SaaS (software as a service), or cloud-based, computing is an important component of the enterprise software landscape. Cloud vendor, NetSuite, sells a complete, browser-based ERP package to mid-market organizations.
To learn more about NetSuite, I spent hours talking with senior management during the last few weeks. Conversations and meetings with the following executives took place in Boston, San Francisco, on the phone, over dinner, and in assorted conference rooms:
To help gain an independent view of the company, I also spoke with three separate NetSuite resellers; these reseller interviews were not chaperoned by NetSuite representatives. Although I have not yet interviewed NetSuite customers, that will come.
Kicking off this blog's coverage of NetSuite, here's a video conversation between CEO, Zach Nelson, and myself. Zach and I discuss several important topics, including differences between on-premise and SaaS implementations, the importance of resellers to NetSuite's business model, benefits of cloud computing, the impact of cloud architecture on customization, and the role of system integrators in the cloud reseller channel.
THE PROJECT FAILURES ANALYSIS
To gain a more complete understanding of NetSuite, we should recognize a fundamental attribute of the mid-tier enterprise software market. The small- and mid-sized organizations comprising this market often possess levels of complexity that are similar to much larger companies. At the same time, however, these organizations do not have comparable resources (both people and dollars) to pay for solutions. In other words, cash is tight for companies in the mid-market.
All enterprise software companies serving the mid-market therefore face demanding, yet resource constrained, customers who expect high vendor responsiveness at low prices. The nature of ERP software exacerbates this situation, because ERP cuts across various parts of the client organization, making both technology and implementation inherently complex.
This set of constraints is even worse for mid-market SaaS vendors, because general industry hype has led customers to equate SaaS with "fast, easy, and cheap." Enterprise software, whether SaaS or on-premise, is rarely that simple.
For NetSuite, this set of dynamics creates both challenges and opportunities. The challenge of customers who want lots of software and services without paying much is universal. The opportunity for NetSuite lies in its ability to innovate around implementation and service efficiency, to get mid-market customers up and running faster and less expensively than competitors.
To its credit, NetSuite is actively working to address these broad industry dynamics. For example, the company has developed tools to make customization easier, which helps reduce implementation labor costs. It's also actively developing a strong reseller channel, to bring services (and hopefully efficiencies) closer to the customer.
[I]f I were a mid market company looking for an ERP solution, NetSuite would certainly be at the top of my short list. The idea of spending the kind of money that you have to spend to get an on premise solution up and running is simply a non-starter for most of the mid-market. NetSuite provides, by most accounts, a comprehensive ERP application service with minimal setup costs and that makes it a winner in this market.
NetSuite has also been in this game for many years, which is another significant factor that potential buyers should not under-estimate.
[Disclosure: NetSuite paid my out-of-pocket travel expenses to San Francisco.]