SuiteWorld 2022 – the big picture

Oracle NetSuite held its annual confab in Vegas recently. It was very well attended by both customers and partners. In fact, the place was abuzz with activity, side meetings, etc.  Everybody wanted to talk.

Of course, diginomica had several folks covering the event on the ground and some doing so virtually. As conferences go, the coverage was quite comprehensive and clearly indicated that travel to user conferences is moving back to pre-pandemic levels.

I’ll provide a brief recap of the relevant coverage below before I dive into the more subtle, underreported observations: you know the things you can’t get virtually but can pick up on in the hallways, expo floor, meals and numerous hallway interactions.

diginomica coverage

I kicked off the coverage with a pre-show piece in August. I thought I did a nice piece covering several new capabilities attendees would see at this month’s show. It’s actually a good, quick read on several items Oracle focused on. In particular, there was a discussion on the analytics warehouse functionality:

NetSuite customers will be able to probe externally sourced or internally generated datasets for all kinds of insights, many of which will be displayed via graphical means. This is important as mid-sized firms I’ve visited often possess mountains of ‘dark’ data: the data that they or their machines generate but no person or system looks at this information. The insights within this data are ignored as mid-sized firms often lack the tools, skills, computing power, integrations, visualization tools or ML tools to make sense of this.

Madeline picked up on the analytics warehouse and described how one customer, Studio McGee was using it:

Studio McGee is using NetSuite Analytics Warehouse (NSAW) to support its move into a new 325,000 square feet fulfillment center, which includes robots for picking and packaging that are integrated with NetSuite. The firm is combining its NetSuite and Shopify data in NSAW, and will be able to add information from Google Analytics and other systems.

Derek covered the main product announcements in this piece. Oracle NetSuite had big announcements in the areas of Accounts Payable (AP) automation, Configure Price Quote (CPQ), Ship Central and Workforce Management.  There’s actually a fair bit to unpack in those announcements.

Madeline filed an Oracle NetSuite customer story re: a UK startup firm and a study NetSuite has on this subject.  Madeline also penned a piece on NetSuite customer Thread. That story focused on Thread’s use of NetSuite to support expansion of its brick-and-mortar business. About Thread, she writes:

Going from a $30,000 Kickstarter startup to a $15m+ revenue organization, the firm realized it needed a more advanced platform to run its business and turned to Oracle NetSuite for its ERP and analytics. This was crucial for advancing plans to expand Thread’s wholesale business and brick and mortar stores, while still continuing to grow its direct-to-consumer business, which has been the largest revenue earner.

Product maturity growing more than NetSuite realizes?

I spoke with a number of customers, software partners and implementers at this event. It’s what I do. I was surprised at the complexity of the businesses these NetSuite customers have. In fact, many of the customers possessed several of these factors:

• There are businesses that are selling to; sourcing from; and/or, operating in multiple countries
• Many firms have several different operating companies, legal entities and/or businesses
• Many firms operate across channels. The retail customers are selling in every possible channel from direct sales, in-person sales, on-line sales, omnichannel, etc.
• Many firms have moved beyond their initial founders and have professional managers, new investors, private equity participation, are part of a holding company, etc.
• Many firms made a number of major, transformative shifts in their businesses during the pandemic and are continuing to change today.

If you thought NetSuite was an SMB only solution – it’s not!

The product line is deeper, wider and uses many advanced technologies (e.g., machine learning) it can get from parent company Oracle. Sure, NetSuite used to be this small, scrappy financial cloud solution called NetLedger that principally served small, straightforward businesses but that’s not necessarily the entirety of their customer base anymore.

No, NetSuite may be considerably more upmarket, more functionally capable as a mid-market product. I can’t decide if Oracle should market it more for the mid-market specifically (a space its JD Edwards and Fusion products serve) or as some sort of cloud product line that exists to help companies scale easily from startup to mid-size. This solution, in my opinion, is not a competitor to QuickBooks. It’s much, much more.

