NetSuite and NetSuite Consulting
Our take on buying, selling, implementing and supporting NetSuite
- E-Commerce (5)
- NetSuite and NetSuite Consulting (23)
- SaaS (28)
- Technology for the Small to Medium Enterprise (38)
- Uncategorized (6)
By not only having a financial software company write a new version of their software on the force.com platform but by then entering into a joint venture with said company to market the newly combined CRM and Financial software product, Salesforce.com validates what we have been writing and saying these five years: To wit, it does not make sense for Small and Medium Enterprises, SMEs, to try themselves to patch together various applications when there are integrated products already on the market. Integrated apps, as in a suite, are an enormously beneficial idea for any company but especially for the SME who does not have the time, manpower or cash to build bridges from one app to another.
In our long experience it is only the largest enterprises that have the necessary resources to pull off the interfaces between applications, and even then it is usually not done well. And to be perfectly frank, integrated suites are not perfect either; I make no argument to the contrary. However, when you are making the decisions for your SME you do not have the luxury of considering a best-of-breed-applications-stitched-together-and-maintained-by-professional-IT-staff approach to your business. It is simply not in the cards. Even if it were you will have a hard time explaining to yourself, and any one else who might be listening, why so many organizations across the world and across so many industries have abandoned the best of breed approach for their core applications and gone to an integrated suite (Oracle, SAP, etc.).
When we talk to SMEs who currently have several key applications from various vendors running core functions in their company they normally run them in complete silos, using spreadsheets to paper over the disconnects. They have either abandoned their interfaces (we still have not met a company that uses the SF to QB interface successfully) or never even bothered with them. That’s reality.
Salesforce has evidently seen the light themselves. I will hazard the following prediction: Over time SF will sell their standalone CRM to very large companies who have large, direct sales forces, and they will sell an integrated suite to the SMEs of the world. They really have no other choice. They are being surrounded in the SME market by a ton of CRM competitors who have matched their functionality. Add to this NetSuite and SAP’s redesigned Business by Design due out any year now and SF really needs to both differentiate its products from the Zohos of the world and confront the integrated suites as they take market share in a world newly interested in cloud computing.
So bravo to Salesforce.com and the newly minted FinancialForce. It will be a presence in the market, I have no illusions about that. It also validates NetSuite’s long maintained position that an integrated suite is the key to running a better information system and finally a better enterprise.
I went through several RIFs while employed with Oracle Consulting. The key thing to understand is that Consulting was told, in no uncertain terms, that it had to meet the same operating margins as software and maintenance, ~40%. Consulting charges $200 – $400 and hour for resources to work on implementation, yet it had a hard time meeting these margin goals. That gives you some indication of how profitable on premise software and its annual maintenance fees are when a consulting division at these prices cannot keep pace!
Also, fewer and fewer are the organizations willing to spend top dollar for consulting help. In some cases you could hire two consultants for the price of one Oracle consultant and muddle through fine. This makes it more and more difficult for Oracle to maintain the margins in consulting that it earns in software and support. But customers have a point here. It’s not like the early days of ERP/CRM suites anymore. There are plenty of resources around now who understand these systems and who have done multiple implementations. Our NetSuite implementations for example average less than 100% of the price of first year licenses.
It’s important to understand, before heading into an on-premise software/implementation/support contract that the inmates have taken over the on-premise asylum and put the visitors, er customers, to work for them.
Salesforce.com on for example, and other SaaS firms, operate at much lower margins, under 10% in salesforce’s case and for NetSuite the operating margin is still negative. Businesses of all types should expect good operating margins, but does it really make sense to have operating margins approach 40%? This is a sign that the market is no longer competitive, that in fact a lot of on-premise software companies have locked in their customers and they can extract a pound of flesh as they wish. Not a good position to be in, if you are a customer.
How have they achieved lock in? Customers have spent so dearly to buy, implement and support the software over the years that all the players in the market know that to even suggest changing is waste of time. No one wants to have to bury the investment they have made in Oracle, SAP, Sage, Microsoft, etc.
