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Nucleus polled NetSuite customers to gauge their success and satisfaction with their decision to entrust mission-critical business functionality to cloud computing. Ninety percent of the customers surveyed rated their satisfaction as four or five out of five — satisfied or very satisfied, and no company rated their satisfaction below three. When asked to elaborate on the reasons for their satisfaction, NetSuite’s ability to drive cost reduction was mentioned as a key driver. By offering tremendous scalability and breadth of functionality, with little to no IT expertise required to install and manage, NetSuite has earned long-term satisfaction and loyalty. “Because the application has been validated by users as an effective tool in cost reduction, deployment footprints at existing customers are more likely to increase rather than decrease,” wrote Nucleus in the report.
I’ve long said that running a system, or especially, many systems, has a huge hidden cost. Some might get away with it by putting the brother-in-law in IT, but believe me there is no way that the systems you maintain do not have a cost, I don’t care who runs them. And there is also a cost to the systems that you do not run, mainly in the time and effort people expend manipulating data on spreadsheets.
6,600 customers, that’s pretty good, too!
Back in my Oracle days I consulted with a Fortune 100 company and two of the CEO/Founder’s children were in the IT Department. Neither of them appeared to be especially talented in matters technical, but there they were, cutting their corporate teeth in 4 hour meetings on system size, redundancy, failover, backup and restore. I even had one instance, early in my career at SightLines, where a client tried to get his aged mother to do the implementation! And the son, supposedly, was knowledgeable about IT. So what’s going on?
I guess it’s not the worse place to learn about a business. There’s always a lot of discussion of key business processes and throughout a typical week/month/quarter you will meet most of the management team, directors and above. But it’s also not the best place to learn about the business. You will rarely meet a customer or vendor, outside of an IT vendor, there. You will never see a sale negotiated, or learn the why your products and services are priced as they are. You will also not see customer service issues managed.
But if your path in life is IT then with all haste take a place in your Uncle’s, Sister’s, Dad’s, Brother’s, IT department. Otherwise I would be a little suspect of how this will play out for you. You may be a trusted family member but hiding in IT will not prepare you for a larger business role, unless you ultimately want to work for an software or IT services firm. More likely than not, your relatives figure that you are trustworthy and since they need a body to handle the work in IT, your it. It’s also quite difficult to find good IT people and they tend to move around a lot, especially when you ask them to work 60 hours a week, every week. So putting a thankful relative in IT adds some stability for not too much money I would suspect. And they can’t do too much harm there, right?
Well, I don’t really have a dog in this fight to be honest, so maybe I’ll let it lie. I have asked my daughter on several occasions about working for SightLines. I’ve gotten a lot of answers, but none have been “yes.” Darn smart kid!
The conversation started me thinking about the current states of software and how this might actually reflect the state of the economy overall, not just in this downturn but in long term fundamental changes in the economy.
Software is in harvest mode, just about everywhere you look. What is harvest mode? When products reach the end of the life cycle they are kept around because they still have some value and market cache. We don’t continue to invest in them because the investment will no longer pay off. So we simply harvest whatever revenues we can while keeping a very close eye on costs.
In the software world, there are actually companies that buy older products and continue to harvest maintenance fees for years, especially true in the software for busines verticals. A friend of mine who works in a local steel service center owns one of these. The company purchased the software 20 years ago to help them manage inventory, processing and scrap. Then about 8 years ago the company that wrote the software sold off to a harvester. They now have a single person who supports the code base, but the product is no longer actively sold. There are after all only so many steel service centers in the world.
But what we are seeing today is something completely different. We have non-vertical, on-premise ERP/CRM software that is being harvested by the company that orginally wrote it, in the case of SAP, or by the companies that purchased it, in the case of Oracle or Sage. One way or the other, it seems that all 3 companies have come to the conclusion that it is useless to invest money in their now graying software products.
SAP’s steady decline went by another hurdle this past weekend when the current CEO left unexpectedly and two guys were promoted into the top spot. You can read extensive apologies here. Oracle has almost 100 acquisitions under it’s belt, making it a software harvester extraordinaire. Sage also has a host of harvest products. In fact in the on-premise space if you aren’t being harvested, you are a harvester.
On the plus side, harvesting means that your on-premise system will continue to run and be supported, more or less, by someone for the foreseeable future. On the down side, this means that you will continue to pay a lot of maintenance fees for the foreseeable future with little if any new features/functions. You have software on life support, basically, and that is both costly and a sorry state of affairs.
Why this is happening is difficult to say because the reasons are nearly as numerous as the underlying products. Sage for example still has some products that are not real time, but instead rely on batch processing. You would think it makes sense for companies using something like this to look around for something new, more useful and modern. There must be two reasons that they are not interested in changing: The newer software does not offer enough value to pay for the investment and trouble to change; the company is no longer making the income it once did and therefore has little to spend and little faith in the future. There’s some truth in both of these, but taken together they really pack a punch.
