Ben recently reported on how NetSuite is going after Salesforce.com, by announcing their Renewforce program. Today NetSuite is going after bigger fish: the leader in Enterprise Software, SAP.
The aptly named Business ByNetsuite program guarantees at least 50% savings to current SAP R/3 customers relative to - watch this! – the annual maintenance fees they are now paying to SAP. Yes, it’s not a price-to-price comparison. With the perpetual licence model customers pay upfront, but are still forced to pay annual maintenance fees – with SaaS there is only a subscription fee, and now NetSuite proves it can be half of only the maintenance component of traditional software’s TCO.
NetSuite’s timing could not be better: in the middle of the economic downturn SAP just increased maintenance fees – and as fellow Enterprise Irregular Brian Sommer sates over @ ZDNet (emphasis mine):
In light of the current economy, SAP’s timing on this cost increase was unfortunate at best and a strategic blunder at worst. Raising customer costs in a down economy is a gutsy thing to do unless you are absolutely sure of your customers and their willingness/ability to pay more.
Well, apparently not all customers are willing, and NetSuite has already presented a showcase convert from SAP to their own system.
Of course it does not mean NetSuite is ready to replace SAP as such. NetSuite is a very good integrated SaaS offering for small to midsize businesses, while SAP (and next Oracle) is what most large corporations run their business on. Comparing the two would be comparing apples and oranges. NetSuite themselves make it clear this is a divisional offer: they can handle smaller divisions of large companies, many of which likely replaced a legacy system with the parent company’s SAP R/3 as a result of acquisition. There’s no way the entire corporation could switch to NetSuite, which is why the new program offers NetSuite-to-SAP connectors for enterprise reporting.
Would these divisions not be better off with a comparable SaaS offering from SAP themselves? Most likely … and there is one, albeit not highly visible. the Business ByNetSuite name is clearly a play on SAP’s very own Business ByDesign, introduced with great fanfare a year ago.
I’ve seen demos of SAP’s system, and am convinced it is the most functionally complete on-demand enterprise system available anywhere, and @ $149/user it is reasonably priced. After some initial doubt most analysts seem to agree the product has strong feature-set, but they also all point to potential execution problems, as well as SAP’s positioning dilemma.
Business ByDesign is clearly meant for the SMB / SME market, but even there it is facing off with two other SAP offerings: Business One and Business All-in-One. Confusing? Sure it is, even for customers. There functional limitations and BYD is clearly not a sufficient system for a large corporation, but within the SMB range it could very well serve customers SAP would rather see in the other “buckets” for its B1 and A1 products. SAP’s insistence on the strict segmentation is largely myopic: it assumes a SAP-centric world with loyal customers: but they have choices, including NetSuite.
SAP is clearly facing the dilemma of trying to get on the SaaS train while at the same time not cannibalizing their existing on-premise software market. In fact it isn’t simply a SaaS vs. on-premise game, BYD brings in new technology some of which has not yet made it to the main SAP Business Suite. But the best technology and feature set is not enough, it needs clear direction, marketing and sales execution. Announcements around SAP BYD’s delay, then counter-announcements that it’s not a delay, just “reduced acceleration in marketing”, the conflicting then all-but-disappearing messages from SAP at their major conferences certainly don’t help.
SAP has an excellent but poorly-positioned product that is hard to get: that’s an open invitation to competitors like NetSuite, and NetSuite is clearly smart to take advantage of SAP’s blunder.
I reported a couple of weeks ago about the aggressive stance salesboom is taking in order to acquire Salesforce.com customers.
Hot on the heels of that comes Netsuite's Renewforce program. Renewforce seeks to migrate SFA customers to Netsuite's own product line and is guaranteeing;
More and more we're seeing downward pressure on SaaS vendors - there is a cyclical effect going on here. When Salesforce first bought SaaS to mainstream business users, the major play was that their product would disrupt the incumbent offerings. Much of this disruption was going to come about as a result of the move from CAPEX to OPEX and the lower TCO of the product.
We're now seeing the initial SaaS vendors begin to feel the pressure from a new generation of vendors - all believing they can do it cheaper than SFDC.
It's a little comical that, simultaneously with consumer applications scrambling to find ways to gain a monetization path, business applications are being pressured on all sides by downward pricing pressure.
I wonder how far this pressure will cause prices to drop and who is best placed to trim the fat sufficiently to come out on top?
I posted a little while ago about some bad experiences had by
Netsuite customers, in fact the CEO of Atlassian himself left a comment on the post indicating their
disappointment with the product.
I thought it would be a good idea then to talk to a Netsuite user and get their perspective. Rich Haus is VP Services at BMG Seltec, Seltec is in the software and automation business, and they cater for the materials industry: asphalt, concrete, aggregates etc - the guys who provide the heavy material for construction. So it's an interesting mix: "old-fashioned" business, with a "new-age" software package.
First some chronology. Seltec began using Netsuite for their sales team functions back early in 2005. At the beginning of 2007 they then rolled out Netsuite for their service and back-end accounting functions. They utilised the Netsuite professional services teams for both implementation exercises.
