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spindles with huge memory and a processor to give phenomenal database performance, but ultimately I think it will be superseded by flash driven machines.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.