Ten years in and NetSuite is seeing larger companies wanting to do business with it as well as expanding into the professional services market.
“The vision to create a suite of applications that was delivered from the Cloud was scoffed at when we started this company 10 years ago,” says NetSuite CEO Zach Nelson. “As recently as Q2 SAP's CTO told Information Week, 'Not only us, but the industry doesn't know how to deliver mission-critical business applications yet in the Cloud'. It's pretty clear that while SAP and the rest of the industry may not have figured out how to deliver mission-critical applications from the Cloud, NetSuite certainly has.”
To back up his claim, Nelson cites an increase in subscriber numbers – and a shift in the profile of customers towards higher end enterprises. “During the quarter we added approximately 270 customers of all sizes across a spectrum of industries,” he notes. “The types of companies we are winning continue to reflect the ability of NetSuite to serve large, complex organizations.
“Earlier this week we announced three of the four most recent tech initial public offerings - SolarWinds, OpenTable, and LogMeIn - chose NetSuite to run key business processes. We announced that Jollibee, one of the largest fast food chains in Asia, chose NetSuite OneWorld to manage 35 subsidiary operations in emerging markets, including China and Vietnam. These four examples show the continued momentum of OneWorld and our move up market to support the needs of large, stand-alone companies and to meet the needs of divisions of very large enterprises.
“The selection of NetSuite by these and other companies is just another nail in the coffin of on-premise software companies espousing the complex ERP and SRM operations of large companies won't be trusted to the Cloud,” he said, adding: “Once again our top line growth when compared with the double-digit negative new licence growth for traditional ERP vendors indicates a continued shift in customer demand from on-premise stand-alone accounting packages to NetSuite's Cloud-based business applications suite.”
A wider trend
That assumption is backed up by third party industry analysis, he argues. “Industry data clearly illustrates the shift from on-premise ERP solutions to NetSuite's on-demand suite of applications,” he says “Gartner Group published interesting data on market share and market share growth recently. In their annual report on the ERP software market, NetSuite for the first time cracked the top 10 vendors list for financial management systems market share in North America.
Furthermore, in the financial management systems study, NetSuite was the only SaaS provider in the top 10 - or the top 25, for that matter. And the Gartner data named NetSuite by far the fastest-growing vendor in the top 10 list.”
Netsuite recently fleshed out its professional services push with the acquisition of QuickArrow. This followed last year's purchase of OpenAir. “We continue to keep the heat on our would-be competitors with our continued progress in verticalizing our suite,| explains Nelson. “We believe services industries are key to economic growth in developed nations and we have the best product set and industry expertise to meet the needs of this underserved and strategic vertical.
“Last year we acquired OpenAir to accelerate our ability to meet the needs of large services-based organizations, and that effort continues to bear fruit, as illustrated earlier in the quarter when it was reported that we won an OpenAir pilot that could grow to 9,000 seats with a global company headquartered in Europe.
“Over the past couple quarters we have something north of 20 companies running the integrated NetSuite SRP product combining both NetSuite and the OpenAir, NetSuite as the CRM ERP platform and OpenAir as effectively the service delivery facing application that consultants use. I don’t know if we've signed it yet, but I believe this quarter we will sign the largest joint implementation, the joint NetSuite SRP implementation probably a 500-user deal - for professional services companies.
“With our vision of the NetSuite Services Resource Planning addition or SRP, we are well on our way to transforming how services business are run and in much the same way we hope to transform that industry as the economics of running manufacturing enterprises was changed in the '90s with the advent of ERP and MRP systems.”
Painful transitions
Does this belief in the potential value of the services market mean that there will be closer integration between NetSuite and the big systems integrators? “We are starting to see more interest from the SIs in NetSuite,” says Nelson. “I won't name any particular names, but we've definitely been having discussions with them. I think what that indicates is more their willingness and desire to get into this market than us having not talked to them for years.
“It's been awhile for them to come to the table because, as you know, my belief is that software as a service radically changes the economics of the services business as well and not necessarily for the better. It's not necessarily for the worse, either; it's just a different strategy. So I think they've been challenged in trying to determine how their model applies in the new Cloud Computing world.
“I think they've come to grips with that and that's why these discussions are beginning...Some of them will make the transition and it's exciting that they're talking to NetSuite about how we can enable them to make that transition. There's going to be a whole class of them that don't make the transition, however.”
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