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Ten minutes with NetSuite CEO Zach Nelson

Stuart Lauchlan Profile picture for user slauchlan October 22, 2013



Phil yesterday covered off NetSuite's unexpected move into HCM with its planned acquisition of TribeHR. I had a chance to catch up quickly with NetSuite CEO Zach Nelson later in the day during which time he gave me some insight into this move.

Like Phil, I had not picked up on the significance of NetSuite founder Evan Goldberg's ambition to “to create the first integrated cloud ERP and HCM software suite for small and mid-sized businesses", assuming this would essentially mean more partnership activity.

Seems I wasn't entirely wrong - at the time. Nelson explained:

"We have been evaluating the HCM space for quite a while. You saw at SuiteWorld that we had different partners from different segments of the HR market and initially the idea was to integrate with a variety of them. The integration that we did with Tribe was nice and we saw it take off in the customer base.

"Really there has been no HR offering in the mid-market. Customers had never really asked us for HR but we saw that they seemed to be taking it up. So we decided to acquire Tribe."

So, if customers were in fact taking up the HR option, does that imply that demand was there all along even if customers hadn't articulated their desire for it? Up to a point perhaps, as according to Nelson:

"Companies use NetSuite to run business processes. In sectors such as manufacturing and distribution, the main practices and processes have not been so people-intensive. The HR problems they face are not as daunting as others."

Then there's the 'chicken and egg' variable to be factored in: no HCM offering, no HR people expressing interest, hence no NetSuite desire to produce an HCM product and on and on. Nelson noted:

"Secondly we didn't have an HR solution so we didn't engage with HR professionals. They were probably the only group that we didn't sell to. We sell to heads of marketing, CFOs, heads of e-commerce, but not HR because we didn't have an HRIS that they wanted or needed."

Tribal thinking

So what does NetSuite get with TribeHR? Nelson explained:

"TribeHR is interesting to us for two reasons. We were looking for traditional HCM features such as applicant tracking, employee on-boarding, and we were amazed at the depth of those pieces in Tribe. They have all the historical requirements of HR that managers need.

"But the second aspect is the social HR element which has the employee collaboration features that's being talked about now. So we have an offering that takes in where the ball has been with traditional HRIS and where it is now with social HR. It really is way ahead of the market."

Athough TribeHR will effectively become NetSuite's de facto HR system of choice, there will still be other options on offer, especially to larger firms outside of the mid-market:

"We are still big believers in choice. For small to very large customers, there will be a variety of solutions required. What we're doing will be great for the SMB market, but when you get above that we will look to partner with others.

"Most notably of course with Oracle and its Fusion HCM. We've had a great deal of success with that since we announced the relationship with Oracle in June."

As my brief chat with Nelson drew to a close, it was of course irresistible to ask his views on SAP's repositioning of Business By Design (BYD), the subject of much criticism from the NetSuite boss for a good few years:

"It was pretty widely known that BYD hasn't been a strategic platform for SAP for several years now. It didn't work on its first iteration or its second iteration of its third iteration.

"I think it's a shame that they continued to sell it to customers when they knew it wasn't a go-ahead platform for them."

"They say that they're going to rebuild it on HANA, but if they couldn't do it over ten years by spending three billion dollars…"

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