For example, global regulatory compliance functionality continues to grow in the NetSuite product line. NetSuite is also expanding the number of global cloud data centers that host the NetSuite application solutions.

So, I suspect most customers, partners, etc. at the event see or feel a lot of this phenomenon, too. They know the product line is more global, more capable and more functionally advanced than ever before. And, if they’re paying attention, they’ll wonder what’s going to happen next? Will NetSuite:

• Outgrow it original customers and possibly ignore them? (I seriously doubt this as customer retention seemed to be a major preoccupation with NetSuite leaders)
• Redeploy its product development resources away from ever greater upmarket capabilities and focus exclusively on vertical functional extensions? (I doubt this, too, and suspect the firm will do both. Vertical expansion was something several NetSuite executives did discuss but they also kept hammering home how they’ll use other Oracle advanced technologies to make back office, front office, fulfillment and other processes ever more productive, efficient and less labor intensive.)
• Compete more directly with other Oracle software solutions, like Fusion and JD Edwards? (This I believe will happen with greater frequency. Will this be an issue for Oracle? I doubt it. Oracle wins more deals if the short list contains nothing but Oracle products.)

To sum up this section, without anyone addressing the growing upmarket capabilities on display at the show, it was clear that the NetSuite product line is more capable than ever and must be considered in more up-market deals.

NetSuite and advanced technology

AKA Hire more people or get new technology

While all kinds and sizes of businesses these days seem to be struggling with the ability to attract and retain talent, small and mid-sized firms often face even more difficult challenges in the war for talent. These firms may not have the recruiting talent or resources to develop relationships with prospective jobseekers let alone get them hired or onboarded successfully.

This is important as small and mid-sized firms may never be able to offer the career paths and compensation that larger competitors can. So, the best approach for some of these smaller in stature firms may be to automate as much work as possible so as to minimize their dependency on an expensive, hard to source, develop and retain workforce.

Efficiency and low friction themes seemed to permeate the event and NetSuite executive messaging. NetSuite Founder Evan Goldberg flat out stated that NetSuite wants customers “to be as cost-effective as possible”.

NetSuite executives seemed to believe this to be a winning strategy for SMBs. This is why they are focusing much of their development energy on the use of advanced technologies in their applications. These technologies could include: artificial intelligence, chatbots, smart analytics, RPA, big data and more. They hope that these technologies could help in areas like process automation so that a process could become almost fully automated. This could significantly help reduce personnel needs in some process areas.

One example of this focus on highly efficient processes is the new Accounts Payable Automation functionality. These enhancements are part of Oracle/NetSuite’s broader strategy of “Optimizing Cash & Profits” for customers. It uses a number of technologies (e.g., process automation, exception handling, etc.) to make Accounts Payable processes extremely automated and efficient. NetSuite can support automated 2 or 3-way matching of vendor invoices. NetSuite partnered with financial services firm HSBC for some payment service options should a customer want to avail themselves of this.

One NetSuite customer using this new AP Automation capability reported going from having 45% of invoices being automatically processed to having 95% of invoice processing automated.

AKA Staff Scheduling

The scheduling optimization capability within the new Workforce Management tool should be a very welcome bit of functionality for retailers and health care organizations as it helps firms do a better job of scheduling workers. Why is this important? If you ask HR leaders in those industries what contributes to numerous Great Resignation and Quiet Quitting problems is that workers who genuinely want to work are being assigned hours that cause them personal strife or are insufficient in quantity for them to make a livable wage. And, operations leaders often struggle to put together a schedule using paper, spreadsheets and other less-than-optimal methods.

Nurses, for example, value the ability to influence their schedule more than most any other retention factor.  In retail, employees want to maximize their hours. Both groups want to work close to home and each may have young children or older parents to care for. The best scheduling tools remember what hours or days a person can work and which ones are off limits. The best tools also have mechanisms to help employers manage total payroll costs, minimize overtime, etc. A great scheduling tool is like a multi-variate optimization tool and an automated tool may be the best solution for such a complex and dynamic management problem. Why? The automated tool could handle hundreds of different variables simultaneously and solve the schedule problem in seconds compared to a sub-optimal solution that a manager might struggle with for days.

