NetSuite is climbing the ladder
My natural inclination right now is to say something like, "I want to buy a vowel," but really, I want more.
I want a few words, and like my buddy the eminent guru, Paul Greenberg, I would like a few that have not been combined together quite as frequently as "as a service." It is remarkable how our species takes something unique and absolutely grinds it until all that’s left is an insipid powder. For instance, decades later all things Washington still need to have a "–gate" suffix before they reach the stature of seriousness, but I digress.
What am I talking about? Last week, NetSuite went to the mountain top — actually, the foot of Russian Hill — with its partners to give them a panoramic view of the future and it included a new component called "SuiteBundler," which is designed to make products out of specialized applications that its partners churn out every year to meet customer needs.
Here’s how it works. A developer builds a vertical application made up of some new screens, tabs and other "stuff" (one of my favorite recondite technical terms) and then packages up just the enhancements and "injects" it (NetSuite’s recondite technical term) into another company’s instance of the NetSuite service and voila! The second company now has the vertical application too.
This is cool stuff, and though similar capabilities are available elsewhere, that’s not the point. The point is that this is a good and smart capability that further opens up NetSuite’s ability to support vertical applications. This last point is not trivial but it really comes into focus when you get to see some use examples.
To its everlasting credit, NetSuite never used the word "mash-up" — though one application its demonstrated did rely on a map from elsewhere in the cloud. All that NetSuite did in its demos was to introduce real hard-working applications that achieved important things. For example, one application that was demonstrated involves tracking ships, their origins, their contents, the special handling requirements of the cargo and more. Some might call this a "micro-vertical," but it’s hard to see what the plain old vertical would be, what utility it would have or who would buy it.
The shipping system is an example of an application that has to be the way it is to be of any use at all, and there really is no conceivable way that a lesser application would be almost good enough. My point here is that it’s an example of a complex application that incorporates a lot of front and back-office data as well as data delivered by SOA (service-oriented architecture).
More important, they tell me that there are about 60,000 ports out in the world that could use this kind of functionality to replace aging green screens and multiple unintegrated applications that may be used to track the same kind of data today.
So why do I want to buy a vowel or a bunch of words? Because the words we have to describe our new generation of software are totally lacking in the ability to deliver any real information to an uninitiated buyer. Software as a Service (SaaS), on-demand and things like it only tell us about a delivery method that once scared many people and today elicits more yawns than watching playoff baseball at 11:30 p.m. (that’s just a description, not a complaint).
NetSuite has another problem and it’s the old front-office/back-office divide. To call NetSuite "ERP" (enterprise resource planning) or "e-commerce" or "CRM" alone is not helpful, because it misses two-thirds of that it does.
It’s really business software made to run all aspects of a medium-sized business. As CEO Zach Nelson tells it, he’s trying to sell to the "Fortune Five Million," and he has plenty of company in that space from the likes of Sage — which has been plowing those fields for a long time along with Microsoft (Nasdaq: MSFT) and Great Plains — and newcomers like SAP (NYSE: SAP).
Tight integration of the main components, an on-demand delivery system, and development and customization capabilities will do a lot to help NetSuite continue its march in this market.
While all vendors will make similar claims, each goes about it differently, and at the end of the day, the determining factor might very well be ease of use that is fostered by NetSuite offering a single vendor interface (along with a vertical partner in many cases), a technology stack whose complexities are hidden from the user, and a modern development environment that leverages standards and steers clear of proprietary things to the extent possible.
What’s great about all this is that we are seeing a real market coming to life. In addition to NetSuite’s announcements last week, a wee small company from Redmond, had a few things to say about on-demand, partners and vertical applications. Microsoft’s announcements point to a serviceable offering and a strategy that will appeal to many, especially its large partner channel.
There is no doubt that for the immediate future there will be multiple successful development platforms, and the marketplace will sort it out and possibly anoint a new king — though that may be less important than it was in, say, the relational database wars. Before that happens, though, we really should figure out what to call it. Much as I like SaaS and on-demand as strategies, the terms are no longer big enough to cover this growing and robust field.
The new M & A — mergers and acquaintances
What a week. It’s amazing how much news you can make by throwing around a few billion dollars. We found that out observing the sound (though maybe not the fury) of SAP and Oracle placing billion dollar bets on the future outlines of the enterprise software industry.
In the last week or so Oracle announced its offer to purchase BEA Systems for $6.7 billion and SAP announcement an agreement with Business Objects worth $6.8 billion. Don’t break out the French champagne yet though, at least for Oracle, as some analysts say that deal might need a little sweetening.