Haus indicated a high level of satisfaction with the Netsuite program. From a
former situation of having to run integration on three separate offerings,
they're now integrated at the application level thus enabling information
sharing and collaboration. Seltec is a business with around 50 people - their IT
function is made up by three people each giving a third of a day so it becomes
obvious that utilising an already integrated product saves them a lot of time
and resource. As Rich said; We're a similar business to Netsuite, selling as we do both software and
services. It makes sense to obtain the implementation function from within the
software supplier - there is a proximity to the product development team that
just isn't possible with a third party professional service
It's also interesting to note that Seltec have also rolled out a hosted exchange solution for their email - yet another logical time saving decision.
Seltec have been pleased with the flexibility of the Netsuite product - indicating that customisation has been, in their experience, much easier than with an on-premises solution. They're also impressed with the general Netsuite user interface.
Haus has been please with the SaaS experience generally - updates have generally been seamless with no real issues becoming apparent as upgrades occur - however as the complexity of the system increases, more room for potential problems develops - it is at this stage that an excellent service channel is key.
As mentioned above, Seltec utilised Netsuite's in-house implementation team. Haus was broadly pleased with the experience he had, indicating that one time the operative was reasonably competent while the other occasion was an excellent experience. He did indicate some disappointment at an implementation operative who could do little more than read the manual - obviously Seltec is a pretty savvy operation, and the cost of the implementation exercise would lead one to expect a real gun running the process who knew the product intimately - as with all things it often comes down to individuals.
Haus did indicate that any problems Seltec had would likely have been worse had they used a third party provider given the proximity to the product team that an in-house team brings. He did however mention that in his time spent on the Netsuite user forums, he did have low level interactions with third party providers and these individuals seemed to have a very good grasp of the Netsuite offering.
All in all Seltec have had an excellent experience with Netsuite - both in terms of product and also implementation. I'm keen to hear from other users - past or present - with their view on Netsuite.
Image via Wikipedia
Are Open Source and Cloud Computing anachronistic enemies? You’d think so, if you read GNU creator Richard Stallman’s interview in The Guardian:
Cloud computing was simply a trap aimed at forcing more people to buy into locked, proprietary systems that would cost them more and more over time.
"It's stupidity. It's worse than stupidity: it's a marketing hype campaign,"
Sure, there’s a lot of marketing hype as it is typical with any major technological advancement, especially as it reaches the peak of its hype cycle. But I think Stallman loses sight of who the “enemy” is:
One reason you should not use web applications to do your computing is that you lose control, it's just as bad as using a proprietary program. Do your own computing on your own computer with your copy of a freedom-respecting program. If you use a proprietary program or somebody else's web server, you're defenceless. You're putty in the hands of whoever developed that software.
I’m sorry, but proprietary vs. open source has nothing to do with on-site (your computer) vs. on-demand (“cloud”). I bet over 90% of my readers have some form of proprietary software on their own computers – and of course they have the choice of open source, too. Software as a Service does not necessarily equate to proprietary software, either. My fellow author, Krish, is both a Cloud and Open Source evangelist, in fact he just recently cited Open Source as a strong personal preference when selecting Cloud Computing providers:
Open source: This is a long shot and it is based entirely on my personal beliefs. I will feel very confident if the vendor releases the source code of the app under one of the OSI approved licenses. Apart from the actual benefits of Open source, I can also be sure that I will still be able to use the app even if the cloud vendor goes out of business. Wordpress, Wikidot, Deki Wiki, etc. are examples of cloud based apps available as open source.
So you can clearly have open source in the cloud, claiming otherwise is nothing but a smoke-screen. That said, let me just silently remark that I am not absolutely against proprietary software when it comes reasonably pricing, along with dependable support, continued development and robust availability.
The Guardian adds:
…his comments echo those made last week by Larry Ellison, the founder of Oracle, who criticized the rash of cloud computing announcements as "fashion-driven" and "complete gibberish".
Oh-oh… has everyone really so badly misunderstood Larry Ellison’s speech? Well, at least Nick Carr didn’t:
But the technology of utility computing, unlike the hype about the cloud, will continue on its appointed course, and, no doubt Larry Ellison will be there at the appropriate time to ensure that Oracle milks the utility model for whatever profits it can churn out. Oracle is the giant cockroach of the IT business - it thrives under any conditions. That's because Oracle, though based in Silicon Valley, is not of the Valley. Ellison long ago came to understand one of the fundamental truths about the corporate IT business: there's more money to be made in exploiting old technology than in pioneering new technology. Hedge your bets, bide your time until the cash begins to flow, then make your move.
A few months ago, Oracle announced that, with its software-as-a-service business growing at nearly a 25% a year clip, it was breaking ground on a big new data center in Utah to help power its web apps. And at the very same conference at which Ellison went on his anti-cloud rant, Oracle announced an extensive partnership with Amazon Web Services to incorporate Oracle products into the Amazon cloud.