Meanwhile small and medium enterprises are taking full advantage of less expensive software/implementation/support from a wide variety of SaaS vendors. It’s a real weakspot in the operations of many companies that they continue to escalate their commitments to on-premise software vendors that have done nothing but hustle them year after year. Oracle’s operating profits may be great news to the buyers and sellers on the stock market, but eventually the customers have to take notice and ask “Why are contributing to our own mugging?”
With the multi-tenant capability of SaaS, the vendor manages the upgrade process. Therefore, the client base is always on the latest release. Integrations between SaaS applications are therefore easier. But more than that, as SaaS vendors themselves roll out the integrations, they also manage the integrations. Take the example of NetSuite and OpenAir, or NetSuite and SalesForce.com. These integrations are generated and managed by the vendor itself. Were these three vendors offering on-premise applications, creating and managing the integration of the apps would reside with each individual customer.
Just think of it. Each customer hiring an employess or using an outside consultant to create the integration. But with SaaS applications, the integration must only be created once and then all customers, all running the same version of the SaaS, can use it. It’s a remarkably efficient way to perform integrations. And don’t even talk about maintenance. With home-grown integrations the authors were often employed full time to maintain the code. That is now off of the customer’s plate and back where it belongs – with the vendor. The customer is therefore the recipient of value based solely on the fact that are part of a larger network of SaaS applications. The vendors benefit from the same network effect.
As SaaS applications move upstream in the marketplace I look forward to the amplification of this SaaS network value. Larger companies for example will require HR Talent Management applications, applicant tracking and benefit management. As these SaaS offerings are integrated with Accounting and Service Resource Planning SaaS, like OpenAir, they also will benefit from this network effect.
NetSuite’s strategy in purchasing but not swallowing OpenAir whole, as some have worried, is now more obvious: NetSuite is stronger with OpenAir as an integrated SaaS than they would be if they simply incorporated OpenAir’s functionality into their own and moved on with a bigger, but less networked, Suite.
First, in a nutshell, is the problem of selling software into a large organization. For example, think about CAD software. Each engineer needs a seat, but engineering might be spread around a large company, spread across the globe in some cases. So company XYZ is already a client, but you are still actively selling to other divisions and engineering teams. How to manage all of that data, all of those people.
The new Lead Converison process is the answer. Bring in the new leads of Company XYZ as individuals and work the lead as you normally would, with the addition of the new data fields on the Qualifications tab. As the sales person makes progress in qualifying the lead, they collect the data and at some point decide that the lead is ready to take the next step into the sales process. There is a new button on the lead form to Convert the lead, and this brings up a form which allows the sales person at this point to create a new opportunity, change the lead to a prospect, create a sales task, assign the lead to a sales territory and, finally, merge this lead with the parent company – while keeping a history of both separately. It’s very smooth and well thought out, and again a great solution when you are selling into multiple divisions of the same parent.
To get there, you’ll have to make a few small admin changes, like enabling the lead conversion process and also setting up a general preference to treat all leads as Individuals. If you are currently using NetSuite there are some good points to consider in the online help for how to make the changeover. Not difficult but you should consider them carefully before pulling the trigger.
Also, you will have to abandon the current workflow that you may be using in NetSuite, where a lead changes to a prospect when an opportunity open. However you will not sacrifice any functionality in the changeover, as the new Lead Conversion process, detailed above, helps you to manage this workflow and much else as well.
This is really a godsend for companies who sell into multiple divisions of a parent company and need to maintain relationships with dozens if not hundreds of contacts at a single company. Using the new lead conversion process will save them many hours of input but also help them to collect better data from their online forms and marketing campaigns.
NetSuite offers of lower cost version for small companies, NetSuite Limited License Edition, but the limits are normally 5 – 10 users and my client wanted only one user. Does not seem like a big deal, and it wasn’t. NetSuite issued a renewal and the client now has the least expensive option until the market turns around and they can return to active operations.
