SuiteWorld 2014: NetSuite Hits Its Stride

suiteworldI recently had the opportunity to attend SuiteWorld 2014, NetSuite’s annual user conference—along with about 6,500 attendees including customers, partners, journalists and analysts. The event provided us with a good mixture of history, progress, new announcements, and future directions.

Memory Lane–A Somewhat Bumpy Road to the Cloud

I’ve been following NetSuite as an analyst since 1998, when Evan Goldberg (still serving as NetSuite’s CTO) and Mei Li (now SVP NetSuite Corporate Communications), first came to Summit Strategies, where I worked at the time. Early on, NetSuite was NetLedger, offering a simple accounting solution geared towards small and medium businesses (SMBs). The term “cloud” hadn’t yet been coined to describe the model of delivering software as a service (SaaS). In fact, even the SaaS term hadn’t surfaced. Back in the day, we called them Application Service Providers (ASPs) or just online solution providers.

NetSuite was one of a just a handful of vendors that came to pitch this new software delivery method to us in 1998. Salesforce and Employease (long ago acquired by ADP) and maybe a few now defunct vendors probably rounded out this tiny group. Of course, in the next couple of years, we were flooded with visits from seemingly anyone with a similar ideas that could create a PowerPoint presentation.

Over the past 16 years, many cloud vendors have come and gone, as for the most part, the road to the cloud has turned out to an evolutionary–not revolutionary–journey. Mainstream customer adoption of cloud solutions only started to become a reality in 2008, when the “great recession” hit, and the OPEX cloud model became much more attractive to cash-strapped companies. Looking at NetSuite specifically, I remember that for quite a few years in there, the vendor seemed stuck at a count of 5,000 active customers, and some wondered if it could ramp up to the next level of growth.

Fast Forward 

Today, while some roadblocks remain, many companies view the cloud as a mainstream approach to get the solutions they need to run their businesses. In fact, in some areas, such as collaboration and marketing automation, SMB plans for cloud adoption are higher than for on-premise.

Figure 1: Current and Planned Solution Deployment Methods Business Applications

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However, financials and ERP—NetSuite’s flagship solutions—have moved more slowly to the cloud than other types of applications. There are many reasons for this, including:

  • Deeper existing market penetration of financials, accounting and ERP. Financial and accounting software has been around a lot longer than many other types of software. So especially in the early days of the cloud, NetSuite (and other cloud-based financial/ERP vendors) needed to convince companies to replace incumbent on premise financials and ERP systems with a new cloud solution. In contrast, vendors outside of the core ERP and financial realm were selling solutions to automate functions that many companies had not yet automated—a much easier pitch to make.
  • Fewer users. Fewer people within an organization typically use financials and ERP systems than, for instance, CRM or collaboration tools. For many companies, the cloud model becomes more compelling as the number of users increases.
  • More regulatory and security requirements. Financial information is subject to many more regulatory concerns than many other functional areas. This, combined with many companies’ reluctance to house the company’s “crown jewels” with a third-party, have slowed the pace of financials and ERP cloud adoption.

Furthermore, the cloud has made it easy for business decision-makers to adopt new apps as needed, without IT involvement or even centralized corporate oversight. NetSuite has always focused on the value of a single, integrated system of record—certainly a longer, higher up the food chain sell than buying other types of solutions.

NetSuite’s Integration Value Proposition Comes of Age

men with puzzle piecesDespite these challenges, NetSuite has successfully stayed the more challenging course, and more companies are coming around to the value proposition that integrated solutions help remove friction and streamline business processes. For Q1 2014, NetSuite announced a record $123 million in revenue, up 34% year-over-year, and more than 20,000 organizations now use NetSuite to run their businesses.

At SuiteWorld, NetSuite showcased its 2014 Transformer Award winners, including Tableau Software, Jive Software, Shaw Industries, Williams-Sonoma and MusclePharm, to illustrate how NetSuite helps them grow and manage change more effectively. But their stories reflect a broader phenomenon. I’ve personally talked to many customers—and not only from NetSuite’s ranks—about how much better business runs when everyone views and works with the same, real-time information.