Very well said. I might just add that other than Mothership Oracle itself, Ellison is still majority owner of NetSuite, a pure-play SaaS provider. He can poke fun all he wants, but will cash in when the time is right.
Update: Others "get it", too. Here's Silicon Alley Insider on the subject: The back-to-back criticisms of cloud computing both target the hype, but the two figures have very
different visions of the future. Oracle's Ellison is selling cloud
computing products and poking fun at his own marketing. Stallman is
opposed to the cloud because he thinks it locks users into proprietary,
non-open source software. Guess which one is a billionaire?
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In terms of commandments, personally we think this one is one of the biggies for a SaaS provider. Why? Well if you look at the truly successful software companies, they all have one thing in common. A really good channel.
Physically that channel might be their own or via a third party. It might be segregated into distinct industry verticals, across geographic lines or dependent on ARPU but either a good channel is a requirement for success for a software company.
Generally in software, but especially in a SaaS world, the actual channel covers a wide range of delivery mechanisms, whatever that mechanism - channel can be defined as “The bit that sells your software”.
For SaaS accounting vendor Xero, the channel appears to be the combination of fantastic design and partnering with the trusted advisors of their end users. For iPayroll - it's their face to face sales people that matter as this post explains. For Google it's viral uptake while for Microsoft a combination of clout, pervasiveness, marketing and third party sales channels does the trick.
For Salesforce and other more complex SaaS products it is building out a integrator channel. The reasons for this are fairly straight forward;
Given this, it came as a shock to learn of Netsuite's recent severing of ties with their largest reseller. This seems on the face of it a really large step backwards. Not only that but Netsuite is also building its own professional services business.
How does this leave enough on the table for an integrator channel to survive? How will Netsuite make up the lost sales coverage and technical expertise? What message does this deliver to the remaining partners? In my view, SaaS providers need to pick where they play in the value chain and stick to it, religiously. At the moment the industry as a whole is still in its infancy, that means there are plenty of on premises software companies to beat yet. Arguable the time to build your own professional services business isn't now. Rather it's when the market is flattening out and you need additional revenue streams...
We've seen similar historical moves from SaP - one minute embracing their third party channel partners and the next setting up their own professional services team - it's an incredibly hard balancing act and one that requires the utmost of sensitivity.
Of course the other perspective is that if your channel partner isn't doing the job for you - there is no option but to either find a new partner or run the channel yourself.
So what happened in this case? Was Skyytek not providing the customer numbers, the support or the services that Netsuite needed? Or has Netsuite gambled hugely on their own channel play?...watch this space for more
A collaborative post by the editor and unreasonablemen.net
I received a Press Release this morning to tell me that Netsuite
One World, the mid-level SaaS business management software solution is
launching in Australasia. This is something of a sea-change, we've got a number
of SaaS accounting applications for SMEs such as Xero and Saasu,
but it's the first time that a "credible" mid-market play has been on offer. But
how credible is the Netsuite offering from a user-perspective?
Netsuite appears to be a fully featured offering that, according to their website, offers the ability to;
Which all looks good so I decided to delve into some user experiences with Netsuite - Netsuite prides itself on being the "one stop shop" for enterprise business software - I decided it'd be interesting to see how this platform approach works in the real world. Unfortunately not very well it seems.
For a start Netsuite is pretty pricey - the Australasian version is just under AUD3000 per month - $35000 a year is quite a lot of software for a mid sized business. You'd think with this sort of sticker price that Netsuite would really be coming to the party in terms of conversion support, after market support and general service - right? Not if this website is anything to go by - true this could just be one person venting their spleen at Netsuite but check out these two customer quotes;
NetSuite is a catastrophe: sales people promise the moon but there is little
flexibility, no support, and no willingness to help solve problems. My firms is
small and we almost went under because of the delays and costs of dealing with
NetSuite. We had to junk the entire solution and start over from scratch. Avoid
NetSuite at ALL costs!
We signed the deal back in the February/March time and had an agreed delivery
date of 1st September but by the time September rolled round, they’d pretty much
done nothing. I was horrified to find they needed to write scripts. At first it
was two but ended up as eight. About a week after delivery in the October, they
pretty much dumped me. That was around the time things started going badly
wrong. They never cleaned up the test data they used and we can’t get it out the
system. In the end we had to come off NetSuite.
Now I have to disclose that I haven't been privy to a Netsuite conversion, and credit where it's due, Netsuite have got the jump on SAP in terms of go to market for a SaaS offering. You'll recall that SAP delayed the release of their own SaaS offering, BusinessByDesign - at least Netsuite has come up with the goods.
But for SaaS vendors - the key way to achieve scale is to create evangelists out of customers - this sort of feedback doesn't do anything to help with that.So what are our readers experiences with Netsuite - is it a revolutionary offering or is it a prettied up dog?
Post script - In another development Netsuite has parted ways with it's largest reseller Skyytek - I'll post some thoughts about that soon.
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