CEO rattled off in his keynote presentation

Representatives from 20 countries attended eighty sessions.  Ten thousand companies use the ERP products running eighty different currencies through it.  According to Gartner NetSuite has one of the fastest growth rates 80% over three years in its survey.  Its nearest competitors have growth in negative numbers.

At the show super cool CEO, Zach Nelson announced new big partners like Qualcomm, partnerships with Accenture, Callidus and Zuora and many others — about eighty announcements in all.  Nelson announced new products for the upper end of his market and technology improvements all around.  Most interesting to me, Nelson told us NetSuite was installing one of Oracle’s Exadata storage devices to further improve perfoprmance and throughput.  Exadata combines small-ish spindles with huge memory and a processor to give phenomenal database performance, but ultimately I think it will be superseded by flash driven machines.  Nonetheless, it’s an important demonstration of the company’s commitment.  It also does not hurt that Larry Ellison owns about 55 percent of the company’s stock.

All of these things and more paint a picture of a cloud ERP company emerging as a leader in its space and as a challenger to established rivals like Microsoft and SAP.  NetSuite emerges at an interesting time in the ERP market lifecycle.  As I have written before, we’re in the middle of an ERP system replacement cycle when systems installed at the turn of the century to deal with four digit dates are aging out and being replaced by newer, more robust and less expensive solutions.

Most of all, the prevailing strategy from its competitors suggests a multi-tiered ERP solution that places smaller systems in charge of regions or countries and leaves legacy vendors largely intact in central locations.  This strategy may be good for the customer and it may be good for legacy providers who hope to sell their solutions for satellite systems.  But it is unquestionably good for NetSuite which, by virtue of its cloud heritage and multi-tier architecture introduced several years ago, can compete effectively with the others and due to its more favorable economics will most likely pick off business from its rivals.

About the only discordant note I can find is the utter lack of focus on CRM — at least on the first day.  I was not able to attend day two and understand that CRM was on the docket then.  I was on a panel with Brian Solis and Paul Greenberg that dealt with social CRM issues mostly at the end of the first day and I think I learned a lot.  These guys rock, pure and simple.  It’s important to know when you are in the presence of greatness and I was.

CRM is important to NetSuite for several reasons.  First, without it the company is really a financials company and it’s hard to see how it lives up to its name and the rationale that its products are engineered to work together thus eliminating the issues of integration faced by many other cloud vendors.  But that’s only if CRM is real and credible.  I have no data but my unofficial research implies that companies that like cloud computing often take NetSuite for financials and Salesforce for CRM.  A cottage industry has grown up around integration with specialty providers like Pervasive and Cast Iron providing solutions and niche players like Zuora offering integration for a purpose.  Engineered to work together ought to be re-engineered around the concept of design and standards.  If everything is engineered to the same standards you get the result that NetSuite is looking for and more importantly you play nicer in the sandbox.

My long term vision tells me that solutions like Zuora will become increasingly important not for pure integration reasons though the integrations provide important plumbing.  Instead, I think purpose built integrations between NetSuite and Salesforce, Zuora, Callidus or Xactly and many, many others are important for another reason.  They give the end customer in a best of breed approach the ability to support good, fast and cheap end to end business practices that enable smaller companies to keep up with larger companies that can afford to hire integration houses to build plumbing for older systems.

I think and expect smart vendors will begin to brand these extended business processes and make the point that their solutions are superior because of the integration rather than offering integration as an after thought.  Salesforce has proven the effectiveness of this approach though few vendors in the AppExchange position themselves aggressively enough, in my opinion.

But this kind of process branding rather than static product branding might turn out to be important as we proceed.  We’ll have to watch of course, but based on this week I would say NetSuite will be giving us a reason to watch for a long time.


Yesterday Zuora, the billing and payment solution company for subscription businesses did a smart thing, at least I think so.  At NetSuite’s user meeting, SuiteWorld, Zuora chief Tien Tzuo announced that his trademark product is now pre-integrated with NetSuite’s financials.  But that wasn’t what’s smart, only the thing that enabled the thing that is smart.

You see, Zuora comprehends a business problem that is bigger than the solution it can provide on its own.  Subscription billing is a different animal from conventional billing for products.  It’s as different as a horse and a zebra.  They might look the same through a picket fence but you wouldn’t want to saddle a zebra.

Subscription billing is like that.  Each type of vendor has to attend to all of the details of the customer relationship that impact billing.  But where a conventional vendor might sell a product and bill in full, the subscription vendor sells a potentially different product every time the customer decides to change the configuration.  One of the powerful aspects of selling subscription services is that by reconfiguring them you can deliver a potentially different branded product — if your billing system can keep up.

There are subscription costs that we’re all familiar with like the number of seats deployed but that can change at any time.  There are also any number of one time fees and costs that may not fall in the same billing cadence as the subscription.  It goes on and on and it gets funky.

There is also the little issue of renewal.  The product vendor thinks in terms of cross sell and up sell but the subscription vendor thinks in terms of all that plus keeping the customer — every day.  I have seen data that says that customers base their loyalty decisions in part on how easy their vendor is to deal with and billing is one of the key points of contact post sale in the subscription world.  There are different metrics that need to be tracked too — monthly recurring revenue, total customer value and the just alluded to churn.

Vendors of all stripes have discovered how hard this nut is and early subscription vendors wrote their own billing systems because there was no other game in town.  But as much as Zuora is a good fit for subscriptions, it still needs support from CRM for effective sales and marketing and back end financials for managing the customer payables and then some.

So, Zuora’s bit of brilliance on display at SuiteWorld has been its admission that it needs other solutions to deliver to the customer an end-to-end solution and then delivering its part.

This is very interesting to me.  Several years ago I thought the same kind of convergence needed to happen in sales (still do).  SFA was and is the workhorse solution for sales but it is increasingly ill suited to the demands of this marketplace.  Solutions from a great variety of sales enablement vendors offer help to consolidate an end-to-end process.  But people on both sides of the divide seemed cold to the thought of declaring a process and one’s alliance to it.

Now, to be fair, just about every sales enablement vendor has integrated with Salesforce and at least some of the other SFA products and in those parts of the world something like an integrated end-to-end solution exists.  But the end-to-end sales process is still elusive in many cases, I think.

A few weeks ago I gave a short talk as part of a webinar for Sage.  The subject was CRM and why small companies need it, as they surely do.  In it I said that we treat our money very well in business by way of ERP systems.  We know what’s been sold, to whom, for what, when it was delivered and when the money is due.  In contrast many companies still track future money — a.k.a. the sales process — on random scraps of paper and in idiosyncratic documents.

The Zuora-NetSuite announcement is important because it goes after that discrepancy.  Zuora, with its new connector as well as its Z-Force connector to Salesforce offers the promise of uniting front office processes in a choice of Salesforce or NetSuite CRM and NetSuite financials on the back end thus delivering the end-to-end process that I crave.  I suspect I am not alone.

So good on them — all of them — as my Aussie friends might put it.

NetSuite has been putting on a rather good show at its user, press and analyst meeting and I will have more on that in a separate post.