NetSuite not sweating over SAP's increasing Cloud commerce credentialsby
28th Jul 2013
With Commerce as a Service having emerged as a key strategy for Cloud ERP player NetSuite, you'd expect it to have been rattled by SAP's recent purchase of Hybris, an act which parks more tanks on the lawn outside NetSuite HQ.
But not so, insists CEO Zach Nelson, who dismisses SAP's efforts to up its Cloud commerce credentials,
"Well, I know on the Hybris front, I made at least two gentleman very happy," jokes Nelson. "I was at a conference this week, and I think two of the core executives of Hybris came running out to me and shake my hand and said, 'Thank you for making SAP buy us'."
"I said, 'That's fine, but unfortunately, they're probably setting up to kill your product now'. As they swallow these products, they don't tend to do much with them. So we'll see what they actually end up doing with Hybris.
"We don't really see them much as competition in the market. We see more Demandware and Magento than we do Hybris. So I think they have a long way to go to make that an established part of all of the Cloud offering they've acquired."
Last month NetSuite was one of the beneficiaries of the seismic week in which Oracle chummed up with Salesforce.com and Microsoft as well as signed a deal with NetSuite built around a 'Workday-killer' HCM partnership.
"The Oracle HCM announcement, I think it was very important, certainly from a strategic standpoint as we move into 2-tier deployments, many of them have Oracle HCM in their operations," argues Nelson. "So the fact that we can offer integration with those makes a lot of sense in 2-tier deployments.
"We rarely get asked for HR. People look at NetSuite to run business processes and they look for something else to run HR processes. And especially in the lower end of the market, HR is usually just called payroll. They have a payroll system installed, and they're not interested in decoupling it."
But it's different in larger organisations, he admits. "We were talking to an SAP customer and they were looking at replacing SAP in their warehouses with NetSuite," he says. "They said, 'Well, we have this SAP HR stuff and we'd like to replace it as well'. And that was really what got us thinking a little more about how we might partner with some of these larger HR vendors. And so now it's great to be able to refer Oracle as an offering in those particular scenarios."
Overall Nelson remains as upbeat as ever about NetSuite's positioning in the market. "If you just look at the SAPs of the world, the Microsofts of the world and even take out the Surface write-off at Microsoft, you see their software license revenue going negative," he argues.
"It's not even a factor of comfort with the Cloud anymore in my view. It's a matter of business survival. If you're not building your infrastructure on a Cloud-based system like NetSuite, you're not going to be competitive in the modern world. I really think that's the main driver of what you're seeing in the shift from things like Microsoft and Sage and SAP to NetSuite."
And on the back of this wave of confidence, we can expect increased investment in Europe from NetSuite after the Cloud ERP and ecommerce firm saw an uptick in performance in the region.
"Q1 was notable for strength in Europe, but it was the first time we've seen that in a while, and so we didn't want to call it a trend based on a single data point," says Nelson. "But given our strong performance in EMEA in Q2, I'm more confident in saying that EMEA, and in particular, the UK is starting to accelerate their move to the Cloud."
One reason for the EMEA boost was attributed to a successful channel and indirect strategy paying off as well some important strategic partnerships. "The large SI channel, great momentum there as well," explains Nelson. "We added Capgemini to the list. We had some very interesting things going on that we'll announce later on some additional strategic partnerships in that space. So stay tuned on the larger SI front."
Nelson is in no doubt about who the target competition is in the UK and EMEA. "Our progress there is almost entirely coming at the expense of Sage, whose myriad, antiquated, on-premise, non-Cloud products are more than showing their age.
"Customers and the Sage partner channel have finally given up on Sage delivering a compelling strategy or a product set to run a modern business," he claims. "Sage did made a last gasp attempt to prove to its customers and partners that it gets to the Cloud, but it was just more lipstick on the pig, as they announced Sage 200, a hosted version of the on premise application of the same name, but offered with even less functionality. So much for getting the Cloud."
Beyond that, Nelson argues that NetSuite's pitch of two-tier ERP is increasingly resonating with large enterprises who want to add Cloud into the mix without abandoning existing on premise investment. This means more and more engagement with traditional SAP enterprise customers.
"This is not competing with SAP Business ByDesign, which is actually decreasing, it's getting into SAP's core market and competing with their enterprise products," declares Nelson. "I had a discussion this quarter with a very large SAP shop that's essentially going to standardise on NetSuite as their two-tier platform of choice in the mid-sized and smaller subs, while they maintain their huge investment in the on-premise product of SAP.
"So I think that's really starting to kick in. And we're just scratching the surface of the two-tier opportunity. But the interesting thing there is the selling by NetSuite of two-tier ERP has turned into customers actually beginning to architect a two-tier ERP strategy and deploy it."
Read more from Stuart Lauchlan
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