“If I was Oracle and SAP, I’d be worried,” said Qualcomm CIO Norm Fjeldheim (pictured left), speaking on Tuesday at NetSuite’s SuiteWorld conference in San Jose. He was referring to the competitive threat posed by cloud-based rivals such as NetSuite, whose ERP systems have been deployed by the wireless technology giant in the launch of a new product division in Mexico and for new businesses emerging from its innovation unit.
These peripheral deployments are examples of what NetSuite describes as a ’2-tier ERP’ strategy: the main business and its core divisions continue to run on an incumbent system from Oracle or SAP, while the cloud ERP platform is brought in at subsidiaries or business units that need a more rapid, agile solution. In another example, leading US retailer Williams-Sonoma has just launched its first international expansion into the Australian market using the NetSuite platform. The roll-out of four brands with both physical and online stores went live May 2nd after a short, 3-month implementation cycle.
Such wins are notable in themselves, but the endgame for NetSuite is a much bigger prize. “Going live in 3 months doesn’t go unnoticed,” said NetSuite CEO Zach Nelson yesterday of the Williams-Sonoma experience. “It’s land and expand. We’ve landed … They get a taste of this, and they want more.”
The ‘rapid platform’
At both Qualcomm and Williams-Sonoma, NetSuite is commonly referred to internally as “the rapid platform,” according to NetSuite COO Jim McGeever, in contrast to the slower pace of change of the incumbent “legacy platform” that runs the core ERP. For the innovative startups spun out by Qualcomm Labs, that speed and agility “has been absolutely essential to the success of those new ventures,” said Fjeldheim. The pattern is repeated in other 2-tier deployments. Philippines-based fast food giant Jolibee first used NetSuite to roll out new operations in Vietnam and China, and has since implemented the cloud ERP system at its food manufacturing unit. “Anything new they want to do, they want to do in NetSuite,” said McGeever.
Behind the scenes at Qualcomm, a larger role for NetSuite is now under consideration. The company has been given early access to the manufacturing functionality that NetSuite announced this week at SuiteWorld, and it is evaluating its suitability for certain divisions within the company in discrete manufacturing.
On stage on Tuesday, Fjeldheim, who joined the company 25 years ago as its first IT specialist, had said, “We consider ourselves very opportunistic as a company.” Asked later whether he could foresee a time when the company might run all its operations on a cloud ERP system, he was sanguine: “I personally wouldn’t have an objection.” But given the company’s investment in its Oracle systems, any change would necessarily be gradual. In addition, he said, there were parts of the business, such as process manufacturing and chipmaking, where NetSuite did not currently have the breadth of functionality or special performance features that Qualcomm requires.
Although tight-lipped about Qualcomm itself, NetSuite’s McGeever said that some customers are already progressing from a 2-tier implementation at subsidiaries to put entire business divisions onto the cloud platform. EMEA executives point to the example of electronics giant Sony, which they said runs its entire Middle East operation on NetSuite. Fast-moving companies or those in industries undergoing transformation are ideal candidates. “The businesses that are ideal for NetSuite are businesses going through change,” said McGeever. “The faster the change the better for us.”
While SAP was the primary butt of CEO Zach Nelson’s jibes during Tuesday’s keynote, at Qualcomm it is Oracle that is the incumbent vendor. If Qualcomm presses ahead with further adoption of NetSuite, Nelson may have to do some explaining to do to Oracle CEO Larry Ellison, who with his family owns more than 50 percent of NetSuite and keeps in close touch. Last October, Nelson fronted the launch of an alliance with Oracle to promote NetSuite’s 2-tier strategy, telling Business Insider at the time that NetSuite was happy to leave the larger core systems to its partner: “If Oracle and NetSuite are [at] the same table, one of us in wrong deal.”
Yesterday, Nelson was putting a different slant on the company’s 2-tier gameplan, predicting that at many customers, “Ultimately, two-tier will turn into one-tier.” As that strategy begins to bear fruit at Oracle customers like Qualcomm and Jolibee, Nelson will have to mollify his lead investor and former boss.
Disclosure: NetSuite paid the author for work last year to research and write a series of white papers on customer adoption of 2-tier ERP. NetSuite funded travel and accommodation for diginomica writers to attend SuiteWorld this week.
Photo credit: Phone mast © Davido – Fotolia.com / Norm Fjeldheim headshot courtesy of Qualcomm Inc.