The effect on the CRM world could be significant for two reasons. First there are a lot of companies that are best of breed buyers of each of these acquired companies’ products as well as users of third party CRM solutions. Whether you are salesforce.com with customers using Business Objects or a NetSuite or RightNow whose customers might integrate solutions using BEA middleware, you may be watching as your orbit comes more in line with a big enterprise player you hoped to avoid.
The second reason is also interesting because these acquisitions suggest the inevitable end of BI and middleware markets led by independent entities. In BI there’s still Cognos but some analysts are already questioning how long that will last and who will buy them. The candidates include IBM, HP and (again) Oracle.
All this buying behavior is a signal of a top in mature markets. Whether the subject is middleware or BI, the markets have said that these kinds of solutions are no longer nice things to have or the playthings of early adopters. No. They are essential to any company’s IT infrastructure and rolling them into the product suites of enterprise software vendors is necessary for any vendor worthy of the description.
This kind of M&A activity is one of the hallmarks of late market cycles as the big fish get eaten by even bigger fish and sometimes the reasons have less to do with products, services or even customers, than they have to do with finance.
The Oracle’s BEA acquisition is at least partially about taking a competitor in a specific market off the street but it is also about removing a potential acquisition for a competitor such as IBM or SAP. In the end Oracle may have needed BEA less than other companies — Oracle is already known as a middleware player whereas according to some analysts, SAP, for example, could have used a fresh infusion of the technology. At the same time SAP already had business intelligence but may have felt a need to bolster its offerings in light of Oracle’s acquisition of Hyperion earlier this year as well as its ownership of the analytics embedded in the Siebel product set.
It seems to be part of Oracle’s strategy to take as many competitors off the market as possible while simultaneously depriving rivals of the oxygen they might need to be competitive. It happened in CRM, for example, when Oracle bought Peoplesoft as well as JD Edwards (each of which had offerings for multiple overlapping markets) as well as Siebel Systems.
As strategy, it makes perfect sense. In a few quick purchases Oracle deprived companies like SAP of the acquisition targets they could have used and forced them to pursue a strategy of building applications in-house, which, at the time SAP said it favored anyhow. Nevertheless, time has shown that a roll-your-own strategy, while having benefits, also has delays. For example, while Oracle has been selling Siebel CRM On-demand these last two years, SAP only recently announced its SAP Business By Design which will not even be officially available until 2008.
Whether the subject is middleware or BI, the markets have said that these kinds of solutions are no longer nice things to have or the playthings of early adopters. No. They are essential to any company’s IT infrastructure and rolling them into the product suites of enterprise software vendors is necessary for any vendor worthy of the description.
Fast forward now to the future of CRM and you get a glimpse of another form of merger, co-operation. The Sales2.0 conference is convening in San Francisco at the end of the month and I think it will be eye opening at least for the differences in the ways companies address each other. The idea sprang from the fertile imaginations of guru Geoffrey Moore and David Thompson, CEO of Genius.com for a way to share information among like minded sales aficionados who see sales as part social networking.
As the name implies, Sales2.0 takes its lead from Web2.0 concepts like SOA which enables multiple applications to work together and deliver a 1 + 1 = 3 benefit to users. We’ve all heard about mash-ups of data with maps which are a useful but trivial example of this phenomenon. Looking at the platinum sponsor list which includes Oracle, WebEx, Genius.com, Landslide, InsideView and other sponsors such as brainshark, EchoSign, LucidEra and Salesramp (I am not going to list all of them) you realize there is a different dynamic at work.
With the exceptions of Oracle and WebEx, none of the participants is in any real position to participate in major M&A activity — a good thing because this market may be too young for us to make a lot of insightful bets. At the same time, though, all have an interest in further improving the end-to-end sales process. In a situation where you can’t simply carve out a niche by buying up one or several companies you are forced to cooperate. Sales2.0 may say a great deal about the future of selling but it will also point out the necessity of and the integral place for the software platform in any 2.0 strategy.
Ironically, if executed properly a platform strategy could yield the same kinds of results in the future that last week’s M&A activity is providing for an older software model. We’ve already seen SaaS and on-demand change or disrupt development strategies and then sales, marketing, service, support and integration strategies. Finance may be next.
Kick it up a notch
It is turning into a busy end of the year with the CRM and SaaS industries advancing on multiple fronts. So far we’ve had Dreamforce and all of the announcements that went with it. SAP has announced SAP Business by Design, available in 2008 and last week made NetWeaver available by subscription too. Salesforce.com and SAP are doing a lot to define two very different strategies for the future of enterprise computing.