The scheduling optimization tech has its origins in a company called Adi Insights and will now be called SuitePeople Workforce Management. That deal was described as:

On May 6, 2022, Oracle announced that it has entered into an agreement to acquire Adi Insights. Adi Insights is a leading provider of workforce management solutions. The acquisition will bring overtime management, time capture, demand forecasting and shift scheduling capabilities to SuitePeople, NetSuite’s human resource management solution. The transaction is now closed and the Adi Insights team will join the Oracle NetSuite organization.

Partner Involvement

NetSuite has a number of partners. Some provide complementary applications while others offer integration technology, BPO (business process outsourcing), implementation services and other capabilities.

Given how critical partners are to completing the Whole Product (a Geoffrey Moore term) functionally, implementing the solutions, introducing the customer to NetSuite, etc., NetSuite would, obviously, want to stay on the good side of its partners. Great partners drive outsized net-new revenue, reduce customer acquisition costs, help in selling many add-on products, and more.

Several analysts at the show wondered how NetSuite’s new advanced Accounts Payable automation technology would be sold and would that cause channel conflicts with some of their partner firms who have been selling competing solutions to NetSuite customers for years.

More specifically, how will this product be sold since several other firms offer software that also provides AP automation? One NetSuite executive indicated that this is a huge market (after all NetSuite has approximately 32,000 existing customers) and NetSuite will only focus on selling it to customers/prospects that currently lack an AP automation solution. NetSuite will not be targeting the customer base of any of its automated AP solutions partners. And, a NetSuite executive also stated that they will respect whatever decision a customer makes re: AP automation whether they choose NetSuite’s or a partner’s product.  Bottom line: NetSuite doesn’t want to antagonize any of them.

Take out friction and make implementations fast & successful

Mid-market software buyers often possess many of the same business complexities of their larger competitors but don’t have the people, capital or other resources to match. My shorthand for this is that mid-market tech buyers have champagne tastes and beer budgets.

To make a mid-market buyer’s implementation a success, a great software solution must:

• Be pre-configured for many best practices, industry requirements, common reports, etc.
• Be easy to acquire. If the software agreement is measured in hundreds of pages, has embedded URLs, and requires a team of lawyers and procurement experts to redline, then this is not going to work.
• Already possess many required integrations, even those that aren’t part of a vendor’s product line.
• Do more than simply map old data into a new system.
• Provide thought-provoking new approaches to how processes should work so that the buyer can experience step change (not baby step) improvements in their business results.

One approach NetSuite previously rolled out to help with this was SuiteSuccess. SuiteSuccess was announced a couple of years ago. Its purpose is to help new customers get implemented in a timely but successful manner. The program is about more than just implementation speed though as customers can access configurators that include pre-supplied best practices.

I pressed a couple of NetSuite executives on the ‘success’ of this program. Evan Goldberg discussed how NetSuite doesn’t do product demonstrations vanilla anymore as they want to show the prospect how the software will look and behave with the most useful/relevant configurations (that are in the SuiteSuccess kits) already in place. That way, prospects can see exactly how the software will behave in their industry/company/function.

I’m very cautious re: programs like SuiteSuccess. The story is one many of you want to believe but many vendors conflate success with rapid implementation. These terms are not synonymous. In the rush to get a product implemented quickly, the vendor or systems integrator may simply map old data into the new system without taking the time to clean up bad business practices, reengineer poorly performing processes, clean up the chart of accounts, or, transform the mundane into something that delivers outsized competitive differentiation. In these rushed jobs, business value can get sacrificed in the quest for speed. Success should not be an either/or decision to make.

NetSuite, I can report, has these pre-built accelerators and they have also taken steps to remove friction throughout the sales and implementation process. At one point in the user conference, I asked a NetSuite senior executive to join me in the hall and we discussed the NetSuite contracting experience in detail. I had my contract redline notes from a pre-pandemic client gig handy and challenged him as to what they’ve done to mitigate earlier issues.