NetSuite’s Next Phase

Over the years, NetSuite has added integrated CRM, Ecommerce and other areas to its unified platform. At SuiteWorld 2014, NetSuite not only announced a new, improved user interface, but additional integrated offerings including:

  • B2B Customer Center built on NetSuite’s SuiteCommerce platform, to provide B2B merchants a platform to deliver a seamless, efficient B2C-like online shopping experience, with the ability to view order status, details and history, track shipments, reorder goods, and more.
  • A new services resource planning (SRP) solution, that provides integrated ERP, CRM and professional services automation (PSA). The offering includes client management, project and resources management, time-and-expense management, and project accounting in a single solution, designed to enable both product- and project-based businesses to modernize and transform operations the way manufacturing resource planning (MRP) did for manufacturing businesses.
  • The TribeHR SuiteApp. After acquiring TribeHR (a social human resources management suite) last year, NetSuite has migrated tight integration with TribeHR to the NetSuite platform. This brings HR capabilities to NetSuite and provides native integration across TribeHR and other NetSuite solution components.

NetSuite has also come to terms with the fact that one company can’t possibly develop ALL the functionality every company will need, or sell and service all of its potential customers. To that end, NetSuite is bringing more partners into its fold to fill in the white space and provide its customers with a richer ecosystem.

For instance, over 100 developer partners had booths and/or conducted sessions at SuiteWorld. The mix included established vendors such as Avalara, DocuSign and Kronos, to newer entrants such as FieldAware and VertexSMB, all of whom have developed integrations with NetSuite.

On the sales channel side, partners ranged from enterprise-focused players, such as CapGemini and Accenture, to smaller ones such as Cloud ERP (which has built its Australia/New Zealand-based business around selling and supporting the full range of NetSuite solutions), and FHL Cloud Solutions, which has developed a successful micro-vertical approach to marketing and selling NetSuite in industries such as wine, medical devices, and furniture wholesale and distribution.

NetSuite also launched the NetSuite BPO Partner Program at SuiteWorld. Through this program, NetSuite and its partners intend to simplify the outsourcing model and help drive costs down and better server smaller customers. Partners who provide Business Process Outsourcing (BPO) or Business Process as a Service (BPaaS) use NetSuite’s unified solution platform to provide services to their clients. Partners get access to SuiteCloud, NetSuite’s development platform to tailor their NetSuite offerings to industries or client-specific needs. Early partners include Capgemini, McGladrey and Accretive Solutions.

Perspective

Integration helps bring order to chaos–and helps companies reap more value from their application investments. But let’s face it, integrating applications after the fact is a difficult, messy and expensive affair, and one that many SMBs struggle to get done.

In today’s social, mobile and multi-channel world, consumers—whether B2B or B2C—have more power, and all vendors face increasing pressure to provide better, faster, and more user-friendly products, services and engagement to attract and retain customers. Having a unified system of record enables companies to have a more knowledgeable view of customer behavior, and to present a more unified face to customers, whether they’re engaging in marketing, sales, billing or service transaction. This means that the appeal and value of taking an integrated approach will only rise—as will NetSuite’s fortunes.

The Small Business Forecast for Cloud Computing

(Originally published October 5, 2011 in Small Business Computing)

What’s changed about cloud computing since 2009, when I wrote What is Cloud Computing, and Why Should You Care? In terms of the basic definition and benefits of cloud computing, not much. But in terms of market trends and adoption, the landscape has changed considerably.

Status Quo: Cloud Computing Basics

Here’s the definition that I provided in 2009: Cloud computing is a computing model in which you access software, server, storage, development and other computing resources over the Internet, in a self-service manner, as illustrated in Figure 1.

What is cloud computing graphic display
Figure 1: An illustrated depiction of cloud computing.
(Click for larger image)
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The benefits that drive cloud computing adoption remain the same as well; instead of having to buy, install, maintain and manage these resources on your own servers, you access and use them through a Web browser.