NetSuite might go public this quarter too giving this front and back office SaaS vendor some cash to do more marketing. Money is the oxygen of marketing and the complexion of the market will surely change when NetSuite has more of it. Oracle has yet to weigh in but you know with Oracle Open World happening in a few weeks that they might have a few things up their sleeves.
It has been a couple of years since the brouhaha that surrounded Oracle’s insatiable appetite for acquisitions which resulted in Peoplesoft, J.D. Edwards and Siebel becoming divisions of the database powerhouse. At the time, Larry Ellison wanted to ensure that his company continued to have the critical mass to compete with other large software companies like Microsoft and especially SAP.
Ellison’s acquisitions ensured that Oracle would have the quantity of products needed to achieve the goal of being one of the biggest software companies in the known universe but the redundant array of similar products gave us (Ok, me) the feeling that we were seeing a conspicuous display of quantity but not necessarily one of quality.
The constellation of CRM applications bought by Oracle and added to its stable were just so many versions of the same stuff. Later that “stuff” got a label — 1.0 — when the savvy, or maybe it was just savants, decided that everything needed a 2.0 label to be valid the old stuff became 1.0 by default. Soundings I have collected recently tell me that Oracle might be on the path to reinventing its CRM offerings for this brave new 2.0 world.
If that’s so we’ll know soon enough; with Open World just a few weeks off product is either finished and awaiting its debut or product managers are saying wait till next year. All this discussion about all things 2.0 — Web, Business, CRM etc. — couldn’t happen soon enough as far as I am concerned. It seems like the 1.0 world was been around for a New York century and it had an old feel to it.
Interestingly, the other day, the duo who helped to usher in part of the 2.0 sensation, Joe Pine and Jim Gilmore, sent me their latest book. You might recall Gilmore and Pine as the authors of “The Experience Economy,” the book that launched the whole customer experience trend. I think one of the reasons these business writers felt the need to write a new book was the way they saw their idea of staging customer experiences hijacked by business people trying to slap a label on some things that were obviously not focused on customer experience and were instead driven down a rat hole.
The new book’s title, “Authenticity: What customers really want,” says it all. Unfortunately, the authors keep on going and not always in ways that feel terribly authentic. The book gets off to a slow start by diving too deeply into philosophical constructs that are best left for more rigorous academic study by asking and answering:
“Can businesses help render authenticity in a world where reality itself seems socially constructed? Certainly. But it means intentionally offsetting the lost sense of objective reality thrust on us by postmodernists with an understanding of the difference between what is real and what we perceive to be real.”
Statements like that kind of make you wish you had a strong espresso, a beret, and an unfiltered cigarette to savor while reading. Fortunately, postmodernism dies a quick death and you can continue on your journey into the authentic, and there is much to recommend about this book.
For starters, it brings into focus the ways business is in many ways trying too hard to turn everything into an experience and in so doing overshooting the mark by subverting the customer’s real experience — like making a sweeter version of saccharine.
All this will have a lot of impact on CRM and related disciplines. Recall for a moment that “The Experience Economy” has a copyright date of 1999 which means that many of the ideas in it were percolating in its authors’ heads for a couple of years prior to that. Also keep in mind that it has taken many years for some of those ideas to penetrate business to the point that software vendors are including its concepts into the functionality of their products. The same is true for authenticity — it will take time for this new buzz to penetrate.
So, ironically, despite all the success and great achievements many software vendors are celebrating this fall, with one swift publishing event, the world has been made new again and software — and businesses — are again in catch-up mode. As if that weren’t enough, it is not immediately clear whether CRM per se is the vehicle for authenticity and in fact the over rendering of reality by sales, service and marketing may automatically disqualify CRM from taking center stage in the new derby.
Authenticity is all about walking the walk. Businesses using CRM or at least CRM 1.0 have been very much about talking the talk and it may be left for a new and relatively un-sexy software discipline — GRC — or its off shoots, to deliver the verisimilitude that Pine and Gilmore think is missing.
If you are unfamiliar with GRC it stands for governance, risk and compliance and it feels like the business equivalent of eating your spinach. However, at its nittiest and grittiest, GRC is about proving that you walk the walk, and having the records and standards that support you. GRC won’t supplant CRM, it will support and enhance it, I think. It will take another five to ten years to get it all right and it will fuel many software vendors’ development plans for quite a while.
I can’t believe I just used the word “verisimilitude.” Where’s my beret? Somebody get me an unfiltered Camel.
Oracle, SAP, salesforce.com, NetSuite thoughts
I have been in a rut, a good rut but still.
