NetSuite Declares the Cloud Wars Won at Suite World User Conference.
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Introduction: A Very Sweet Cloud World
Declaring the cloud wars over, Zach Nelson, CEO of NetSuite, kicked off Suite World 2015 in San Jose. Over 7,500 attendees were treated to theater in the round and denial of an early death by PowerPoint (hurray!).
An underlying message beyond the major interesting customer go lives and new product announcements was that NetSuite is not a ‘small player’ in the ERP market anymore. NetSuite’s market share growth is outstripping their competitors at an astounding rate. Zach showed market growth numbers for 2013 of 41.7% and 2014 of 46.6% outpacing their competitors by a wide margin. The closest competitor growth, Microsoft, grew at 5.2% in 2013, and 2014 was only at 1.6%; with a shrinking year for SAP at -1.8% and Oracle at -6.7%. (NetSuite’s actual sales grew over 37% last year.)1 No wonder Zach felt the war was over. Not only is the cloud considered the first choice platform for new purchases (you can see this data in Business Priorities 2015) but NetSuite is beginning, in many cases, to compete nose to nose in functionality. This, in fact, was the most significant point of the whole conference that major investments in the product NetSuite can win deals not just on cloud, but can also hold their head up with a functional RFP competitor. (More on the product enhancements shortly).
Zach mentioned that the share of the enterprise using NetSuite for the ERP is growing whereas before they may have only had commerce. This is also a recognition of a broader solution (as well as partners who can fill in the gaps).
NetSuite has quadrupled their headcount over the last few years, with the majority of hires in development. So where is that development being put to use?
SuiteCommerce InStore—this significantly expands SuiteCommerce. SCIS is a mobile and web product that unites in store and online POS. NetSuite, in 2013, through their acquisition of Retail Anywhere POS, built in their Point of Sale and integration to back office processes. For NetSuite customers this new Omni–channel capability provides a 360 degree view of the customer in an easy to implement solution for both small and midsize firms, for firms like Williams-Sonoma to Planet Dog.
Content Management—based on an acquisition of Element Fusion (LightCMS) which NetSuite did two years ago, the development team rewrote it into the NetSuite platform.2 This is not just important to retailers. GS1 supported major retailers by creating a Product Data Management Standard3 that encompasses content, graphics, etc. that major retailers would like their suppliers to adhere to, saving both the supplier and the retailer redundant work. For manufacturers who serve their own and other channels, content and catalogue consistency assure that products can be found across the web, and that end-to-end systems maintain data quality and consistency.
Warehouse Management—last year NetSuite purchased WMS partner eBizNet (more on this later). Although NetSuite has the advantage of eBizNet as a key partner and has important and leading WMS partners (such as High Jump), they felt that warehouse management is a core function to ERP. Thus they added and embedded WMS into the solution. (More on this later in the article).
Marketing Automation—NetSuite also announced the acquisition of Bronto Software.4 Bronto coupled with content management and customer analytics provides permission-based marketing to support email and mobile campaigns, which are so important to web business and retailers today.
An intriguing section of Zach’s talk delved into the fact that the multi-tenant cloud allows NetSuite to see every data, every transaction—he called it the power of aggregation. Examples he gave were Facebook and Fitbit5—their power to aggregate allows them to discern trends.6 He stated that NetSuite’s use case of these aggregations is to be able to see, through pattern recognition, across all their customers—all industries—what their customers want next.
Figure 1: NetSuite statistics on transactions processed
And, more importantly, for the NetSuite customers, to leverage their own data for analytics. On the drawing board NetSuite is planning to release special analytics for customer history and behaviors later this year. Zach talked about their partnership with Qlik, which supports a modern graphical device-agnostic analytics framework that customers can use.
But more intriguing was the thought that this foundation could open the door to new and interesting services in the future, such as performance optimization and benchmarking.7 When probed about this later at the analyst’s session, Zach implied that NetSuite was not headed that way. In fact he stated that kind of work takes big investments in data scientists to glean through the meaning of the data, which varies so much between verticals and other types of companies. However, it remains to be seen what NetSuite will do in this realm in the future. (Having said that, these companies have so much on their plate that it may take a customer groundswell to get these kinds of capabilities on the short list.)
Zach’s major message was that NetSuite is investing heavily in the product, to not just keep up, but to lead the market. Their focus is key trend strategies such as Omni-channel with trendy—but practical—new products each year that are already being put to use by customers, not mere announcements that represent some distant future date or baffle customers in terms of their usability and ability to run simply.
On day two, NetSuite founder and CTO Evan Goldberg provided some entertainment, including Mrs. Goldberg (Evan’s wife) in a clever and instructive experience and demonstration in Omni-channel retail, which included purchase online and pick up in store as well as the merchant’s opportunity to up sell the Goldberg family.
Highlights for technology here include:
Templates for ecommerce development. This is particularly useful for SMBs who rely on part time web masters to keep the web sites current.
Re-architecting SuiteCommerce to allow multi-channel, i.e. mobile, on any device: smart phones, or tablets, with Microsoft, Apple and Android operating systems.
Closely to come later this year is enhanced Revenue Recognition to enhance the financial and CRM capabilities.
Procure to Pay. This is also one of those ERP-cores that NetSuite was lacking strength. Solid Procure-to-Pay (P2P) exists in the leading procurement suites as well as many ERPs. (You can read about P2P capabilities and solutions here.)
Until recently, NetSuite had only basic sourcing and procurement functions in their platform (such as the ability to create POs, pay invoices, etc.) and they relied on partners (such as Coupa and others8) to deliver best-in-breed P2P functionality beyond that. As they moved to serve the needs of larger and more sophisticated clients, NetSuite began building out some sourcing functionality, including the ability to send an RFQ (Request for Quote) automatically to multiple vendors to request pricing and terms, capturing awarded RFQs as contracts and converting them directly into a PO (purchase order). NetSuite can also create blanket POs that can be used to drive material releases for direct materials.
