SuiteWorld - the end of the beginning, not the end of days, as Microsoft becomes NetSuite's new BFF

Profile picture for user slauchlan By Stuart Lauchlan May 5, 2015
Peace broke out between NetSuite and Microsoft on day one of the SuiteWorld 2015 conference in San Jose, California.

Zach Nelson
Who'd have thought it?

The end of the beginning. That was NetSuite CEO Zach Nelson’s jumping-off point on Day One of SuiteWorld 2015 today.

But if you’d told me last week that he would go on then to announce that NetSuite and Microsoft are now BFFs, I’d have been more inclined to think it was a sign of the end of days!

Nonetheless that’s exactly what happened as NetSuite named Microsoft Azure as its preferred cloud infrastructure with plans to drill down on Office 365 integration in a public display of co-operation.

This, mark you, coming after over a decade of Nelson taking pot shots at Microsoft’s Great Plains and Navision offerings, dismissing them as a “Stone Age hairball” and firing off zingers like this one from 2010:

Microsoft is offering what I call the "fake cloud." Microsoft is trying to convince customers to use hosted versions of their pre-Internet, client server-based systems like Great Plains and Dynamics.

I did note last month that the latest quarterly earnings call was notbaly less bellicose than has sometimes been the case. In fact there was no reference to Microsoft at all. Now we know why.

What exactly is the agreement between the two former adversaries? The main points are:

  • An immediate integration between NetSuite and Azure Active Directory that enables single sign-on (SSO) for customers using NetSuite together with Azure Active Directory, eliminating the need for users to manage and use multiple passwords.
  • In the coming months NetSuite and Microsoft will start cloud-to-cloud integration between NetSuite and Office 365, providing “seamless access" to both technologies from within a single interface and improving productivity and collaboration across a variety of roles, from financials to shipping, marketing, ecommerce, business analytics, retail store associates and more.
  • Integration with Microsoft Excel so that customers can connect NetSuite data to Excel and Power BI for Office 365 to visualize information and discover new insights into their business.
  • NetSuite will migrate its entire employee base to Office 365.
  • By the end of 2015, NetSuite will migrate from AWS and on-premise deployments to leverage Azure as its preferred cloud infrastructure platform and will use Azure for testing and development.

It’s a pretty big deal then.

It's who you know

So what’s changed? How did we get from sniping to snuggling up in a relatively short space of time?

Two things. One is the arrival of Satya Nadella as Microsoft CEO.

The second is the hiring of former Microsoft cloud exec Fred Studer as NetSuite CMO. With those two appointments, the stars were aligned in the right direction for a major shift in attitude.

When it comes to the Nadella factor, there is precedent here. When Salesforce did its own deal with Microsoft last year, I was minded of the expression ‘Only Nixon could go to China’ as I watched Marc Benioff posing for ‘best of friends’ photos with Nadella.

Benioff told me later that this rapprochment could only have happened under Nadella and would have been impossible under former Microsoft CEO Steve Ballmer.

Satya Nadella
Nadella beamed in

It’s something of the same here. In his keynote address, Nelson acknowledged that after being so combative against Microsoft for so long, there’s an element of strange bedfellows about the new stance:

The world is changing. It’s not just us, but also the traditional software firms.

Historically, we haven’t had much of a relationship with Microsoft. In fact they’re kind of a competitor.

When Satya Nadella came in I could see a sea change…[he] is really interested in partnerships for Office365.

He added:

We use Microsoft Office and Azure, and so do many of our customers. Tighter integration means reduced security risk and more powerful capabilities.

This will help our customers thrive in a mobile first and cloud first world. NetSuite will have access to best and brightest at Microsoft to bring productivity and business suites together. This is just the beginning.

Later Nelson told me:

We were blinded by competition with Great Plains. Fred [Studer] coming on board gave us more insight into Microsoft’s strategy.

We got access to Satya. We have access to the heart of the machine.

Studer took up the tale:

[At Microsoft] I led the Office business for 4 years and launched Office 365 in North America. I worked very closely with the Office tram and got to know Satya very well.

When Studer joined NetSuite, he and Nelson had a white boarding session about the ERP vision for the firm and the idea of approaching Nadella was born. A phone call later and the two found themselves in Seattle meeting Microsoft execs and building bridges.

Not the new BFF

But the tie-up between NetSuite and Microsoft doesn’t mean there’s been an outbreak of peace in the cloud ERP space.

Circling the NetSuite conference venue are mobile advertisements from rival FinancialForce, claiming that “NotSuite” is pushing a “FrankenCloud” monster.

CEO Jeremy Roche stepped up the aggro between the firms with some critical words about the Microsoft alliance:

NetSuite and Microsoft strategic partnership is a bit of a catch-up to what some of our ERP customers are already able to achieve on the Salesforce1 Platform. For example, Zach names Active Directory integration as an expected new capability from the partnership but we have had it for years. This is catching up on fundamentals!

NetSuite says, "By the end of 2015, NetSuite will migrate from AWS and on-premise deployments." So they are kicking out Amazon, which means NetSuite customers need to get ready for the technical infrastructure changing beneath their feet. How are customers supposed to make a strategic decision on platform when it is being changed for them by their vendor?

Them’s fighting words. And with Microsoft now on side, we can perhaps expect NetSuite and FinancialForce to lock horns more aggressively.

Certainly Nelson’s in no mood to take criticism based on what he calls a “fantasy vision”.

Asked about other claims made by FinancialForce, he pondered whether NetSuite’s legal team needed to send the other firm a letter, stating:

Lying is the best approach to marketing.

Where is their ecommerce system or does that not matter to them? Where is their retail strategy?

We’re only ten times their size. That’s where you start lying, when you’re that small.

My take

We live in strange and interesting times.

While everyone’s been fretting this week about whether Microsoft’s a possible takeover candidate for Salesforce - the rumor flared up again while Nelson was opening SuiteWorld - NetSuite was preparing to reveal its own Microsoft surprise.

That both Salesforce and NetSuite have been able to reach a working relationship is testament to Nadella’s ‘reach out’ attitude and to NetSuite's pragmatism in making the most of that new avenue.

On the face of it, this is a new relationship that can only benefit customers of both firms.

And while I’ll miss those Microsoft zingers from Nelson, with FinancialForce picking a fight, he’s not got far to look for a replacement target.

Disclosure - at time of writing FinancialForce, NetSuite and Salesforce are premier partners of diginomica.