NetSuite’s been talking about increased incremental investment in Europe for some time now. Yesterday it made a significant move in that direction with the announcement that it has acquired London-based ecommerce firm Venda.
The move has several immediate consequences:
- It increases NetSuite’s reach into Europe with Venda already serving major European retail brands such as Laura Ashley and Tesco.
- It beefs up NetSuite’s own SuiteCommerce play and adds weight to its omnichannel credentials.
- It provides a route to the European market for US retail customers currently using the likes of Demandware in the domestic market.
- It also provides NetSuite with a ‘native’ data center solution at a time when the post-Snowden climate is making that an increasingly good thing for some European cusomers.
So who is Venda? It’s a 240 strong provider of cloud-based digital commerce services for a number of leading retail brands, founded in 2001 by UK entrepreneur Dan Wagner and James Cronin of boo.com and with offices in London, Bangkok and New York. Some 15-20% of existing Venda customers are in the US.
I caught up with Cronin and NetSuite CEO Zach Nelson this morning to get their take on the drivers behind the deal and the road ahead. Nelson began by explaining the two-pronged motivation underpinning the decision:
It plugs into ecommerce, but the other major piece is investing incrementally into Europe. We’ve been talking about that for the past couple of years and a big piece of this is that it begins now. It is important to us to have more critical mass in the UK and Europe.
A lot of Venda customers are US retailers who want to come to Europe. They may be using Demandware in the US, but that doesn’t have the capabilities they need to expand to Europe. We’ve got one customer who’s said that they have Demandware in the US and will use Venda in Europe - and they say they now know what they’ll use for ERP and CRM in Europe.
So there’s a perceived cross-sell opportunity here, akin to NetSuite’s familiar two-tier ERP mantra? Nelson argues that the best comparison here is NetSuite’s previous acquisition of OpenAir, where OpenAir would service customers in different markets to NetSuite, but then NetSuite would slide in at a later date.
SuiteCommerce is doing incredibly well for us, it’s the fastest growing segment of our business today. But there are opportunities that we can’t address because the customers has SAP or Oracle as their ERP. But they are looking to invest in a new omnichannel front end while keeping their existing ERP investment, so it’s a functional 2-tier deployment.
Cronin adds that what Venda brings to the party here is a platform agnosticism:
We’ve integrated into every ERP enterprise system - proprietary systems within Tesco to legacy systems at TK Maxx to SAP and Manhatten Associates. We have a number of joint customers already with NetSuite. We will look to strengthen that integration.
But that will take time - and quite deliberately so. Nelson explains:
Venda will remain as a standalone company for the foreseeable future with the focus for the next six months being to support existing customers, especially as we move into the holiday season.
Over time, the teams will start to work more closely together. Development teams will cross-polinate and we’ll bring Venda technology into NetSuite. We will have stronger shared sales and service and support.
But our tendency for now is to keep things as they were. As we understand the business more and find out more, we’ll get closer.
- Fifteen minutes with NetSuite's Zach Nelson (diginomica.com)
- NetSuite CEO talks omni-channel challenge, CRM re-imagination and services (diginomica.com)
Meanwhile the value proposition for the retail sector is straightforward, according to Cronin:
Every retailer needs a mobile offering. Every site we build is fully responsive for mobiles, tablets, large screen TVs. Customers expect their experience to be seamless. The product added to their baskets on mobile devices should be in their basket on their desktops.
The threat to the large established retailers is the small up-and-coming retailers who don’t need to make the decision to replatform. All the large retailers platforms are ancient, giant hairballs. There’s no way they can respond to the new ways that customers want to interact. The new retailers are the guys to look out for, like Boohoo.com.
The reason the retail market is so nervous is that it is being disrupted in the same way that every other cloud computing market has been - by the upstarts who come out of nowhere. It’s their old infrastructure that’s going to kill them. Someone like Boohoo.com builds their platform on next generation stuff like Venda. Everyone else has to replatform.
One additional bonus of the new arrangement is that NetSuite can add ‘European data center’ to its ticklist of features and functions as Venda has its based outside Reading in the UK. Nelson had previously talked about NetSuite opening its own European center, but this is now in the mix:
We came very close to pulling the trigger on [the data center] then this opportunity came up, so we might want to re-evaluate. It’s fortunate that we hadn’t done it as we might now take a different approach. But I still think that we’ll be having a NetSuite data center in Europe in a year or so.
Looks like a good move all round. Some commentators have raised the question of some functional overlap between Venda and NetSuite's offerings and cautioned that there may be integration issues to take into account, but there are already joint customers for the two firms and this is simply the latest iteration of the 'two-tier' philosophy NetSuite has expounded for years.
Clearly over time there will be a greater coming together, as there was with OpenAir, for example. The financial impact of the deal on NetSuite's bottom line is unclear today as the firm is in its pre-quarterly results quiet period, but we can expect more insight there next week when the firm faces the Wall Street analysts.
Meanwhile, extra points for a European data center almost by the back door. I hope that NetSuite takes advantage of this gift horse to think in terms of another center elsewhere in Europe. Salesforce.com is parking its tanks on SAP's lawn by building a German data center. Might NetSuite consider following suit?
Disclosure: at time of writing, Oracle, Salesforce.com and SAP are premium partners of diginomica.