Time did not permit us to go through everything but I was convinced that the company did, in fact, shorten, simplify and made more reasonable its contracts. The company, for example, now has a third kind of licensed user: one that needs full access to only 1 or 2 modules but not every module. Previously, you could only be a full, all module access user or a read-only access user. Apparently, embedded links are mostly gone and the overall length of the contract is less than a dozen pages. All of this is good news as the typical NetSuite customer does not possess the budget, internal talent, etc. to mount an exhaustive contracting process with a software vendor. It costs too much and simply sours the prospect on a vendor.

More configuration please

I previously mentioned that Derek covered the new CPQ functionality in the NetSuite product line. This tool allows manufacturers and customers to use many of NetSuite’s existing manufacturing and web commerce applications to create a product whose needs exactly match a customer’s while also ensuring the finished product will have all needed components and that these will interoperate with each other. After the product is configured, the software components will inherit pricing and other attributes and these will flow into a price quote for the customer.

CPQ functionality has been a big deal in the MRP and web commerce space in recent years and this should find a lot of adoption within NetSuite’s customer base.

The CPQ (configure price quote) tool we saw at the show was clearly oriented for manufacturers although a couple of vendors on the expo floor were showing some CPQ tools for services firms, too. CPQ capabilities are definitely different for manufacturing versus service firms but many design capabilities can be shared. We’ll have to see when/if NetSuite wants to expand its CPQ functionality to the services arena. Personally, I’d expect them to either build or buy a solution here as they already possess a major PSA (professional services automation) product and a CPQ solution seems like a very logical and valuable product line extension for them to pursue.

Growing companies

I also chatted with some of NetSuite’s larger and more complex customers. These customers confirmed the applicability of NetSuite software in larger, growing entities. They also were users of several of NetSuite partner solutions (e.g., MineralTree, RFSmart, Curo, etc.).

Some of the conversations were notable as the companies are growing in significant organic or inorganic means. One of these companies is over 125 years old and not only navigated the pandemic well but also grew their firm and added new sales methods. Another firm continues to acquire new firms to add to its portfolio. As it does so, it implements NetSuite in these entities, drives process improvements and tries to implement shared services for the member firms. The product is definitely scalable.

We know some NetSuite customers fared well during the pandemic but how did NetSuite do? NetSuite founder, Evan Goldberg, mentioned that NetSuite actually does well during recessions. Companies realize during an economic downturn that they must become more productive and efficient. Old technology, paper/manual systems, spreadsheets and out of date processes are rarely ever desirable but can be toxic to a company during lean times.

Even if these customers were reluctant to share their financial results, you could deduce how much they’ve grown via other tells. For example, one executive discussed how his firm has upgraded its management team several times as it has traversed a couple of thresholds. His firm is good at knowing what every executive’s “Best Used By” date is and bringing in a more capable player at the right time.

Another interesting conversation topic with these leaders concerned the growth in data these firms are experiencing. These businesses are acquiring new smart machine tools, capturing web metrics, using third party databases and installing sensors/meters/cameras everywhere. These devices are throwing off a lot of dark data: that is, the kind of data that a company has but isn’t using yet. These companies know this information could be a real asset of their firms but they’re not fully capitalizing on it just yet. This could be a real opportunity area for NetSuite as well.

My take

It’s interesting to see the NetSuite product line growing in functional sophistication and module breadth.  This is what enterprise-class vendors do. They add in more functional complexity to help their solutions move up-market.

Simultaneously, NetSuite is making it easier for prospective customers to do business with them via simpler contracts. They’re also making the product implementations more likely to deliver value the first time. These are things you often see when a vendor is trying to go down-market.

So, NetSuite appears to be bringing the best of the small business market/product/implementation world to an ever more sophisticated and powerful up-market solution. In effect, NetSuite is broadening its potential market opportunity. Too bad, its competitors do just the opposite (e.g., make simple products more complex to buy, implement and use).

There may be real value to this strategy. Value that’ll accrue to customers and Oracle shareholders alike.