NetSuite's victory in the mid-range and enterprise CRM categories of Sift Media's Software Satisfaction Awards brought into focus some of the differences between suppliers of on-demand business software, writes John Stokdyk.
Where Salesforce.com represents the "best of breed" software tradition, NetSuite is all about integration, according to company executives who spoke to AccountingWEB recently.
"We're about delivering a business suite as a software as a service offering," says Craig Sullivan, NetSuite vice president of international products. The company was founded at the same time as Salesforce, with backing from some of the same people, including Oracle CEO Larry Ellison. While Salesforce was conceived as a standalone CRM system, Sullivan explained, "Our mandate was to build a suite."
NetSuite built the package around accounting and finance - the hardest place to start, but the most important, because all important information goes through finance and it has to be able to keep up with the resulting transactional volumes. With the core financial functions in place, ecommerce and customer relationship management facilities were easy to add in, he said.
"Once you've got the architecture, what's the workflow?" continued Sullivan. NetSuite was based around the classic sales lead-opportunity-quote-order-fulfilment-invoice sequence, and each step can be activated by a single button click in the software.
"The key thing is to architect the system to support financial things such as taxes, while we can expose the current accounts receivables for the CRM person so they don't sell anything to customers if they're slow to pay. That's the power of the suite."
NetSuite's user portals and dashboards bring data within the application forward to show users how the organisation is performing on a minute-by-minute basis. "Queries and P&Ls are all updated instantly. The internal workflow is the logic behind the curtain, and the specialness is that the information is available all the way down through the organisation," said Sullivan.
Since its inception, NetSuite's strategy has been to emulate the success of SAP, which rode the shift towards integrated applications in the 1990s to become the dominant supplier of enterprise resource planning (ERP) software.
To make a serious dent in the business software market, NetSuite will also need to emulate SAP's ability to infiltrate niches fields where the software can handle occasionally esoteric specialist functions and features. NetSuite's most recent product enhancements were new modules to support what the company calls "service resource planning"
"SRP is our first acronym," quipped NetSuite VP of production Mini Perris. "We intend it to be the equivalent of what SAP did with R/3 for manufacturing industry. Where ERP at its core is geared towards companies that sell physical goods, SRP presents best practices for service based industries."
In June, NetSuite acquired OpenAir and rapidly incorporated the Boston-based company's project management, billing and resourcing capabilities into the parent product. "Our new modules are a first step in offering a complete suite that will allow you to run a service business from end to end," Perris said. "Dealing with clients who book contracts and sending out invoices will be at the core of NetSuite, while OpenAir will fit in when they need to manage the product and bill expenses against that project."
This emphasis on the suite - and acquiring other developers to get there - sets NetSuite apart from some of the more recent software as a service start-ups. Rod Drury, who founded the New Zealand-based accounting service provider Xero, recently had a dig at NetSuite's expensive, US-based sales model.
"It's not at the price point of small business," he said. In contrast, Xero and other specialist providers stick to accounting fundamentals and look for partners to get into specialist markets. "Accounting is a massive market and all the independent software vendors and vertical solutions have pretty average-to-poor embedded accounting solutions," Drury argued.
"We believe in the Web 2.0 model where there will be a lot of collaboration between SaaS providers. One company can't build the all-encompassing suite, so what we tend to do is partner with everybody. We've already got links in Xero to Salesforce.com, SugarCRM and Microsoft CRM, so customers can choose. If you take a suite, you get average products."
It's entertaining and instructive to see the software as a service industry repeating many of the arguments that were played out by the previous, server-hugging software generation. But NetSuite executives counter that they are targeting a very clear market niche among companies that "overbought" traditional ERP systems, or have several installations that they want to consolidate onto a single software base.
Neither Xero or Salesforce would argue with NetSuite's contention that SaaS has cost advantages over traditional desktop software and reduces the need for capital expenditure. Where they differ, however, is whether the new wave of online software will go through the same kind of consolidation that taken over client/server business applications.
"The suite has won out in the enterprise market, but the mid-market is still a few years behind. It's still into best of breed, but will move to suites in a few years' time," said Perris.
"In general, a suite is better for the organisation because you're dealing with one vendor. You don't take on the headache of integration where you spend a lot of money with consultants and every time there's an upgrade, you have to pay more."
For the time being, participants in the Software Satisfaction Awards 2008 survey may have proved her point.
Links:
[1] http://www.softwaresatisfaction.co.uk/winners.html