I have been paying a lot of attention to salesforce.com recently mostly because of Dreamforce and all the partners asking for a few minutes to pitch me their ideas. It’s all good, but…there has to be other stuff going on. Of course there is.
Oracle Open World will happen soon and we’ll be able to see what they’ve been up to in the labs. They’ve been pretty dark since the Siebel/Peoplesoft acquisitions and it’s time for them to bring forth some new integrated wonderfulness. Can’t wait for that one.
SAP introduced Business By Design (BBD) which I have previously commented on a little. Let me say here that it isn’t out till 2008 but that it will be fun to take a look at. At first blush it appears to be something that the installed base will like but that may not compete favorably with the likes of NetSuite or salesforce.com. SAP has time and money to make improvements but markets don’t wait around. NetSuite will have cash from its IPO — are we there yet? — soon and then the fight will heat up. Also, all those salesforce.com partners will have something to say about front and back office integration and applications that span the two.
Speaking of which we need a word for the applications that span front and back office but all the good terms seem to be taken by boneheaded marketing from a while ago. For example, hybrid would be a really good term but it was used to describe an on-demand to conventional architecture that should never have seen the light of day. What to do? Seems like the situation is tailor made for GRC but governance, risk and compliance seems kind of heavy for describing simple, necessary front to back hook-ups.
Let’s give GRC its due though; it is the next new thing.
Back to NetSuite, a last thought, isn’t it amazing how they continue to carve out their niche? You keep waiting for them to go head-to-head with someone like salesforce.com but it doesn’t really happen. They’ve just introduced more vertical applications in the services and wholesale/distribution sectors and if anything they compete more with SAP than salesforce.com (as they should). But NetSuite is a native mid-market player and in a close game right now you still have to pick them over SAP and the points (recall SAP’s BBD isn’t out till sometime next year).
NetSuite, more than most other vendors, needs to start thinking about GRC issues (assuming they haven’t already). Specifically, GRC is a big enterprise idea right now but it will need to be brought down to size for the SMB and mid-market and that’s NetSuite’s sweet spot.
Pay attention to GRC
There’s a new category of enterprise computing beginning to take shape and I believe it will be important to the front office and CRM. The category in question is GRC which stands for governance, risk, and compliance. Governance became a big deal when too many corporations let down their shareholders as well as other stakeholders like employees and imploded due to management misconduct. Companies like Tyco and Enron will be GRC whipping-boys and shorthand for bad management for a long time.
GRC is a software response to legislation like Sarbanes-Oxley that attempts to set standards for corporate transparency and financial best practices. But SOX really only deals with a small part of the picture and there are many other areas including IT, HR, procurement, sales and more that need the same kind of rigorous record keeping and auditability that will prove to all stakeholders — including boards of directors — that a management team is working properly.
What’s interesting to me about GRC is that it shows many of the signs of becoming a big market that CRM did more than ten years ago. Back in the late 1990’s there were vendors of point solutions like SFA but no well integrated suite of solutions that provided the 360 degree view of the customer and shared customer data and all that. GRC is in the same predicament and I expect we will see similar arguments about point solutions and integrated suites and because this is 2007 there will also be a platform discussion as well.
Backing up a bit, this all makes sense to me. GRC is an idea made up of three things that need to be seen as one. It makes no sense to calculate risk if you don’t have controls to manage it and managing risk is at the heart of governance though it is not necessarily its soul. The soul of governance is understanding the risk portfolio across multiple departments like HR and IT and managing it across all the stove pipes and that takes software.
In CRM we’ve already seen the first indicators that GRC is coming in products like compensation management, expense management and CPQ (configuration, pricing and quotation). These applications place some basic financial controls on some departments but they are not enough — all you have to do is understand that most compensation management vendors integrate with finance but not HR to see that.
I think GRC is going to be a big deal for CRM and for ERP and it might actually give those two disciplines a better way to interface. If I am right, almost every company in this country and well beyond it, will need a GRC sysstem/platform/whatever and that potentially means a market at least as big as CRM.
Currently, the action in the GRC market is low level and fragmented. Gartner manages to have a magic quadrant for GRC but it seems like they have three different analysts contributing three different perspectives — sort of like the blind men and the elephant. What’s interesting to me is that several analysts have invested serious brain cycles developing market maturity models and forecasting revenues but there has been little substantial thought put into defining the space and the business processes that make it up. All that will come, it’s an early market after all.
Nevertheless, I think it would be prudent to begin some self-education about all things G, R and C. As usual the early birds will get to make the important definitions and capture the early market.
