Zach Nelson, CEO of NetSuite, can justifiably be referred to as one of the veterans of the Cloud Computing revolution.
BusinessCloud9 met up with Nelson at NetSuite headquarters in San Mateo, California, for an exclusive chat about his views on the Cloud market state of the nation.
On speculation that NetSuite no longer sells to small companies:
“When it comes to small companies, we've said for a long time that we've stopped selling to companies who pay us less than $10k a year. Now, that could be the US government or it could be a two person bakery - they just spend less than $10k a year. It's really not about small companies, it's more about small customers. To some others in the market, a 50 person company is going to be regarded as a small company, but in our view a 50 person company faces the same challenges as enterprise companies. So it's not a case that we don't want to sell to small businesses, but rather to small customers.”
On partnering with other firms to service smaller customers:
“We have partners. We know that after being in business for 13 years that different segments of the market need different offerings and different types of hand holding. We have moved our expertise upmarket to more complex businesses, but it's not the case to say that we aren't suited to all types of companies. Our partners help us there. We have a company in Australia, for example, which is building a version of NetSuite for companies of under ten users. So really, this is all about how NetSuite as a company has resourced itself to meet the needs of our customers.”
On the role of service firms in the Cloud age:
“There are two sorts of places that the next tier of services companies will come from. The first is made up of those companies that started at the same time as NetSuite and saw from the start that Cloud is the future. The second group is made up of those companies that have seen the Cloud is here and are re-tooling to take advantage of that. Those are the companies that have seen that the likes of Microsoft just don't sell the Cloud. The Cloud services firms that have been the most successful to date are the pure plays, for the same reason that the pure play Cloud firms like NetSuite have been more successful.”
On working with enterprise services giants:
“Our first large systems integrator partner was Wipro and then we had a BPO deal with Genpact. Now we have a partnership with Accenture. Ultimately the Cloud changes the services model. The services model norm was 'give me $10 million and I'll have you up in running in…oh, ten years'. There has been a lot of experimentation among services firms about how to inject the Cloud into their existing business models. One of the strengths that services firms bring to us is their understanding of verticalisation and understanding that how you manage the customer is more important than understanding how you manage the apps. That's ultimately where the likes of Accenture and Wipro will find success in the Cloud. With larger organisations, the likes of Accenture bring us into those deals. We're getting into the upper end of the market where Accenture has all those relationships already, so they're bringing us into these deals. They are talking to companies where they are already heavily involved in their IT strategies and have great visibility into how they work, so they have a deeper reach into those accounts than we do.”
On why the finance sector is finally coming around to the Cloud:
“The success of NetSuite in the finance and accounting sector is down to use being the only Cloud ERP vendor of scale. That's been driven by a couple of things. Most of the reporting systems that companies are running are not designed for the Cloud age. Those companies look around at their own internals and ask 'why does it take us a month to place an order?'. If they go to Amazon, they know they can place an order immediately and they want to know why they can't do it at work. Companies look at those internal systems and they say 'we are never going to be able to change our world'. You know, most of the systems in those sorts of companies haven't been changed for a decade or so. The last many of them touched their reporting systems was the Year 2000. So when you take both those factors into account, you start to get a sweet spot for an ERP replacement cycle. The other factor of course is that we can see successes. If you look at the likes of Groupon, where they put 26 subsidiaries live over a 6 month period, then you see companies that are saying 'this is not ERP, this is something different'. You see companies who say that if we can roll out one subsidiary every month then it will change what we see is possible with ERP. In much the same way that companies rolled out Salesforce.com and said 'this is not sales force automation, this is more than that', so the same is happening with ERP.”
On the importance of Platform as a Service:
“Our Platform as a Service strategy is based on the fact that we knew very early on that every customers would have to customise the apps. Every company needs to customise their business systems and need to be able to change the business processes in the apps. Early on we realised that and so with Suite Cloud the idea was to enable each customer to be customise NetSuite to their own business. Nowadays we call that verticalisation - how do you build a version to support the electronics industry or agriculture? In a standard distribution system you get inventory control and management of goods sold and so on, but if you're in the agriculture business you need something called cold storage. Now we don't have that or provide that so we enable others to customise the application and then we're in the agriculture sector. We think PaaS is so important that in two years time, our own developers will build on our platform.”
On why the deadly enemies can be useful:
“I always said that the downturn would shift people to buy Cloud services at a higher rate. The benefits will accrue to the large players, such as us and Salesforce.com. The other thing that is very helpful for the early Cloud pioneers is that the laggards like Microsoft and SAP are telling customers now that they should be looking for very rich Cloud solutions but have very poor thin Cloud solutions themselves. Larry Ellison told me very early on that what happened at Oracle will happen at NetSuite. Larry had been advocating relational databases for a long time when IBM announced one before they actually had one. Oracle benefited from that. We see the same thing now. You have someone like NetSuite working on Cloud for 13 years, then you have SAP announcing that they now believe in Cloud ERP.”