Think about a company that wholesales/distributes dental supplies, a b2b business. There was a time when the population in their area was surging and dental offices popped up like flowers. They became a strong regional player with a one or a few competitors, and all of them did well. But over the past few years business has changed substantially. First there are fewer new practices opening in their region, and the ones that are there have begun finding better values online. They can deliver next day, but it actually costs them more to hire a driver, a cost that he must pass through to customers, than it costs an internet distributor to send next day air. Huge efficiencies have happened in their market, and all have squeezed their margins.
What does a company in this space do to compete? They could also sell online, but they don’t have the expertise in materials management nor the capital to bring to bear to run an enormous, national brand warehouse. So, like the software companies, they go into lockdown, or harvest mode. They continue to service their region, keeping a very close eye on costs, but they are unable to afford huge new investments in the business. Including software. So they keep on with their old system and eventually they will run out of reasons to exist altogether. Meanwhile, dentists squeezed by better oral care buy used, re-conditioned chairs instead of new ones. These are also available on the Internet.
In short, the Internet has thrown a wrench into the works of many mainline companies and as a result they have turned off new investments in technology. When I go over my NetSuite client list I can see a lot of companies that we implemented the software service for but only 2 of the more than 90 companies are mainline wholesales/distributors . Interestingly, one of my first clients was an Arizona company called Lifestyle and Leisure Creations, a wholesaler of massage equipment and supplies who sold out to a larger competitor.
That’s probably a strategy that a lot of businesses need to be looking at. Purchasing competitors, especially at current discounted prices, can be a useful way to expand your customer list and restore some pricing strength. But you still need to gain greater efficiencies and the best way to do that is to think about investing in better technology. If you have a growing company across a large geography, you need to see where you are everyday and at every location. It’s not good enough to just throw together results manually at the end of the month. This is how on-demand software as a service can really help. Your entire company can work off a single account of the software, giving you real time results from all branches, warehouses, etc. And you don’t have to add the very expensive computing infrastructure that used to be necessary.
Again, looking over our client list, I see a dozen brand owners. These are wholesale/distributors who have gone an extra step and now are also manufacturing the products they distribute, using third parties in most cases. Brand ownership is one way of averting the steady decline of growth death spiral.
If your margins are getting hit hard and you’re thinking growth through aquisition or brand ownership is the only way to continue the company, then you have to consider on-demand software. Like you, it operates unbounded by geography. And while on-premise software continues to struggle, NetSuite’s SaaS ERP/CRM grows and takes their customers.
Talking about baseball, my recent travels took me to St. Louis where my gracious hosts were so kind as to take me to the area know as The Hill, a predominantly Italian area of the city. We had a great meal at one of the many local eateries, but the highlight for me was the passing of a ball yard where former major leaguers Joe Garagiola and Yogi Berra once played. That was kind of cool. The whole neighborhood was very nice, even on a snowy winter night.
Good-bye to Curtis Granderson. The Tigers traded the best Tiger to the Yankees, which I am sure makes my friend and baseball nemisis Paul Greenberg happy. Best to Curtis, I for one always loved his defense. New York Yankess, ugh. Don’t get me started. I always like the way that they pronounced ‘Yahnkeeees’ in “Last of the Mohicans.”
I also actually saw it rain in California. I have probably spent a whole year of my life, a week or weeks at a time, in CA, and cannot remember it raining. This trip in rained everyday and hard. Fremont was flooded, and the storms only added to the overall picture of a California under deep stress. The cab drivers, the waiters, the client and the folks at the hotel all talked about the local and national economy. For once I did not hear any snarky remarks when I mentioned that I was from Michigan. That was in itself a revelation.
But don’t get me wrong, I am not celebrating the hurt the West Coast is currently undergoing, or anyone else’s for that matter, including our own here in the Upper Hand. To the contrary, I am a little nervous because so goes California so goes the country. It is such a big part of our economic engine that when I hear about the commercial real estate vacancy rate I have to wonder how long before we’ll see a real and regular pick-up in activity. In my darker moments I wonder if we are not heading into the 2nd dip of this recession. We will eventually pull out of this, but will we be any smarter? Does the political class, all of them, realize that we have now run out of other people’s money? I’m not sure.
At any rate, we have been fortunate to continue our NetSuite consultancy into the New Year with several new clients. Helping these companies start to use NetSuite made me wonder how companies operate across wide geographies without a tool like NetSuite. How do you keep far flung sales people, warehouses, support staff on message, working with purpose, productive, connected? We have so many different modes of communication now that we often take for granted how difficult it is to create an effective team and get everyone moving in the same direction. It takes more than IM or cell phones, or smart phones. If you are operating virtually, meaning that you have employees that do not come into a central office everyday, then you really should think about an online place where the company can meet, where everyone can add their efforts to the team and understand their contribution. You need to connect everyone to headquarters. How?
Well, I hear the IRS calling my name, telling me that I need to get everything over to the accountant. Best to all of you in this New Year, and I hope we all pull out of this in one piece.
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