Since many small and medium businesses (SMBs) lack the time, money and/or resources required to buy, deploy and manage the increasingly complex array of applications and infrastructure they need to run their businesses, this is a huge plus.

Cloud computing lets you access these resources as a service, without having to worry about the care and feeding of them. You can expand or shrink services as your needs change, and do it all on a pay-as-you-go subscription basis instead of forking over capital to buy hardware and software.

The concerns that people raise about cloud computing haven’t changed much either. They continue to revolve around reliability, security and support questions, such as how do providers protect your data? What happens if a service goes down, and you can’t access the application or your data?

Even highly reputable cloud providers — including Amazon, Google, Intuit and Microsoft — have experienced outages. Customers still need to do their homework and get details from providers on uptime guarantees, data protection, service levels and other policies and practices.

Cloud Computing Adoption Becoming Mainstream

Cloud computing has been around since 1997– albeit under different labels. But cloud adoption was more evolutionary than revolutionary for a long time. In the early going, many of the technologies required to effectively take advantage of cloud computing — such as ubiquitous high-speed Internet access — weren’t ready.

Equally important, people tend to be creatures of habit, and they felt no need to rush away from packaged software to the cloud. Finally, many IT people were reluctant to go to the cloud for fear it might put them out of a job.

But in the last 2 or 3 years, studies from both researchers and vendors indicate that cloud computing is becoming a more mainstream choice, especially in categories such as online marketing, collaboration and contact and customer management, as shown in Figure 2.

What’s Driving the Change?

Several factors that have coalesced to create the right conditions for cloud computing’s increased popularity. To begin with, cloud computing providers have grown up. NetSuite was founded in 1998, and Salesforce.com was founded in 1999.

Small business cloud-computing adoption rates, by application category
Figure 2: Small business adoption of cloud-based software-as-a-service solutions in selected application categories. Source: SMB Group 2010 SMB Routes to Market Study.
(Click for larger image)
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Meanwhile, “old guard” players including IBM, Microsoft and SAP have also created rich portfolios of cloud solutions. Cloud vendors continue to address reliability, security and performance concerns with more redundant services and controls.

Many are also providing more visibility into performance. For instance, Trust.salesforce.com is Salesforce.com’s site for real-time information on system performance and security. Zoho Service Health Status provides a similar service.

Customers have also learned that they like many things about the cloud model. They like the responsibility being on a vendor 24/7 — and that it’s easier to switch to another provider if their expectations aren’t met. They like what I call the “virtuous feedback loop,” which means that when a cloud provider fixes a problem for one customer, it gets fixed for everyone.

Meanwhile, a funny thing happened on the way to the cloud — an explosion of mobile and social technologies. In both cases, the adoption curve has been truly revolutionary.  In contrast to cloud computing, these revolutions didn’t require IT managers or business decision-makers to take off.

Individuals could drive adoption, which in turn required businesses to interact more effectively with these newly empowered customers, employees, constituents, etc. — when, where and how they wanted.

This has had a profound effect on cloud computing. Although it has been on a slower trajectory than social and mobile technologies, cloud is increasingly the critical enabler for both mobile and social solutions. It provides the:

  • Economies of scale and skill that developers need to create, reiterate and reinvent.
  • Continuous customer-feedback loop and data aggregation required to spot trends, identify opportunities and get a leg-up on the competition.
  • Real-time collaborative environment that’s necessary to accelerate new ideas, launch new solutions and solve problems.

Finally, the curve to take advantage of new technologies and new ways of using technology is getting steeper. Most individual companies can’t tap into these opportunities on their own, however. They need IT solutions that will empower the business without draining it — and they are more likely to get this with cloud computing than with traditional on-premises software.

The net-net is that we’ve reached a tipping point. Increasingly, small businesses that want to use technology to move their businesses ahead will need to move to the cloud — or risk falling behind the competition.


Acumatica’s Best of Both Worlds ERP Story

Just want to let you know that we are publishing highlights from recent vendor briefings on the SMB Group web site. As time permits, we discuss our takeaways from the more interesting briefings. I’ll try to remember to post them here as well. There are several up there already, here is the most recent one.

