NetSuite stops selling to smaller businesses. Congratulations

NetSuite stops selling to smaller businesses. Congratulations

Summary: NetSuite has stopped selling to smaller customers. Is anyone surprised? It is exactly the right thing for them and their customers.

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TOPICS: SMBs
19

Bob Scott says:

NetSuite is ignoring the girl that brought it to the online technology dance, the sub-$10,000-a-year customer. That was the message delivered today by Ron Gill, the CFO, in remarks at the Pacific Crest Technology Leadership Conference. "We simply stopped signing new business in that business. The small customers represent about 6 percent of revenue and 40 percent of customers.

The Twitterverse starts getting its knickers in a twist. Why?

NetSuite stopped actively selling to the sub-$10K market a while ago. As it should do. It is exactly the right thing for NetSuite and its customers.

Regular readers will know that in 2007, I was receiving a regular email bag of complaints about NetSuite customer service and support. I still get a few of those kinds of email trickling through. Today, I spoke with a business that moved from NetSuite about a year ago because of customer service issues. Almost immediately following that call, I spoke with a very happy NetSuite customer. If that's the case then why is this an issue?

Back in the day when NetSuite was trying to figure out what it wanted to be, the low end of the SME market seemed to be the right customer. The problems arose as the business scaled up. The company quickly found that while it was great to talk about adding customers, in the background they were having horrendous service issues.

About two years ago the company stopped talking about acquisition numbers because - quite frankly - it had become an embarrassing millstone. As quickly as NetSuite was growing and adding revenue, smaller customers were leaving by the back door. Net-net, it was not growing the customer base in absolute new signings but it was scaling up the deals.

In short, NetSuite had outgrown its customers and could not find a good way to solve the problem. Part of that was to do with the sales led culture, epitomised by Zach Nelson, CEO. The escapee I spoke with today said that culturally, there really wasn't a good fit between NetSuite and itself. "When you buy a software as a service solution you kinda expect there to be some service, not more upselling when you take them a problem."

That may sound like a harsh indictment but that's reflective of much that I have heard over the years from disgruntled customers. In deals where NetSuite could be a player, one of the first questions I ask: "Can you manage on your own or will you need a good amount of NetSuite support?" That's because even now, NetSuite's service record counts against it in many of the deals I see.

Contrast that with Sonny Jelinek. Last year his Canadian cork distribution and light manufacturing business quite literally went up in smoke. At the time he was contemplating moving his company's systems to the cloud. The fire and resultant melt down (sic) in the on premise solution was the trigger to him buying into NetSuite. "When people talk to me about data security then I say that moving to the cloud was the best thing I did. We're expanding, have NetSuite in three of our subsidiaries and will move others over the next year or so. I get a single view of what's going on and I can work from anywhere." I know Jelinek is an extreme case of desperate circumstances forcing change but you cannot deny the benefits the company is seeing. I specifically asked about service and he said: "We couldn't be happier." From our extended discussion, and bearing in mind what NetSuite says about average deal sizes, Jelinek represents one of those 'sweet spot' customers the vendor can profitably service.

NetSuite will slowly whittle those small customers away - or they will grow and become the kind of customer that fits NetSuite's preferred profile. It is a transition that is good for NetSuite and good for customers.

In the meantime, and despite the angst the service has caused, I give Ron Gill credit for coming clean on a topic that has simmered just below the surface for far too long.

Topic: SMBs

Dennis Howlett

About Dennis Howlett

Dennis Howlett is a 40 year veteran in enterprise IT, working with companies large and small across many industries. He endeavors to inform buyers in a no-nonsense manner and spares no vendor that comes under his microscope.

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19 comments
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  • So much for the cloud....

    Even with the elasticity in the tech, there will always be customer support issues.
    happyharry_z
  • RE: NetSuite stops selling to smaller businesses. Congratulations

    from this blog post i can't really tell if this is a good thing or not. are the bigger customers more profitable? this is implied but not explicitly stated by netsuite. or are the customer service issues a real problem with functionality and service and a competitive disadvantage?
    rocketman2
  • Contrasting strategies

    NetSuite's strategy is in contrast with 37 Signals letting their customers outgrow them (they wanted to keep serving small businesses):
    http://37signals.com/svn/archives2/growing_in_vs_growing_out.php
    duncanmurtagh
    • RE: NetSuite stops selling to smaller businesses. Congratulations

      @duncanmurtagh - 37 Signals adheres closely to the 80 / 20 rule in most of their business practices. They want to provide a simplified baseline of features to the maximum folks and they are ok if you walk away. They've done this since day one.