I really did not think twice about the whole thing until I read the following today:
SAP (like Oracle) has so far refused steadfastly to accept partial maintenance cancellations. While this is (from the vendor’s point of view) quite understandable, it can lead to very unpleasant situations that are not without legal issues.
Case in point: a recent insolvency in Germany. A mid-sized company filed for insolvency and failed to revive the troubled enterprise. There are still orders that must be served but in a few months the lights will be out.
Most of the 350 users of their SAP system are gone. Only about 50 are left and, of course, the HR-system is required to pay the residual staff. Closer to year end, a few legal updates will have to be fitted to the SAP-HR-installation.
The administrator, in an attempt to make sure that staff can be paid, asked SAP to accept a partial maintenance cancellation for 300 seats – very appropriate especially in light of the upcoming increase for standard support.
SAP refused to accept the partial cancellation. Either you cancel in full or you pay in full.
Ouch – that’s being damned miserable to a company that is experiencing possible end of life issues.
I know for certain that when our client moves back to full operations in the US they will have some loyalty to NetSuite, who cut them some slack when they really needed it. Why do companies not expect the same from the big on-premise vendors? I can’t say for certain what the psychology is that keeps so many taking it from these vendors for so long. But at some point there will be alternatives and I cannot imagine that some companies don’t finally say enough is enough.
At any rate, after going through the process of having it fixed by Ray and the boys for a mere $74 I caught up with an interesting article by Vinnie Mirchandani about using a local repair shop, like Nightingales, compared to a Dealership. It’s an interesting article, more so because Vinnie uses the Dealership/Corner Auto Repair comparison as a proxy for software support from the Vendor vs a 3rd party. I think the analogy makes sense, especially in terms of the interests of various parties.
We have a similar situation at SightLines. When a prospect interviews us about NetSuite implementation they often ask why should we use SightLines instead of the vendor’s own professional services group. Our answer is straight out of the corner auto repair playbook: We only answer to you, the client, and your needs, not corporate’s; and since we are a small consultancy, not employees of a large company, your reference means a lot to us – it’s how we build our business.
Having been an Oracle Consultant for Oracle earlier in my career, I can relate to the interest in having the software vendor handle the implementation. Oracle used to ask prospects “Who knows our software better than us, Oracle?” Well, actually, a lot of smaller consultancies knew Oracle as well or better than Oracle’s own consultants because they had been at it longer. Oracle tended to hire and train the newbies while the small solid consultancies brought in experienced users and trained them in consulting.
If you are looking for experience and for a consultant who will look out for your interests more than the software vendor’s folks then look at an independent consulting firm. They often have well trained, experienced people who not only want to complete the project on time and budget, but also want to delight the client and perhaps pick up a reference along the way.
NetSuite’s recent initiative is therefore aptly named Crossroads, not that they had Eric Clapton in mind. What NetSuite is thinking is that as many large companies with dozens if not hundreds of divisions, many of which may be running SAP at a huge cost, many others which have still not migrated to SAP, face the decision to upgrade or pay greater maintenance taxes over the next few months, they have an opportunity to look at other alternatives in the marketplace. No, NetSuite will not replace SAP at the Corporate office, but large companies can deploy NetSuite successfully at the division or business unit level, at greatly reduced costs. And using one of NetSuite’s integration partners, we have used Boomi successfully to integrate applications with NetSuite, the division can roll their results up to corporate without a problem.
I have seen this exact scenario play out in an Oracle ERP implementation earlier in my career. The client was a Fortune 100 employment services organization that was opening offices across the globe. But there is no way to roll out Oracle to such small business units. So they found a smaller software package and implemented it at several of these offices. Unfortunately at this time there were not the internet based services available to them and results from each office had to be sent via ftp to corporate and manually consolidated.
