When NetSuite founder and CTO Evan Goldberg took to the stage at SuiteWorld in San Jose this week for his keynote, he had a key message for delegates about the company’s technology direction. Like other cloud vendors in the market, the platform is central to future development. He said:
I’m going to talk a lot today about how we are bringing the platform to the next generation, allowing you to do even more. Really the platform is one of the greatest strengths of NetSuite. It really is one of our top priorities for investment at NetSuite.
And if the announcements coming out of the event this year are anything to go by, this is very much the truth. NetSuite has released a slew of new features that significantly bolster the company’s proposition as the leading cloud ERP platform.
The main announcement, which has already been highlighted by my colleague Stuart, was the addition of unified billing and revenue recognition to the core NetSuite OneWorld system - with CEO Zach Nelson proclaiming that NetSuite is now the only company that can truly support both products and services businesses.
The argument goes that as companies shift their focus to online distribution, business models will no longer require a distinction between products and services. Product companies are looking at how they can wrap services around their offering, whilst services companies are also adding physical products into the mix. The two are becoming blurred and this requires new capabilities in the back-end to support both.
During a Q&A session with press and analysts following the morning’s keynotes, Nelson said:
We are on the only company on the planet that will solve this problem. That’s because as an accident of our first verticals, we have been exposed to it for the last decade. No one else in the world has built a system that’s good for a product company and a services company, we are the only one.
And I think that’s the problem facing everybody. If you look at the companies born on the cloud, they’re service-based companies. But believe me they’re going to add products to their services, they’re going to bundle hardware. There is no pure business model anymore, there is no standalone products company, there is no standalone services company.
If you don’t have a system that understands how to manage products, how to manage time, how to manage product as a service, I don’t think you’re going to succeed very well in the ERP space of the future. It’s a hard problem to solve. It’s built into the core, I’m more excited about this than SuiteCommerce.
The subscription billing market is currently being led by Zuora, which recognised the shift to ‘as-a-service’ offerings early. Many NetSuite customers, until now, had been looking to the likes of Zuora to support their services offerings. However, with NetSuite coupling both product and service into the platform, this could result in some disruption in this space.
However, this wasn’t the only announcement that related to boosting its capabilities across the platform. Other noteworthy announcements include:
- Secondary books consolidation and financial reporting - allowing companies to maintain accounting records according to their corporate or headquarter accounting policies, in parallel with local accounting rules that may have different recognition timing or classification.
- Electronic invoicing framework - allowing companies to create country-specific electronic invoices, which means they can comply with local legal and cultural operational requirements.
- Global vendor management and country-specific localisations - companies can now centralise and manager their global vendor relationships, as well as expand support for tax calculation and reporting requirements in more than 100 countries.
- Governance, risk and compliance - expanded capabilities with a focus on ensuring companies of all sizes have the ability to define role-specific access controls across their global organizations, track activity and configuration changes at a granular level and report on that activity, including proactive alerting related to business-specific exception criteria.
- APIs - NetSuite has made improvements to its development platform, allowing companies to customise to their specific needs. This includes a series of specialized, purpose built APIs.
There was also a number of references to future development around making the NetSuite platform “more intelligent”, stripping out processes that would once require manual intervention and allowing companies to be more efficient. At the moment this is focused largely on order management, but it was hinted that this idea of an ‘intelligent platform’ would be extended elsewhere and more automation would be introduced.
But what about the verticals?
It was evident this year that a number of messages from previous years were finally being pulled
together under a more coherent, unified message around the ‘platform’. Last year there was a lot of focus on e-commerce, the previous year the product/services element was picked up on a lot. This year NetSuite was keen to point to all of its development work coming together as a horizontal package that solves the ERP problem for global businesses that have international and local needs, that can scale in the cloud and can support both product and service businesses.
But this left many wondering about the vertical focus - what is NetSuite going to do about moulding this horizontal platform for specific vertical needs?
We’ve seen the likes of Salesforce, Oracle and Infor push deeper into vertical markets, by either releasing full offerings that are tailored to a specific market, or by making key appointments that can bring the required knowledge in.
So what about the vertical play at NetSuite. Well, for starters, Nelson believes that the horizontal platform investments are necessary to make any strong vertical play going forward. He said:
I think a lot of the horizontal features we are building are going to enable much deeper verticalization. If you can’t handle this unified billing and rev recognition, almost every company is going to have multiple billing challenges and then this complex rev rec. If you don’t do this as the base line with one rule sitting underneath it, it doesn’t matter if you verticalize, you aren’t going to solve the problems. A lot of the horizontal features give us an incredibly strong platform to verticalize.
But added that going vertical isn’t an easy proposition. Nelson said:
It definitely is a challenge to verticalize. You have to have deep, deep domain expertise. We have deep domain expertise in running a software business and I think we have it for software companies running on the internet. But I think it is more about our knowledge more than anything else. We are beginning to verticalize, we talked about retail. For the first time launching retail apparel as a specific vertical. We feel that we can knock off two or three verticals a year. It takes that much focused effort to get to verticalization. Retail apparel was our first one, the whole stack, and that’s coming out this year. Next year we will do one or two more.
It’s so hard to find these guys with vertical expertise. It’s very hard to find the person with the domain expertise that can translate it into a software product. It’s important that we’ve done the retail verticalization, but our hope is to add two or three a year after.
Partners will be keyJust because it’s difficult, doesn’t mean that NetSuite isn’t going to continue to verticalize. Where there is lots of demand and expertise can be brought in, the company will go there. However, partners are going to play a critical role. Goldberg said:
We are really relying on partners to get some verticals, we can’t do everything. We will do a couple of strategic ones, but there are a lot of great verticals that are already adopting NetSuite. We can kind of figure it out by looking at our existing customer base. If a vertical is right for NetSuite, there are usually customers that have adopted NetSuite despite the fact that it’s not verticalized. Some of them we will work on ourselves, some of them we will work on with partners.
It was also suggested that NetSuite may either acquire or invest in companies that had done their own vertical version of the product, built on the NetSuite platform, instead of NetSuite beginning from scratch itself. Nelson said:
I saw a guy today that wants a version of NetSuite to manage complex changes in accounting standards for real estate, I said great, you go do that. The small and mid-market, they need verticalization as much as the big guys do. They want the system to run their business too, I think partners can use their domain knowledge to go build a leasing system, or a real-estate system on top of NetSuite, in addition to us saying strategically we aren’t going to build this for ten years, so let’s go find someone who will.
A far more coherent first day at SuiteWorld, compared to previous years I have attended. The company is approaching a $1 billion run rate, and whilst this isn’t close to the likes of Salesforce, you’ve got to remember that replacing an ERP system is a far more difficult decision for a buyer than going for a CRM package.
NetSuite has recognised the changes in the market (e.g. global/local requirements, product/service billing, e-commerce) and now has a platform that is very competitive if a company was looking for a new ERP - particularly for those recognising the importance of operating in the cloud.
It’s clear that NetSuite will pick some verticals it sees will have a direct benefit to its revenues, but it isn’t going to built them all. It wants partners and other companies to do that for it on the platform, which is a smart move. However, as we know, fostering and building those ecosystems is no small task - especially when you consider that all the other cloud companies out there are attempting something similar.