NetSuite muscles in on Salesforce.com and SAP

NetSuite has already offered sweeteners to get SAP and Salesforce.com customers onboard but has now called a truce of sorts by turning its attentions to integration - much to the surprise of Salesforce.com CEO Marc Benioff...

By Stuart Lauchlan, news and analysis editor

NetSuite is talking tougher in a bid to win a share of the action of Salesforce.com and SAP, but remains curiously quiet on the subject of Oracle.

The firm has offered financial sweeteners over the years to customers of both SAP and Salesforce.com to defect to the NetSuite camp. But it's now decided that a degree of co-existence is the way ahead and is offering new integration functionality between its ERP software and Salesforce.com's CRM as well as securing divisional wins in major SAP enterprise accounts.

SuiteCloud Connect is actually a group of third party integration applications from Boomi, Celigo, Pervasive Software and Cast Iron Systems, rather than NetSuite itself. Salesforce has its own integration platform, the Service Cloud, built on Salesforce's Force.com application platform. Salesforce.com itself was not exactly enthused by the NetSuite announcement. "I don't know anything about this," says Salesforce.com CEO Marc Benioff. "No-one called me, no-one talked to me about it. I don't know what it does. I've never had a customer contact me about Netsuite integration."

SuiteCloud Connect for Salesforce.com allows for bi-directional data integration and sharing between SalesForce and NetSuite applications, even though the two systems will be hosted in two different data centres. Account information, such as costs and pricing, sales incentives and lead generation can be synchronised between the two, keeping all staffers up to date with information. It also allows NetSuite to take home some revenue from customers who have opted for the CRM offering from Salesforce.com.

"We want to remove obstacles to people using NetSuite and Salesforce," says Raghu Gnanasekaran, senior director of business development at NetSuite. "Our backbone is ERP [enterprise resource planning] and financials; Salesforce's is CRM. For our customers that are using these two together, this is making it easy for them to get these two systems tied together."

A new threat?

Such a move, if successful could pose a threat to those firms that have chosen to develop versions of their own products on top of Salesforce.com's Force.com platform, such as accounting software firm Coda. "Integration between NetSuite and Salesforce.com looks good on a slide. However, it would require two databases, price lists etc and they'll need to map the different databases," says Coda CEO Jeremy Roche.

"We have spent a lot of time talking to people who are currently struggling with lack of integration to NetSuite and who were ecstatic to learn that there is a serious financial system available on the Salesforce platform. We are seeing that these middlemen hooking applications together are charging more for their integration stuff than our entire application, which needs no 'gluing together.'"

Others are more convinced that it's potentially a winning strategy. "NetSuite is known for its financials and eCommerce ERP service, less so for its CRM functionality. In contrast, Salesforce.com leads the software as a service (SaaS) CRM market but has no native ERP functionality," reckons Warren Wilson of research firm Ovum. "Integrated via a third-party application, the combination of Salesforce.com and NetSuite's services is greater than the sum of its parts. Among other things, the combined solution can provide deeper customer visibility, synchronise account information and product data across the applications, and eliminate manual processes across business units – for example, by making ERP functions such as order fulfillment and accounting available from within Salesforce.com."

He also adds that the integration of NetSuite and Salesforce.com creates an enterprise SaaS solution that features leading financials, eCommerce and sophisticated CRM capabilities. "Just as importantly, it leverages the brand and marketing resources of all participants – including the integration partners – at a critical time when many software vendors, including the largest ones, are becoming more aggressive about SaaS," says Wilson.

The battle gets closer

Among those larger firms is SAP, whose Business ByDesign SaaS offering has stalled but which still poses a significant threat to NetSuite, particularly if it can deliver on its ambitions. To that end, NetSuite is taking the battle ever closer to SAP with the launch of NetSuite OneWorld for SAP, which the firm says allows large SAP accounts to use NetSuite to manage multi-national, multi-subsidiary business operations in real-time and then pass on division-level transaction and summary data to gain a key enterprise-wide view of business operations. For example, using SuiteCloud Connect for SAP, a user could roll-up general ledger, order and revenue information from NetSuite to SAP for aggregate financial reporting purposes.

"NetSuite OneWorld for SAP enables large companies to keep their investment in legacy business applications, while deploying a modern, web-based business application suite that reduces costs and helps make their divisions more competitive and employees more productive," says NetSuite CEO Zach Nelson.

"NetSuite is looking to exploit one of the gaps in SAP's strategy by offering a cost-effective product for smaller sites," claims AMR Research's Bruce Richardson. "This would have been an ideal role for SAP Business ByDesign but the company never intended to target its installed base. Instead, Business ByDesign was aimed at first-time customers looking for a new SaaS offering. NetSuite is positioning its product as more functional than SAP Business One and less expensive and complex than SAP Business All-in-One and the SAP Business Suite. It does have some customer references to prove its argument."

Richardson cites the example of the CFO of a textile company that moved from SAP R/3 to NetSuite in 90 days. The executive had been frustrated by his inability to attract SAP consultants to his site but by switching to NetSuite, he was able to eliminate 11 topical consultants and two dedicated consultants, and take usage down from 90 SAP users to 32 NetSuite users, while spending went from 3% of revenue to one-tenth of 1%.

Is Oracle safe?

But can NetSuite succeed in tackling SAP? "While its revenue and customer counts pale next to those of SAP, there's little doubt customers are looking to move more of their applications to the cloud and they're willing to spend more to do it. NetSuite's revenue per customer for NetSuite OneWorld topped $100K in 4Q08," says Richardson. "This is a very clever move by NetSuite's Zach Nelson, one that should generate attention from C-level executives looking to drive down IT costs as the economy slips and slides. The challenge will be turning interest into invoices without incurring drain-the-bank sales costs."

Absent to date is any aggressive offering against Oracle, despite a mysterious unnamed source this week telling Reuters that NetSuite planned to ramp up its offerings to take on the firm on its home ground. The unsubstantiated 'leak' gave NetSuite's share price a bump but provided no information on how exactly this assault would come about in practice. Oracle's CEO Larry Ellison remains the majority shareholder in NetSuite, although he is unable to take part in day-to-day operational decisions concerning the firm.