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The question is a good one, let’s be honest. As companies like SF.com and NetSuite move upmarket they are bound to hear more questions of this kind from prospects in all markets. In other words, it’s not unreasonable to ask these questions. On this blog, in its last incarnation, we wrote about this topic often, but with, as I now realize, a bit of a chip on our shoulder.
We always argued that forcing SaaS vendors to answer these questions was unfair because no one ever asks these questions of on-premise software vendors. There is some justification for this defense, but I don’t think it really stacks up, all things considered. If an on-premise vendor ceases to exist, the customer has some ability and time to put together another solution and migrate, etc. But if you lose your SaaS provider you’re in some deep water.
So what is to be done? The question of business continuity came up again when my fellow Enterprise Irregular, Vinnie Mirchandani, questioned a post by Frank Scavo. I respect both of these gentlemen a good deal, especially now that several industry players got involved in a debate on both Frank’s and Vinnie’s posts. Some of the ideas were excellent and should be more widely circulated. Here they are in a nutshell:
The ideas are across the board as you can see, but what finally has to be answered is what works and what is affordable. In my mind this leave the first two option as both workable and affordable, and the last two fall off as unworkable, the escrow idea, or simply not affordable – the on-premise, vendor managed solution.
If I had to choose one idea I would select the Trust. SaaS providers could set aside $5 bucks per year per user into a trust that would pay to continue maintaining the software for a full 6 months in the case of vendor insolvency, or to restore the service in the case of data center emergency, etc. This makes a lot of sense to me and I hope that SaaS providers start thinking along these lines in the near future. Regardless of what they finally come up with, it’s important to take this whole contingency planning/business continuity issue seriously. In the end, serious businesses are taken seriously.
On the other hand, it’s really discouraging to see some of the on-premise pimps show up on the comments as well. You can tell some of these writers are not technology professionals but simply the pr types/hacks spreading around the FUD. I think in some ways it is the presence of so much FUD that makes SaaS providers avoid this issue. Put that issue aside though and meet the challenge head on. That’s the best way to win in the end.
The questions were tough and right to the heart of NetSuite’s business and SaaS – software as a service, especially on security. On several occasions Nelson mentions that the target maket is th 5 million companies in the segment just below the Fortune 500. This might be a ‘bit’ of an exaggeration but we’ll give it to him. These are actually good size companies, most of them. They probably have over 200 employees and several locations, and many of them have of course an employee count in the 1000′s.
My one question for Nelson, which was not asked, is how NetSuite is going to help to create a SaaS ecosystem in its targeted customer base. For example, if a company is going to use a SaaS ERP and CRM system then you have to expect it is also going to use a SaaS HR System, and a SaaS Supply Chain, etc.. As I wrote recently, NetSuite suffers in my opinion from a lack of competition from other SaaS ERP systems in this market, and helping to create a SaaS ecosystem would be one way to crack this nut.
Of course, it’s a lot easier said than done, as anyone in business knows. There is a lot less collaboration between software firms that have synergistic, as opposed to competitive products, than one would expect. Alliances are difficult to start and often end up creating more problems than they solve. NetSuite has also used some of the proceeds from 2007′s IPO to purchase some products that gave it broader functionality – like OpenAir and QuickArrow, both in the Professional Services Automatoin space. Buy or ally – probably not a question NetSuite or others can answer at this time, and this also makes alliances more difficult.
At the very least, some of the key SaaS players in various software verticals should really think about creating a unified force. It would be great to see Saleforce.com, SuccessFactors, Taleo, Concur, NetSuite, HelpStream and several others together in a SaaS showplace.
As Larry clearly delineates in the article there are really only 2 players in the on-demand ERP market at present: NetSuite and SAP’s BusinessByDesign. But SAP has had an awful time trying to bring ByDesign to market and their current strategy leaves one scratching one’s head vigorously. SAP’s biggest issue is that they have not been able to scale the ByDesign applications for new customers, and now they are baking in business intelligence, making the product even more difficult to scale. You wonder if they are killing ByDesign with kindness. At any rate, BBD is not generally available and the current thinking is that it won’t be until some time in 2010.
So where does that leave us? We have NetSuite with a full ERP less manufacturing - though partner RootStock is taking care of that – and a fully integrated CRM and E-commerce engine as well. There is Intaact, very strong on the finance side but less interesting when it comes to operations. Then there is Coda2Go, a financial app built on the SalesForce platform with an interface to the SF CRM apps. But that’s it. There are a few other offerings of simple accounting applications, and some even simpler invoicing applications, on demand.
But there are not enough competitors out there to create a strong team. My sense is that software buyers, whether they are the business owner or the CIO or whatever, like to look at several strong players before making a choice. Right now, that means looking at a couple of on-demand players lined up alongside of several on-premise players.
This is NetSuite’s unique dilemma: They are first to market, far out in front of everyone else, so much so that they have not yet been challenged. It must make tech buyers wonder why the field is so sparsely populated?
Larry commits to a tipping point 2 or 3 years out for on-demand ERP, and that’s probably within reason. But the quicker NetSuite finds some other players in this market, the quicker the tipping point will happen. On-premise ERP really got going when buyers saw Oracle, SAP, Peoplesoft, Lawson and dozens of others in the market. Vendor exuberance for an idea, like integrated enterprise resource planning applications, created excitement in the buyer community and furthered their acceptance of integration over best of breed. In my opinion we will need to see a couple of strong new players in on-demand before buyers sense the excitement of this new idea.
Thinking about the Enterprise Software market recently it dawned on me that we have entered our own Octoberfest Harvest celebration, almost universally. Harvest refers to the last phase of a product’s life when the marketing department comes to the conclusion that there isn’t much left to exploit, so cut all inputs and just harvest whatever value is left in the product. In enterprise software this phase appears to have happened across many vendors and products at roughly the same time. Let’s take a look:
Vinnie Mirchandani, the deal architect, spent several days at Fortune magazine’s Brainstorm and complains that the event was severly tilted toward consumer technologies. And when the attention does turn to enterprise matters, the topics are usually around other technologies that may use the enterprise transaction processing systems as a platform, but are rarely focused on business process innovation.
As someone who has spent, and continues to spend, a good deal of time on enterprise business process questions, problems and solutions, I wonder why the marketplace has turned as it has? Do most organizations have the business processes that they need, creating the value that they want? Is it a case, then, of been there, done that and we’re good?
Or have organizations simply lost their enthusiasm for business process design and innovation? And if they have, then why have they? I meet very few enterprise application users who have mastered their processes, yet it appears from the evidence that no one seems too concerned about just moving on to whatever’s next. My question is have enterprise software applications simple sapped the strength of enterprise users? Has the bloatware complexity of products like SAP, Oracle, Sage and Microsoft simply exhausted organizations? And at this point do they just accept the fact they have an expensive business system that has ceased creating value but which it too difficult to move out of the way?
Oktoberfest can be a good time, but the day after can also be a a helluva hangover. Is this the way enterprise software buyers are feeling about their business applications?
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