NetSuite goes vertical

NetSuite is going vertical, with a software industry-specific edition. I caught up with NetSuite CEO Zach Nelson at PC Forum who described the software vertical as a "single system from lead to renewal.
Written by Dan Farber, Inactive
NetSuite is going vertical, with a software industry-specific edition. I caught up with NetSuite CEO Zach Nelson at PC Forum who described the software vertical as a "single system from lead to renewal." More and more the software-as-a-service world is looking somewhat similar to the old client/server world,--suites, verticals, APIs, development platforms. On the other hand, no hardware to install and less clunky customization.

According to Nelson, the NetSuite-Software Company Edition is just the first of many vertical his company plans to introduce. The Software Company Edition grew out of NetSuite's own use of its product. It supports  NetSuite Sarbanes-Oxley compliance with Section 404, milestone billing, renewals and maintenance sales management, multi-tiered commission schemes and role based dashboards. NetSuite-Software Company Edition is priced at $2,999 per month, plus $99 per user per month. Nelson said that NetSuite would also work with partners to build verticals, such as point-of-sale.

Of course, I asked him about Salesforce.com and Oracle's efforts in the on demand space with its E-Business Suite On Demand, as well as Siebel acquistion. Regarding Salesforce.com, Nelson said, "Salesforce.com can't add a transaction engine to its forms-based engine after the fact. They can never get to where we are. They announced billing-order management and they are nowhere with it."

George Hu, senior vice president of applications at Salesforce.com, told me earlier this month that his company is "evolving from data to content, process and transaction management—giving customers the raw tools to go deeper.” That doesn't mean that Salesforce.com is going toward an all-in-one suite, with a transaction engine to run ERP financials. Salesforce.com is integrating its platform with transaction-based systems via Web service interfaces and has opened up its platform for third-party developers to create and sell applications (AppExchange) that run on top of the Salesforce.com CRM-centric engine, Hu said. NetSuite has allows developers to extend its data model with NetFlex. Nelson described NetSuite as "tightly coupled" with its all-in-one data model, which he said is more advantageous for transactions (fewer hops), compared to a more loosely coupled Salesforce.com. It's certainly simpler and cleaner to have one system, but not the reality today, and Web service integration at least fills the gaps.

Referring to Oracle's E-Business Suite (Oracle CEO Larry Ellison has bankrolled NetSuite since its inception), Nelson said, "It's hard to take something designed for large systems and make it work for [SMB]. We approach more from the bottom up." Nelson is focused on the mid-market. "Everybody lusts for the mid-market," Nelson said. "Nobody has more than 10-percent share--you have to design for the market. It's a fragmented and the SMB market--500 employees and below--is as complicated to run as big businesses, but they can't afforts a $100,000 mistake. Verticalization is important whether the company has 500 or 4 employees."

The market is fragmented because the vast majority of SMBs have a mishmash of applications running their companies. Buying into the full NetSuite story means replacing the entire system, not a just a part, such as CRM. As a result, despite their shared Oracle pedigree, Salesforce.com has grown much faster than NetSuite. As an example, NetSuite has 462 employees and Salesforce.com over 1,300. But, they each fill a different market market need and are growing, so there is plenty of room for both approaches with or without the sniping.

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