Today the situation is both the same and better. The same business requirements exists for far flung business units but with NetSuite they could all operated under a single account using NetSuite’s SaaS OneWorld, with multi-subsidiary, multi-language and multi-currency functionality. Using one of the integration partners the NetSuite OneWorld results can be electronically consolidated with Corporate results. What an enormous improvement. If the parent company has actually forced the divisions to run SAP, or try to run SAP or Oracle, then the advantage is even greater: Jettison the resource intensive package and roll out NetSuite for literally pennies on the dollar for what is costs you to run and maintain SAP or Oracle.
The press has covered the announcement pretty well here, and here and our friend Vinnie Mirchandani has also jumped in. Whatever the take by the press, NetSuite is absolutely correct in doing everything they can to highlight the awesome efficiencies they can offer in the business unit/division space.
I have attended several of these in the past and I always find it interesting to hear how a particular company uses NetSuite for their business. Every company is different and NetSuite has the flexibility to accomodate a great deal of complexity. So if you are thinking that the cloud might be the right place for you, then this might be the right webinar to attend.
The most important question facing the company considering an ERP system, whether it is a replacement or a first time purchase, is ‘Does this system fit my business?’ It is a daunting question to answer, and most companies realize over time that the better question is ‘Is this system flexible enough to meet my business needs, not just today but in the future as well?’ It is impossible to meet all of a company’s needs out of the box, so flexibility is key. I’m sure that in this webinar you will hear a lot about flexibility. I hope you find it an hour well spent.
GoEngineer uses the NetSuite ERP/CRM system extensively, including a division that uses Advanced Project Accounting to manage a large professional services team. Previously they had the website hosted by a local company, and every time they needed a change they had to pick up the phone to speak to the principal, and then wait for time on his schedule.
What they really needed was a Content Management System, or CMS, to help them manage the site ongoing; adding new pages, products and training announcements on their schedule. The NetSuite CMS was a perfect fit. They didn’t have to learn another User Interface, it’s completely integrated with the rest of NetSuite, and it enables them to sell online effortlessly, they are doing a bit of e-commerce, as well as list new classes, events, whitepapers, videos, etc.
The key for GoEngineer was to find a way to put a lot of content into a site and keep it looking streamlined and classy. The last thing that GoEngineer wants is a ‘busy’ website. They sell B2B and need to present a professional face to their audience. At the same time they want engineers and designers to find interesting content that will help them make a decision about both SolidWorks and GoEngineer.
One of the neat customizations that we did on the site was a Calendar that lists all of the schedules classes that Go offers, by location. The allows current customers to check in and see when they might have a chance to send a new employee to a class, or take an advanced class themselves, and they can find it in the most convenient location. We also added some scrolling customer testimonials and placed a SolidWorks rotating advertisment on the interior pages.
A large site like this requires a good deal of content gathering and editing and Go’s Marketing Director Jennifer Douglas did an awesome job. Great site, great project.
Also, Zach Nelson, NetSuite CEO, reiterated his interest in Service Organizations while talking about NetSuite’s recent acquisition of QuickArrow. Nelson said that the service sector would continue to see strong growth in mature economies and this is where NetSuite wants to play. NetSuite has always gone after those sectors of the market where they see strong growth, like e-commerce for example in the late 90′s and earlier this decade, and it’s a useful strategy. With OpenAir, an earlier acquisition, and now QuickArrow NetSuite has the opportunity to make hay in a very attractive sector.
Given the news that came out this morning about software sales continuing to decline, though at a lesser rate, in the US Q2, I also thought it remarkable that N posted growth in the quarter. Not stratospheric growth, but growth nonetheless. From a MarketWatch article on the US Q2:
Business investments fell at an 8.9% annualized rate during the second quarter, shallower than the 36.9% drop in the first quarter
Investments in structures dropped 8.9%, and investments in equipment and software fell at a 9.0% pace. Business fixed investment subtracted 0.94 of a percentage point from GDP, compared with a whopping 5.29 percentage points in the first quarter.
So all together I was impressed by N’s 2nd quarter. I don’t think that they set the world on fire, but they signed up over 200 new customers, and made significant progress moving upstream in customer size.
Recent Comments