4-23-10

Highlights:

Acumatica is a relatively new player on the SMB ERP scene. It delivers its web-based ERP solution both on premise, and via a software-as-a-service (SaaS) model. Targeting companies with 5–1,000 employees (or roughly $5M – $500M in annual revenues), Acumatica provides accounting, CRM and distribution capabilities, and worldwide currency and language customization.

Acumatica offers customers a choice to run its solutions on-premise or via the SaaS model, providing the benefits of cloud technology and social media capabilities in both delivery models. Subscription pricing for the SaaS version of the accounting module starts at $12,000 annually, while on-premise licenses start at $15,000.  On-premise pricing is CPU-based, not per-user based, enabling customers to maximize the ERP user base without incurring added costs. The company has more than 50 customers using its solutions to-date. About 30% use Acumatica via the SaaS modes, and the other 70% have deployed it on-premise.

Acumatica has a 100% indirect sales model, which provides an attractive and neutral compensation model to motivate value-added resellers (VARs) to sell the solution that will work best for the end-user customer. The vendor has signed up more than 40 VARs to date—mostly from the ranks of Microsoft Dynamics and Sage.

Quick Take:

Acumatica intends to capitalize on key trends and requirements in the traditional VAR community and it the SMB market.  First, as I’ve written many times, SaaS vendors have yet to crack the code on creating a VAR-friendly model. Customer demand for SaaS is on the rise, and  many VARs want to add a SaaS offering to their line-up. But, they worry that SaaS vendors (who often sell both direct and through channels) will disintermediate them once the partner has brought in the business. VARs searching for a SaaS option are likely to find Acumatica’s 100% indirect model, combined with a choice of delivery options and a Microsoft-centric approach, quite attractive. The fact that VARs can sell the same solution via either delivery model is also a plus—most VARs don’t want to be evangelists, they want to sell the solution that best fits the customer’s needs.

Acumatica offers customers a distinct value proposition as well. Customers can either self-select what model (SaaS or on-premise) will work best for them, or Acumatica and its partners can help them decide what will work best. In contrast, other major vendors in the mid-market space—including Intacct, NetSuite, Microsoft, Sage, etc.—have a pre-determined agenda.  Acumatica also offers customers that want to switch from one delivery mode to the other discounts that take into account their prior investments.

As a relative newcomer, Acumatica will have to work harder than more established rivals to prove that it has both the product capabilities and corporate viability to be a “safe” choice. However, if Acumatica can keep pulling in VARs, and broadcast its best of both worlds story out to the market, it should be able to cross this chasm.

NetSuite’s SP 100 Program: An Offer VARs Can’t Refuse?

In a bold move to get traditional value-added resellers(VARs) off the SaaS fence, NetSuite announced its new Solution Provider (SP) 100 Program, which gives business application VARs 100% margin on the first year of license subscriptions they sell. The program requires a 2-year minimum license commitment from the customer, and after the first year, NetSuite pays VARs 10% margin on recurring annual license fees. Prior to this program, NetSuite had offered VARs 30% of annual license sales.

NetSuite’s SP 100 Program targets established mid-market and enterprise ERP and CRM VAR’s and consultants, including VARs selling Microsoft Dynamics, SAP, Sage, Epicor, Deltek, and others. The program is not exclusive—VARs can continue to sell their packaged business software offerings as well. NetSuite is also extending the program to it’s current solution provider partners, and it includes all other SP program perks, including sales and technical training, sales cycle assistance, and marketing support.

Background:

Since the model got off the ground over 10 years ago, SaaS vendors have argued that SaaS can open the door for VARs to create a recurring revenue stream, and free them up from low margin IT service chores to focus on generating higher value business.

But the case has evidently not been strong enough to entice the masses, for a few key reasons. First, the recurring revenue model is radically different to the conventional business applications model, where VARs earn a large upfront commission for selling a business solution, hardware and infrastructure software. Second, VARs have balked at not being able to generate income from services necessary to deploy and maintain business applications on customer premises. Third, whether real or perceived, many VARs don’t trust SaaS vendors. Deep down, they think that after they make the sale, SaaS vendors will take control of the account and soon disintermediate them entirely.