      NetSuite's problem (??? - I don't like that word but too tired to think of another) is that they are in the "all things to all comers" business which forces an organization to go upstream and chase bigger ticket sales. There's a place for both models in the market.
      pwolf@...
  • Message has been deleted.

    monclera
  • RE: NetSuite stops selling to smaller businesses

    NetSuite (NS) still has small companies on the system, and Baac Office has supported these types of businesses for over 10 years. Even though NS no longer focuses on small companies, they will still be on NS, if they see the value and competitive advantage. If small companies have a hard time justifying NS, they should estimate how much staff time and costs (payroll, etc) NS saves them, and that should be ample justification.
    baacoffice
  • What Type of Small Customer Are You?

    My company (Acumatica) caters to mid-sized businesses, but sometimes small customers slip into our sales process. There are small customers with small needs and small customers that demand everything.

    Landing a small customer that wants the Cloud to deliver SAP/Oracle for $12,000/year with no setup is a bit like running a mile through the desert to get a pound of salt. Once you get the prize, you wish you hadn't tried.

    On the other hand, some small customers can be very positive wins. These are customers that have a very focused business plan and automate key processes instead of every one off procedure.

    The key is identifying which type of "small" you are speaking to before you put $10,000 into the sales process.
    Web Cloud
    • RE: NetSuite stops selling to smaller businesses. Congratulations

      Completely agree with what you put here. We too deal with small and mid-sized companies but have got (over the years) very good at screening out the small business that wants everything and has very adhoc procedures that they need to replicate. The worst part normally for bad reasons.

      Basically if a company invests in any ERP system you generally require a professional setup but more importantly be prepared to change your business procedures. What is sometimes missed (actually often in small businesses) is that adopting and using an ERP solution is a on-going journey that needs caretaking; to adapt for business changes, regulatory changes or like. This is amplified if customizations are deployed. Obviously a cost that some are not prepared for - only when its too late.

      Clearly though. Full ERP is not really for the very small business - they just do not have the budget or infrastructure to support it properly and normally ends in vocal regret. Until such a time ERP becomes more people centric (like some CRM systems) - I suspect it will remain that way for a while.

      Actually - a big gap in the market right now in that arena. ie. very small biz ERP. There are system out there that "integrate" to fill the gaps - but who the heck wants that if your a small business. IMO there are no tangible system in the ERP space aimed at tiny businesses. NetSuite Small Business was one. But obviously that has run its course now.
      rtetlow
  • Message has been deleted.

    kristine13
  • RE: NetSuite stops selling to smaller businesses. Congratulations

    Good article. I think NetSuite is positioned to serve companies that are ready for Advanced Growth. This article spawned me to write an article called "Four Questions to Ask if Your Business is Ready for Advanced Growth with NetSuite" at http://blog.prolecto.com/2011/08/15/four-questions-to-ask-if-your-business-is-ready-for-advanced-growth-with-netsuite/

    Marty Zigman
    Prolecto Resources, Inc.
    http://blog.prolecto.com
    mzigman@...
  • Netsuite leaves a gap for smaller businesses

    @rtetlow - we agree with you that this leaves a gap in the market with no compelling suite offerings for small businesses willing to spend $2,500->$10k/yr on an integrated system. There's quickbooks on-line and then a gap until you reach the level at which ERP vendors will take you seriously, now including Netsuite. Or there are several point solutions like salesforce etc. but which small business wants to manage their own integration?<br><br>At iBE (<a href="http://www.ibe-erp.com">ibe-erp.com</a>) we are aiming directly at this market gap, building an ERP system which does not look, feel, behave or cost like an ERP system. Cloud-based, multi-tenant, mobile, extendible, preconfigured for industry micro-verticals, easy to use, easy to deploy and based on simple & open subscription license terms. Sounds too good to be true? We hope not!
    rminney
  • RE: NetSuite stops selling to smaller businesses. Congratulations

    I don't agree with this strategy of deserting small enterprises. Had the product been intuitive, flexible and scalable, I see no issue in supporting the SMEs. When players like SAP and Oracle are trying to get into the SME space, it is surprising that NetSuite is abandoning the initial adopters. As a medium enterprise, I would be concerned. What will prevent them from abandoning the medium enterprise and going after large enterprises few years down the road?

