Sightings in SaaS

Archive for the ‘NetSuite and NetSuite Consulting’ Category

Lyrics by the infamous Robert Johnson, screaming guitar by the legendary Eric Clapton Cream Play Crossroads. Why the blues reference? This is what SAP users do when their software version is iced and they are forced to upgrade, at the cost of several hundred thousand dollars, to the latest release or pay increased maintenance costs, as will happen to thousands of them currently running SAP R3 v4.6 and 4.7.

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.

Was just notified that AMR Research is hosting a Webinar on SaaS ERP with AMR Research Chief Research Officer Bruce Richardson, Commco President and CEO Franklin Christopher – they are a NetSuite customer – and NetSuite CEO Zach Nelson. Should be an interesting hour. You can register here.

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.

We recently finished up a project for GoEngineer, the largest reseller of SolidWorks 3D Design software in the Western US.

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.

I listened to the NetSuite investor con call last night to find out how N made out in the 2nd quarter. Couple of things caught my attention. The average deal during the quarter was $34,000 for conventional NetSuite and $100,000 for NetSuite OneWorld. NetSuite is certainly moving upmarket. OneWorld, the product for companies with multiple subsidiaries, did especially well. This is going to be a real sweetspot for the foreseeable future in our opinion.

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.

My good friend Jennifer Caputo has her new NetSuite site up and running, as of about an hour ago. This is one helluvanaccomplishment for Jennifer. She runs Tall Couture with a small staff and great passion. This was a lot for her and her staff, so she deserves one heartfelt congratulations – and she has it.

We created the site in NetSuite, top to bottom, with some interesting additions. First, since Tall Couture sells clothing, for Tall Women as you might have guessed, they needed matrix options for sizes. This required a custom solution because Jennifer did not want sizes appearing in the drop-down if they were not in stock. Always thinking of the shopper is that Jennifer. It was a good call, no doubt. Shopping can be difficult enough without having to find out after you have made your choice that the size you need is out of stock. Takes the fun out it pretty quickly. With the custom solution shoppers will only see sizes that are in stock.

Along the same lines, we also added in custom narrowing filter on the product pages so that the shopper can quickly filter out items which do not have their size. Again, that makes for a better shopping experience.

I’ll add on to this post over the next few days, but until then I invite any tall women who read this blog, or any men who know tall women and the difficulty of finding great fitting fashion, to take a look at Tall Couture.

The SaaS channel continues to be a bit of a conundrum. Recently SightLines had the opportunity to speak to several NetSuite partners about how they are handling the business of being in a SaaS channel and there was one thing that came through perfectly clear: Everyone continues to search for the right mix of consultants, employees, 1099s, support staff and for the right mix of business.

In other words, no one has yet figured out how to make the SaaS channel partnership a business with a clear roadmap to growth and long term profitability. Most common is the channel partner with 1 or 2 principals and a stable of 1099s for both consulting and customer support. There are a few partners with a short list of high value employees, and a group of 1099s for implementation and customization. It is nigh impossible to support a large employee base on the SaaS business model. Where on-premise consulting can often charge 8 times licenses fees for implementation, it is nearly impossible for SaaS consultancies to justify more than 2 times subscription. There is no hardware setup and configuration, no database install and training, no application server install and training, no application install and patching, patching, patching. These activities, often opaque to the business’s managers, eat up an awful lot of time, budget and timeline. They are big money makers for on-premise consulting.

So the SaaS partner is left with business process requirements and system configuration and, in some cases, customization. These are time consuming and laborious tasks, often difficult to predict. In addition, the SaaS client has not spent $250,000 for licenses. Their firm with 25 users can probably negotiate something in the $30,000 to $40,000 range, depending on what they need. So you have not going to walk in and suggest a $100,000 implementation. It’s just not going to happen. The end result is that you have an implementation in the range of $40,000 to $50,000 on the high end. You pay a short list of bills, take a salary, pay the consultants and that’s it. You have supported the cost of sales and implementation, but there is little left to grow the firm.

So what’s the answer? Some partners are looking back at the on-premise model and trying to find deals where they can push the tab into the low to middle 6 figures. These are home runs and they come along rarely. It’s a dubious strategy I think. You have to add in the $20,000 – $40,000 implementations to keep cash flowing. But in the long run you are still looking at a low margin business that will have a very hard time breaking out.

NetSuite has suggested publicly and to the partner group that the way forward is twofold: Model the business on ‘Service as Software’  using a remote sales and implementation strategy and building vertical apps on the NetBIOS (NetSuite’s Business Operating System – customization and extension platform). This sounds like a great idea but how can a Solution Provider partner with already thin service margins make the jump to Vertical software development, maintenance and support? This is not a simple jump to make. A company doing custom software development, which is finally what a vertical built on NetBIOS is, needs some deep pockets, maybe even VC or Angel pockets.

Selling grilled sausages is also a dubious business model unless of course you have a concession at a stadium, in which case you can make some good coin. Likewise, the most successful vertical apps on SaaS, NetSuite or otherwise, have a captive audience. I had the chance to chat a few years ago with a company that sells information and they created a vertical app for NetSuite that included integration with their data warehouse, enabling their customers to formulate deals on the fly for thousands of different items.  Their customers became then not only their data customers but their NetSuite customers as well. Good work if you can get it.

One of our favorite SaaS writers Phil Wainewright had an interesting piece not long ago about the opportunities in the SaaS integration space and I agree with him. But again, in this kind of derivitive market you have to have a product with a huge potential audience, or a captive audience to succeed, methinks.

So there is still much to figure out in the SaaS channel. SightLine will have its own announcement in the near term as we make our way forward.

Regular readers of this blog will immediately see that we are starting over and have a new format. Not only is this a new look, it is also a new start. For the first 4 years of our blogging life we used a blogging service that had exceptional functionality, but it also came at an exceptional price. Service however was not their hallmark. After constantly finding issues with the blog we decided to move on and have now implemented a simpler wordpress blog through our registrar, bluehost.com. It will take time to create a foundation of posts, and more time to add the necessary plug-ins etc. But we are confident that we can get there. We hope you stick with us for the ride.

Tom