Quick Take:

NetSuite’s SP 100 Program supplies VARs with the big upfront payment that they are accustomed to. NetSuite’s own side-by-side VAR revenue comparison to Microsoft Dynamics favors NetSuite of course, but VARs can try it and do their own math to see how it proves out without having to give up selling competitive packaged software. It’s an opportunity to get up to speed on SaaS, the cloud and recurring revenue models and develop their business consulting skills.

As important, it comes at a time when the SaaS model has proved its maturity and staying power, many VARs have lost deals to a SaaS vendor, and many customers are trying to avoid big upfront capital outlays. While some VARs will remain skittish, distrustful, or even just lethargic about adding a SaaS solution to their business management portfolio, I think NetSuite’s SP 100 will be big wake-up call for many VARs.

What Is Green IT, and Why Should You Care?

(Originally published in Small Business Computing, December 29, 2009)

Technology insiders tend to throw around technical terms and business jargon, assuming people outside the industry understand what it all means. By its nature, technology vocabulary is often confusing and complicated, and insiders often add to the confusion by over-complicating things. To help add a sense of clarity to the confusion, each month, Laurie McCabe, a partner at Hurwitz & Associates (a business consulting firm), will pick a technology term, explain what it means in plain English, and then discuss why it may be important to you. This month, Laurie takes a look at Green IT.

What is Green IT?

Green IT refers to the study and practice of using computers and IT resources in a more efficient and environmentally responsible way. Computers and computing eat up a lot of natural resources, from the raw materials needed to manufacture them, the power used to run them, and the problems of disposing them at end of life.

Why Should You Care?

All businesses are becoming increasingly dependent on technology, and small business is no exception. We work on our PCs, notebooks and smart phones all day, connected to servers running 24/7.  Because the technology refresh cycle is fast, these devices quickly become obsolete, and at some point—more often sooner than later—we dispose of old devices and replace them with new ones. We use massive quantities of paper and ink to print documents, many of which we promptly send to the circular file.

In the process, most businesses waste resources, in the form of energy, paper, money and time—resources you could invest to develop new products or services, or to hire and train employees. Even if you aren’t a tree hugger, it makes good business sense to green your IT environment and culture.

Fortunately, there are many simple steps you can take to do this, no matter what the size of your business, or how far along you are in the process. Many IT vendors have major initiatives underway to green their products, services and practices. These include building computers with more environmentally friendly materials, designing them to be consume less energy, providing recycling programs to dispose of old systems, developing virtualization and cloud computing alternatives, and providing tips to businesses that want to go green.

What to Consider

Creating a sustainable business isn’t just for big businesses. With help from several vendors (links to their green initiatives are at the end of this article), I’ve compiled some practical tips to help you get started or continue on the path to go green and save green.

Novice:

  • Eliminate paper, printer and packaging waste. Statistics from Infotrends indicate that the average office worker used 130 pounds of paper in 2008. Try tools such as Green Print make people “think before they print” and automatically eliminate things such as printing that extra page with only a footer or disclaimer on it. Buy remanufactured toner cartridges and get personal ink cartridges refilled to save money and waste. If you’re looking for an new printer, shop for one that automatically prints double-sided, such Dell’s 2335dn Multi-function Laser Printer or HP’s LaserJet P2055d.  When shopping for new products, look for eco-friendly packaging. For instance, Dell recently announced that it will use highly renewable bamboo as packaging for it’s Inspiron Mini 10 and 10v netbooks.
  • Reduce power consumption. The Northwest Energy Efficiency Alliance found that businesses can reduce their average power consumption through effective power management. “Set it and forget” tools, such smart power strips, which automatically turn off peripheral devices when you turn off the main device. When buying new equipment, look for EnergyStar 4.0 ratings and above. Try Edison, a free application helps you monitor energy use and save energy. Intuit QuickBooks users can use Intuit Green Snapshot to estimate their firm’s carbon footprint and get recommendations to conserve energy and dollars.
  • Recycle old equipment. The U.S. Environmental Protection Agency estimates that  only 18% of electronic waste was collected for recycling in 2007—while 82%, or 1.84 million tons, was disposed of, primarily in landfills. But its easy to recycle: At Gazelle you can sell and/or recycle all kinds of electronic devices, from mobile phones to printers. Through Dell and Goodwill’s Reconnect Partnership, you can donate unwanted devices. All proceeds go to support Goodwill—and you get a tax write-off. Or go online to IBM’s Asset Recovery Program, and get a buyback quote for the value of 1 to 250 items.

