Special Report: NetSuite puts hairballs in the Cloud

Can NetSuite OneWorld fix the "giant hairball of applications" that sits within firms? Whilst CEO Zach Nelson talks up its new module and Cloud computing, analysts deliver their verdict.

By Stuart Lauchlan, news and analysis editor

NetSuite has long advocated the 'suite' approach of integrated applications; now it's reaching out to embrace an integrated global approach with its OneWorld pitch. It's the beginning of the next stage in NetSuite's life, according to CEO Zach Nelson - and apparently the end of corporate hairballs!

OneWorld, according to NetSuite, is a prime example of the kind of thing that could only be done as a result of the emergence of so-called Cloud computing. “You hear a lot these days about people rushing to Cloud computing, but you have to approach this with a discerning ear,” said Nelson at a launch event in San Francisco. “Some things in Cloud computing are pretty much inevitable, such as taking things that happened in the client server world and moving it to the Cloud. We saw some of that this week with a sales force automation firm tying up with a productivity applications vendor. That hasn't transformed what customers can do.”

"Once your company begins to grow, how do you scale to support international operations? You find you have so many applications that you can't get any information out of the hairball."


Zach Nelson, CEO, NetSuite

It's worth noting of course that the sales force automation firm in question is Salesforce.com and the productivity applications vendor is a little outfit by the name of Google! So it has to be said that there's a chance that such a tie-up is going to get more than a little attention from customers. But Nelson's point is that there are other firms and actions that are unique to the Cloud. “The interesting companies are those that could not have existed with client server,” he said. “Amazon.com needed the Cloud. eBay could not have existed with client server.”

So, Amazon.com, eBay, now NetSuite OneWorld – that's the basic audacious claim being made. “OneWorld is in a similar vein to them,” insisted Nelson. “It needed a great idea, it needed great execution and it needed the Cloud. All of this combines to enable customers to run global businesses in real time. It's long been the dream of business people to be able to click a button and be able to see what's going on in the nine operations for their company around the world.”

Natural evolution

This is, he argued, a logical evolution of what NetSuite was set up to produce in the first place. “The original idea for NetSuite was simple: instead of running the business with a giant hairball of applications, why not create a single applications with which you could run a business,” he noted. “Take that now to a global scale. Once your company begins to grow, how do you scale to support international operations.

“Everyone wants to be a global company,” he continued. “If you're from Europe, you're instantly an international company because you're selling to different countries across the region. It's the same in Asia. It's only in the US that we can have an isolated market, although even here there are regions and problems with divisional operations. So you take your hairball locally and you multiply it. In the US you have Great Plains as the accounting basis for the systems; in the UK, you have Sage; in Australia you have something called MYOB; in Germany you use SAP to be patriotic; in Canada you have Accpac, something so old that you can hardly say it. You just have too many hairballs, so you decide to consolidate.

“Then you find you have so many applications that you can't get any information out of the hairball. You set up the Americas, EMEA and Asia Pacific as regions, then they want regional reports so that they can manage the CEO's expectations before he or she gets a global consolidation. It just becomes impossible to figure out what's going on in your own company. Every firm deals with this by writing giant cheques for a $100 million to firms like SAP and Oracle just to try to solve the problem of how to operate locally, but consolidate globally."

Big cheques, multiple P&L statements

“But the problem is that the traditional approach does not result in multiple companies, but multiple profit and loss statements. When you consolidate globally, you get a consolidated profit and loss statement. You get zero drill down. You just have to trust the controllers in the various regions to follow instructions on your practices. But the end result does not provide real-time global business management. There is no magic dashboard that lets the CEO drill down to the Tokyo figures to see the transaction that screwed up the profit and loss. The right way to run your business is with fewer systems, not more. You never solve the problem of the hairball by adding more systems.”

OneWorld supports 170 currencies, but local tax codes are pre-configured only for the US, Canada, Australia and the UK, with Japan expected to be added later this year, although Craig Sullian, vice president of international products, added that the tax codes be adjusted to cover countries such as Germany.

Priced at $1,999 per month in the US, Nucleus Research reckons that the ROI on NetSuite OneWorld "can be nearly immediate”. Rebecca Wettemann of Nucleus noted that this is based on the assumption that at that cost, over 12 months, it equates to the basic salary of an admin executive who is no longer needed. She argued that while there are still possible issues of execution, the basic idea of OneWorld is one likely to resonate with customers.

Other analysts are less impressed. “We're not convinced OneWorld's $1,999 per month cost is the right price point,” suggested China Martens, senior software analyst at The 451 Group. “It looks a little on the expensive side when stacked up against the $499 a customer pays per month for the NetSuite product and the $99 per user monthly charge. As the SaaS model takes hold, customers are being a lot more cost sensitive, particularly when it comes to add-ons.”

“That said, if one or more OneWorld users can publicly share experiences where using the module has helped them quickly respond to and successfully resolve issues at far-flung subsidiaries, NetSuite could have struck upon a key differentiator for its on-demand software. OneWorld could also prove useful in creating more stickiness among NetSuite's upper mid-market customers to help convince them to renew their one-year contracts."

Early adopters

Early adopters of OneWorld include software firm Kana which has four of its subsidiaries on OneWorld's full financial system and all of its sales people using the same CRM system for the first time. Chief administrative officer Jay Jones has experience of Nelson's hairballs. “Before I joined Kana, I worked at Veritas and got to work through the hairball scenario,” he said. “We tried to have an integrated worldwide solution. We tried with lots of different technologies, such as ERP, CRM and professional services systems. We tried to integrate them with ETL tools and to do analytics with data warehousing. Over five years, we spent more than $100 million.

“I've been at Kana for over a year. We had one group looking at CRM, one looking at ERP and the internal groups were disconnected. There was a home-grown CRM system that was disconnected from the ERP, and we had two instances of ERP, one for the US and one for international. So we had consolidation that was done in spreadsheets. Consolidation for us meant high level accounting balances from the subsidiaries, with no ability to drill down if you have queries. If you had questions, you went back to the accountants who went back to the subsidiaries. The finance guys could figure it out in a few days; the business guys often never got the answer at all.”

So, market differentiator or not? This is genuinely the vision that NetSuite's techie founders had in its formative days above an Indian restaurant and next to a hairdressing salon. That was before Nelson came on board to provide the business gravitas and leadership. The question now is whether NetSuite can deliver on the marketing clout needed to promote the vision, stealing back thunder from a certain "sales force automation firm".

A final thought: OneWorld used to be a brand belonging to JD Edwards, which was gobbled up by PeopleSoft which was in turn gobbled up by Oracle whose founder and CEO Larry Ellison bankrolled the setting up of NetSuite in the first place. It's a small world, whether you have a global view or not.

Related articles