    We at iBE (<a href="http://www.ibe-erp.com">ibe-erp.com</a>) are developing a product that would be intuitive, flexible and scalable so that we don't have to give up on part of our customer base.
    mperiasamy
  • RE: NetSuite stops selling to smaller businesses. Congratulations

    Part of Netsuite's challenge in that SME market is because their functionality is pretty broad (full ERP), it can be too complex for SME's to implement.<br><br>Not that the technology itself is too complex, but by adopting a completely new ERP platform SMEs are having to implement (and often design) a new business process, which impacts every part of their business. Larger businesses have the benefit of IT departments and the budgets to afford an army of consultants and trainers to help, but SMEs don't.<br><br>At Workbooks.com (http://www.workbooks.com) we provide a Web based CRM platform, that extends beyond traditional CRM to include order processing and invoicing, but not the full complexity of accounting. We then integrate into the popular accounting systems, such as Sage. <br><br>Feedback from our customers, is that by having all the customer transaction information (orders, invoices, credit notes, contracts), inside the CRM system, they get many of the benefits of a 'fully integrated' platform like Netsuite, without the complexity of implementation. <br><br>We wouldn't claim to be suitable for every SME (we don't for example have any stock control), but we believe SMEs would be better of implementing something we has been designed for their needs, rather than a product which is functionality rich, but too complex to implement successfully.
    john.cheney
  • RE: NetSuite stops selling to smaller businesses. Congratulations

    We almost subscribed to NetSuite a few years ago, but we found a fantastic alternative at a fifth of the cost !
    Check it out: www.interprisesolutions.com
    palmscan
  • NetSuite is still supporting us, and we are a small company

    This article should not be misinterpreted. NetSuite is still supporting us just fine, even with one license. Of course it makes sense for any company to focus on the big customers. But we have received no indication of being cut off. On the contrary, NetSuite's service has been great, and are nice as can be. We just signed on for another year.
    rick@...
  • Obvious grounds for a split

    <br>Lets get one thing straight here, as Dennis implies, there's been a fundamental incompatibility or two between small businesses and this cloud Vendor for a while now, so it's no suprise there's a parting of ways, here's the story we get time and time again from Netsuite customers... <br><br>First date... <br><br>Appear to be the only good looking girl at the cloud based small business ERP party. BTW.There are at least 5 'lower cost' alternatives out there now and it's therefore harder for Netsuite to compete..<br><br>Proposal...<br><br>Seduce small business owners with significant discounts to get them into the marriage. Like I said, there are at least 5 'lower cost' alternatives out there now and it's therefore harder for Netsuite to compete..<br><br>Expensive wedding...<br><br>Offer all of the features most businesses need (and some they don't), however lots of features = lots of complexities which in turn means significant going in costs in terms of Training and Implementation Services. Sensible move from Netsuite - chase the businesses with deeper pockets. <br><br>Daily life... <br><br>Cost of ownership is far too high, paying for features you don't need becomes very irritating, contract renewal is a wake up call to the real costs. Obvious answer - both parties look for a more suitably economic and compatible partnership. <br><br>Where to go from here?<br><br> There is a cloud based small business ERP, designed specifically for the smaller businesses, it's really easy to use, enables self implementation (no going in costs), and costs up to $36 (22 GBP) per user month.<br><br>You can read about it here:<br> <a href="http://www.salesorder.com/netsuite-cost-too-high-heres-the-alternative/" target="_blank" rel="nofollow">http://www.salesorder.com/netsuite-cost-too-high-heres-the-alternative/</a>
    salesorder.com
  • For most of us I don't see this being a bad thing.

    In a fairly natural progression, NetSuite is focusing on the market most ideal and profitable for their business. This is great news because it leaves a greater pool of customers for up and comers in the industry to work with and refine their products.

    I think there's a huge demand for vendors who can provide a fully integrated one-stop platform for small businesses that includes key
    CRM and ERP components an an easy to use package. Nothing is more frustrating than having to spend dozens of hours just trying to figure out how to make a complicated application work.

    This is what our company focuses on and I can think of several others working on similar pursuits. Small businesses need the tools that their larger competitors have, to operate more efficiently and be more agile and responsive.
    Sterling.Jackson
  • Netsuite doesn't understand small business in Australia

    I have had a very frustrating few months with Netsuite here in Australia. We have been with Netsuite for over 6 years and struggle to get any service here in Australia and when considering a switch to JCurve to get some more local connection, better priced and more appropriate features to suit our business, JCurve's hands are tied until Netsuite gives the OK since the two are related, we just cannot seem to get anyone to call us back from Netsuite in Sydney !! Using Netsuite as a small business in Australia feels like riding an elephant that is missing a leg who doesn't know what its left back leg is doing in relation to its front right. We get payment reminders from half a dozen different parties around the world and our manager is based in the Philippines ??!! Don't do it, find someone else, its expensive, clumsy and requested changes to problems don't get actioned. Would rather have spent the money from the last 6 years on a company car !
    milfox
  • Quickbooks to NetSuite

    I agree. Small business should convert NetSuite to a cheaper solution like QuickBooks.

    www.qbconvert.com
    Prince Edward 2014