Zach Nelson: ERP with ecommerce needn't be a painful operationby
30th Apr 2013
"We are a mission-critical system. We are a heart transplant, not a knee replacement."
Typical rousing words from NetSuite CEO Zach Nelson as he announced top line year on year revenue growth of 32%, up to a record $91.6 million for the quarter. Profitability may remain elusive, but customers are coming on board at a good rate - 325 new customers in the past three months - and the deal sizes are increasing as the number of enterprise-scale deployments rose also.
NetSuite is of course best known as a Cloud ERP firm, but Nelson argues that it goes beyond that. "We talk about it as ERP but what we enable our customers to do is not possible in the traditional ERP system," he says. "The ability to turn your ERP system into customer-facing commerce system [is] not possible with SAP, not possible with Great Plains without enormous amounts of pain."
This means customers are ready and willing to pay higher rates for this additional functionality, particularly when it comes to the ecommerce capabilities offered by SuiteCommerce.
"SuiteCommerce is NetSuite, right?" declares Nelson. "It's not a separate product. It is the core application. In effect, it's NetSuite instead of looking like a controller's dashboard, [looking] like your customer-facing website. It's the same product. They're different technologies to enable that, of course, but it's not a separate code base."
Nelson admits that often what NetSuite goes in to sell to customers does not end up being what is bought, but this is only to be expected he suggests - and is a good thing.
"We build a system designed to run a business. Very few companies and very few CEOs wake up in the morning and say, you know, I wish I just had a system, one system that could run my business. What they do is they wake up and say, oh I've got an accounting pain, I've got an ecommerce pain, I've got a warehouse management pain, I have an order management pain. How do I go solve this?
"So we ultimately end up marketing the many different pain points. But what happens when they get into the funnel and they see NetSuite and they realise their pain isn't that point product issue, it's how data moves across their company. So while they may come in for a point product pain, they all buy the Suite and they all deploy multiple elements of the Suite. Literally, every one of our customers buys the entire suite."
What is important is to drill down on the operational functionality of the offering, he urges, not to get distracted by bells and whistles.
"You hear a lot about the phenomenon of social when people talk about next-generation business applications and how companies are quickly trying to retool their maybe, customer-facing capabilities to address some of the changes in how people communicate nowadays," he notes.
"You've heard less about what companies are doing to really retool their operational systems to address new business models. How do you transact a business, not just how you communicate with customers online, but literally, how do you transact a business seamlessly with them?"
"That's what NetSuite's all about - enabling them not just to talk to their customers but actually, take an order, to fulfil an order, to generate an invoice, to really have a true business relationship with these customers but in new way."
This leads back to a familiar Nelson-meme: competitors like Microsoft and Sage aren't geared up for internet-enabled business. "You really can't build a modern business on a system that has no idea that the Internet exists," he argues. "You can't have a real customer relationship with a company when you bill your operational systems on pre-Internet architectures."
To this oft-repeated claim he now adds another. "You're also starting to see companies that bet on the wrong Cloud platform begin to move to NetSuite for their sales efforts," he states.
"In the last quarter, we saw people begin to move from Business ByDesign, for example, based on the lack of traction of that product in the market, and frankly, the lack of commitment from SAP as their strategy has begun to change in the Cloud. They've moved that really to be an HR sales model and enterprise sales model and moving away from Business ByDesign."
That said, some competitors seem harder to shift than others. In the US, NetSuite has claimed success in ousting Sage on many occasions. In the UK it's proved somewhat harder however.
"The companies there are incredibly loyal to Sage for whatever reason," admits Nelson. "Obviously, it's a local company, particularly in the UK, and there's some loyalty to the product line. But I think that's starting to fade now as Sage has been unable to deliver anything Cloud-based, particularly on the ERP side. So seeing what happened in the last quarter there, I'm very excited about the Sage replacement cycle that's about to happen in that area."
In general though, Nelson is more upbeat about NetSuite's European traction than in recent times. "It was a bit retarded from the speed with which it happened in the US," he says. "You are starting to also now begin to see enterprises, large enterprises, move up to NetSuite. We signed a very large deal with $1 billion company over there in the quarter.
"So you're beginning to see begin to happen in Europe what happened really in the US. over the last couple of years. We're very excited about Europe now."