Intermediate:

  • Use Web conferencing instead of traveling to meetings. Web conferencing is a great way to go green—and save huge amounts of time and money. Ecopreneurist states that if every small business owner in the United States conducted one teleconference in lieu of a domestic business trip, we would save $25.4 billion dollars in travel expenses and 10.5 million tons of C02 in just one year. Web conferencing vendors such as Adobe Acrobat Connect, Citrix GoToMeeting, IBM Lotus Sametime and Cisco Webex offer free 30-day trials. Newer entrants such as Dimdim and Zoho offer free Web conferencing.
  • Transition from paper based to digital processes. Paper-based marketing, forms and faxes add a lot of trash to landfills.  Email marketing solutions are greener and  more affordable, flexible and interactive than direct mail. Free and low-cost online invoicing solutions such as Sage BillingBoss and Freshbooks, and online faxing solutions such as myfax and RingCentral Fax also help cut down on paper waste.
  • Use cloud computing and software-as-a-service solutions (SaaS) instead of running a new application in-house. With cloud computing, multiple organizations share the same computing resources, which increases utilization by making more efficient use of hardware resources. For instance, researcher Greenspace found that with more than 6,000 customer companies sharing datacenter resources, NetSuite’s cloud ERP and CRM solution saved more than $61 million in energy bills per year, or nearly 595 million kilowatt-hours (kWh), the equivalent of nearly 423,000 metric tons of carbon dioxide per year. Almost every kind of application in the cloud, from personal productivity applications to accounting to industry-specific solutions—for every size company. If you use dedicated hosting services, shop for green hosting providers that use solar or wind power, and take advantage of energy saving technologies such as virtualization.

Advanced:

  • Enable staff to telecommute. While it may not work for every employee or business, the American Electronics Association estimates that 1.35 billion gallons of gasoline would be conserved yearly if every U.S. worker who has the ability to telecommute did so 1.6 days per week. Technologies such as virtual private networks, and collaboration tools such as HyperOffice and IBM LotusLive help employees work together from different locations.
  • Server and storage virtualization. Because hardware itself is relatively inexpensive, many midsize and even small companies are facing server and storage sprawl. But by 2012, experts estimate that for every dollar you spend on a server, it will cost $1 to power and cool it. Meanwhile, surveys show that up to 85% of systems capacity goes unused. While you will have to invest in initial start up costs, virtualization can help you improve resource utilization, reduce energy costs and simplify maintenance. Dell, HP and IBM each offer a range of comprehensive server and storage virtualization solutions and services.
  • Develop a thin client strategy. Netbooks and other thin clients use about ½ the power of a traditional desktop PC. They are  smaller, cheaper and simpler for manufacturers to build than traditional PCs or notebooks—and cheaper for you to buy and operate. Thin clients run Web browsers, and/or remote desktop virtualization software, such as Microsoft Remote Desktop Services,Citrix XenDesktop and VMware View so you can use the desktop environment that you’re used to. With these solutions, you can also extend the life of older PCs and/or buy less expensive refurbished PCs to save money and reduce waste.

Links to green IT initiatives from vendors that contributed ideas to this article:

Dell: http://content.dell.com/us/en/corp/dell-earth.aspx

HP: http://www.hp.com/hpinfo/newsroom/feature_stories/2007/07-360_greenup.html

IBM: http://www.ibm.com/ibm/green/index.shtml

Intuit: http://greensnapshot.homestead.com/

NetSuite: http://www.netsuite.com/portal/infrastructure/netsuite-green.shtml

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