NetSuite's earnings fire a warning shot to the incumbents

NetSuite's earnings fire a warning shot to the incumbents

Summary: NetSuite's blow out Q3 sends more signals the incumbents should be concerned.

TOPICS: Banking

I can't get on the call for this evening (my time) earnings call with NetSuite. Be that as it may, the top line results are better than expected, as reported by Larry Dignan. My take away on this is different to the usual discussion about company specific performance. I am more concerned about the trends.

NetSuite's blow out numbers follow success at Workday in raising $85 million plus holding a very successful user conference. But before we get ahead of ourselves, the business apps market is in an upswing. Given the power of the incumbents you'd think the cloud players would fare less well. That's not turning out to be true. All boats are rising. Given the SaaS/cloud players did well in the depths of the recession you have to wonder why they continue to fare well in the good times.

As NetSuite and Workday plow ahead in building reputations as class players in the enterprise space, the incumbents must be concerned. If not then they are fooling themselves. The characteristics of the new kids on the block stand in sharp contrast to what the incumbents have to say.

Earlier today, I read a report from Brian Sommer entitled: SaaS: Now serving large, complex enterprises. (PDF registration required.) Inter alia he said:

SaaS application technologies have matured in recent years. Many solutions support global operations and functional needs of some of the world’s largest businesses. - The implementation costs of SaaS solutions are routinely half or less of an onpremise solution. - Executive committees will not green-light on-premise application implementations as capital is still constrained in most firms. - SaaS decisions create partnerships unlike the typical software vendor relationships.

Those words were written in early/mid 2010. If my research, based upon the deals I see, is correct, then those words were prescient.

SaaS/cloud vendors seem capable of continuing to grow regardless of the economic conditions. There can only be one explanation. The total value proposition is more compelling than that offered by the on-premises vendors.

That spells one thing - a changing of the guard that no amount of incumbent maintenance revenue can protect. It represents disruption the incumbents cannot match with outdated, antiquated business models that do not match today's realty.

I'll be a tad bold here: two or three more quarters of a similar kind and it is game over for the incumbents. They will not go away but they will become irrelevant to those businesses committed to growth.

Topic: Banking

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.

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.


Log in or register to join the discussion
  • RE: NetSuite's earnings fire a warning shot to the incumbents

    "They are more true today than at the time of writing if my research."yes,I thank so.
  • RE: NetSuite's earnings fire a warning shot to the incumbents

    It doesnt sound like SAP is worried as in this recent article "SAP Readies Comprehensive Cloud Strategy" Bill McDermott talks about "We're ready to unleash the tiger" as it relates to cloud.<br><br><a href="" target="_blank" rel="nofollow"></a><br><br>In all seriousness the article gave me a chuckle as it is a stretch to say that SAP even has a Tiger to unleash (more like a newborn cub) and given that SAP have been VERY careful to position Business ByDesign as a complimentary (not competitive offering) to On-Premise shows a lot right there. I like the onDemand offerings but unfortunately with only a few released and a few planned for 2012 hard to believe it is going to make a dent.<br><br>Something tells me the true SaaS vendors like Workday, Saleforce and Netsuite got a chuckle out of the "Unleash the Tiger" comment.
  • RE: NetSuite's earnings fire a warning shot to the incumbents

    Dennis and Jarret,

    One day someone will have to explain to me why there is this perceived notion that SAAS is the future and On Premise is a thing of the past or at least, a fading deployment offering.

    Certainly in the small business space where I spend my days focusing, customers and partners tell me they want a choice of deployment methods, but it first comes down to this - does the solution do what my business needs to for me to get value from it and run my business effectively.

    Then I will worry about whether or not I want it in house or in the cloud...but give me a choice.

    Richard Duffy

    Disclaimer: I work for SAP as the SAP Business One Product Evangelist but this comment is purely my own view based on the last 25 years of my life selling and deploying ERP solutions
    • RE: NetSuite's earnings fire a warning shot to the incumbents

      @richardaduffy - this is really easy. From everything I've seen, SaaS/cloud prevents the incumbents from achieving meaningful organic growth. When I look at what's happening, I see the incumbents losing out. The only meaningful sales being made by incumbents are in the installed base rather than serious net new.

      You can make the comparison with the client/server days where net new was a consistent theme. All I see is a re-arranging of the deck chairs.

      On BYD, SAP has had plenty of challenges and continues to do so. Will it get to 1K customers this year? Where it once was a slam dunk it now seems something that may challenge SAP. We'll see.
  • RE: NetSuite's earnings fire a warning shot to the incumbents

    I feel that cloud computing for ERP is the way of the future. No software need, just a web browser. Additionally, programmers these days are more comfortable working with web-based programming languages, like php so customization is easier. <a href="">Flags</a>