NetSuite SuiteWorld Part 2: Growth of the Platform Ecosystem

There were many announcements at the SuiteWorld (NetSuite's user conference) last week that involved new channel partners and other developments within the NetSuite platform ecosystem. Briefly, NetSuite added Deloitte to its large integrator partner roster which previously included Accenture and Wipro. Similarly, NetSuite announced additional partnerships with midmarket professional services firms such as Blythe & Co. and Grant Thornton. Previously, they established relationships with Baker Tilly (a current client of my firm), McGladrey and others.

NetSuite CEO Zach Nelson indicated that the company now has 5500+ developers building and extending applications on the NetSuite platform and platform toolset. I asked Zach about how the size of his current ecosystem compares with the ecosystems of Salesforce.com's Force.com, Google's Android environment and Apple's iOS environment. These environments often count hundreds of thousands of developers within their ecosystems.

Zack responded along the lines of NetSuite attempting to build a high-quality ecosystem focused on a more structured rational approach to building out new products, new product extensions and an environment where different partner products can be more easily tested for potential conflicts from one product to the next. In other words, NetSuite is attempting to build a higher quality platform ecosystem versus a high quantity of developers.

In a subsequent briefing a few of us had with NetSuite chief operating officer Jim McGeever, we learned that NetSuite is not interested in "press release partners". His comments reminded me of sage advice given to me by a senior Accenture partner when I was in the running for a partnership slot. This partner told me "there are partners and there are partners that count". Clearly, focusing on the partners that count is what got me promoted and appears to be the modus operandi of the NetSuite executive team when it comes to recruiting, developing and directing the partners within its ecosystem.

Jim also shared a number of other insights involving the management of partners in the partner ecosystem. He is acutely concerned about the ability of two different partner solutions to coexist in a functioning, compatible manner. It is not enough for a partner's product or product extensions to work with the NetSuite core applications, they also must interoperate successfully with the applications of other partner products.

NetSuite apparently has a long-term product roadmap that it is sharing with selected partners. Within this roadmap, NetSuite has identified core functionality that NetSuite has already or will soon develop on its own. Secondarily, it has identified specific functional areas it would like partners to more fully develop with product extensions and/or all-new applications. Jim indicated that some integrators, notably midmarket and smaller integrators, are requesting the right to develop specific vertical applications or application suites. Larger integrators prefer to discuss a number of major opportunity spaces that may become mutually beneficial to both parties. Either way, NetSuite wins as its product line becomes more competitive, more complete and more cost-effective to sell as channel partners will take an ever greater role in developing the markets and closing deals involving the broadening NetSuite product line.

One of the NetSuite executives in these briefings added that the company develops the roadmap and potential enhancements from listening to the requests of customers and the marketplace. I'm quite familiar with this process as it is one commonly used by many software companies. However, the problem with this approach is that often leads a software company to continue to enhance existing products that it sells to its existing customers at the expense of creating visionary, transformative and amazingly all new products that capture the hearts and minds of the customers to come. Steve Jobs, in my estimation, was absolutely brilliant at that understanding what to put in and what to leave out of products developed by Apple. I seriously doubt that Steve Jobs consulted a list of customer functional enhancements to determine what would eventually go into products that we know today as the iPhone, iPod or iPad. Should NetSuite desire breakthrough product innovations within its partner ecosystem, then it needs a mechanism to create breakthrough innovation not just incremental innovation around the periphery of its product line.

NetSuite executives also expressed a desire to retain the integrity of its core product line. It discourages partners from developing functionality that is redundant with existing functionality within the core processes NetSuite currently supports. They welcome products that extend existing applications, do not serve as functional substitutes or become direct replacements of NetSuite applications. Moreover, they do not want partners to build products that insert themselves in the middle of NetSuite processes unless these insertions yield truly high-value added capabilities for the mutual customer base.

What can we conclude from NetSuite's partner strategy?

NetSuite appears to be building a very deliberate, not chaotic, partner ecosystem. Rapid product line expansion and functional improvements seemed to be at the top of their priorities. Cross product integration is clearly a management priority.

One group of potential partners was not apparent to me: providers of external data sources that could enrich existing processes. I did see CCH, a provider of tax table maintenance and other data, in the exhibitor hall. But, most of the firms in the exhibition area were clearly selling add-on modules, standalone applications that integrate with NetSuite applications, reporting/analyst tools, HR software, consulting services, etc. Providers of external data were not abundant, in my opinion. That needs to be a thrust for next year's event.

The quality of the NetSuite partner group continues to improve. Like a fine wine or cheese, the partner community seems to get better with the passage of time. Bigger systems integrators, more channel partners, more complementary technologies, etc. would define the environment I saw at this year's show.

Big, global systems integrators may provide headlines for NetSuite; however, I was not overly impressed with the degree of actual commitment from these providers. One NetSuite executive pegged the number of Accenture deals involving NetSuite software at approximately 2 dozen. Deloitte is currently working on a similar sized number of deals. Yet, some significantly smaller firms are already pushing deal sizes of 10 or more clients today. This would indicate that large systems integrators may be:

• still moving very slowly away from on-premise work to multi-tenant, cloud application software
• taking a wait-and-see attitude before jumping in with full-blown investments in training and product development around new age products like NetSuite and its NS-BOS platform
• not so nimble or advanced as their marketing might suggest

I would recommend that NetSuite lean hard on its large global integrator partners to see just how committed they really are to the space, to the NetSuite platform, to building out the NetSuite ecosystem and to NetSuite specifically.