With these sourcing basics now available, NetSuite has decided to also address P2P (procure to pay) needs. We’ve heard many solution vendors say something along the lines of “the requisitioning experience should be as easy as shopping on the web.” Well, NetSuite already has powerful and very mature ecommerce capabilities, so they wisely decided to leverage those in creating a requisitioning system. NetSuite repurposed their ecommerce UI used in creating requisitions. Users can browse, search, and select items from a catalog, add items to the shopping cart and check out, which initiates the approval process. The ERP item master identifies the items that should show up in the catalog, as well as restrictions on who can see/buy which items. This functionality was demoed at Suite World and should be available soon. Further down the road is the ability to create catalog items that are not in the item master and/or to punch-out to other catalogs.
D&B for Vendor Monitoring and Sourcing
D&B has one of the largest business databases, with records on about 250M businesses, aggregating about 30,000 data sources. This can be used to monitor and manage supplier risk, as well as discovery of new or alternate sources. In addition to information about headquarter location, D&B has some plant location visibility. D&B data can be used to keep supplier information up-to-date and cleaner than most small businesses can do on their own. Furthermore, some of the same D&B data can be used by customer-facing functions, such as checking the credit-worthiness and financial viability of customers.
These procurement workflows—such as requisition sending/receiving/selection, PO approval, contract approval—are built using SuiteFlow. NetSuite creates generic versions of these workflows, which customers can modify. NetSuite customers use that capability heavily to create custom workflows to meet their needs.
NetSuite is also revamping their vendor center with performance metrics, such as quality, on time delivery, actual vs. budgeted cost, invoice accuracy, returns; all using information pulled directly from NetSuite transactions to see actual performance. Further, they are starting to look at vendor risk management. They have a partnership with D&B for supplier risk data. This includes financial risk, but can also look at other types of risk, such as lawsuits, strikes, natural disasters, etc. Some of these are on the future roadmap, not yet available.
Serving Broader Needs
Customers that want full best-of-breed functionality will still turn to third party solutions integrated with NetSuite. However, by adding these capabilities, NetSuite is able to serve an increasingly broader set of their customers without them needing to buy another solution. NetSuite told us they have seen strong adoption of these new functions, showing that there is an appetite for sourcing and procurement within the suite. Looking ahead, in addition to more comprehensive catalogs, NetSuite is looking at providing more granular rules, with tolerance settings, for automating requisition approval, PO creation, contract renewals, and automating other routine functions. The idea is to move more to management-by-exception, so that the majority of transactions flow through in an automated fashion. In addition, intelligent alerts could be generated, such as when an order is close to a volume discount cutoff level.
Late last year, NetSuite acquired eBizNET, providing solid warehouse capabilities much needed by many of NetSuite’s wholesale distribution clients and some of their manufacturing clients. There are two basic versions: WMS Lite for smaller and simpler warehouses and WMS Advanced for larger, more sophisticated operations. WMS Lite includes barcode labeling, RF scanning, cycle counting, bin management, manifesting, and workflow capabilities. It can do lot and serial number tracking, FIFO and FEFO inventory management, and basic B2B fulfillment.
WMS Advanced provides picking waves, directed putaway and picking, EDI integration, zone picking and replenishment, advanced slotting, cross docking, pick-to-light, pick-to-voice, TMS integration, and support for interleaving conveyors. It also has an operational dashboard, with mobile support allowing warehouse managers visibility while on the floor. WMS Advanced can optimize space utilization within bin location using information about the dimensions of the items. Rules can be set up to prevent mixing of lots. Scripts can be set up to evaluate orders and classify items as fast or slow movers, then putaway in the appropriate (near or far) location. These rules may take some time and effort to set up initially, but once created, they can automatically adapt the putaway strategy as item velocities change. The flexibility of these rules can be used to support different channels with different characteristics and to optimize the warehouse space.
NetSuite users who have other WMS needs can also turn to firms like HighJump. ‘Warehouse Advantage,’ HighJump's WMS, recently achieved ‘Built for NetSuite’ verification. This verifies that HighJump has implemented NetSuite’s recommended best practices in building their SuiteApp.
This is a mega investment for NetSuite. Three years ago they took the plunge into retail—the store front—that was with the acquisition Retail Anywhere web POS. Though this initially achieved only modest success, NetSuite demonstrated its commitment to retailing and has continued to pursue a major investment in retail to bring its Omni-channel solution to market. This solution neutralizes differentiation between web and store and modes of fulfillment. Thus commerce seamlessly talks to the warehouse and so on. A mighty accomplishment for NetSuite.9 As Zach pointed out today, ‘every company is an Omni-channel company.’ Thus NetSuite can serve many markets with this capability—not just B2C.
NetSuite’s retailer customers often represent a new breed of retailing with young up and comers like Planet Dog or disrupters like Alton Lane. For NetSuite this is new territory. But they are moving fast to capture Omni oriented retailers since NetSuite can provide a whole suite, whereas many others in the retail industry are modular-based point solutions.
Not Little Anymore
Not only a significant increase of customer wins, but the size of the deals challenges the notion of NetSuite as a provider for just SMBs. And Zach Nelson and other executives at NetSuite pointed out that NetSuite is running the full business—not just a commerce module—for more and more companies.
American Express GBT’s Dual Role—Customer and Provider
When American Express Global Business Travel (GBT) was spun out of Amex last year, they had a deadline to get off the Amex EBS system. They could have just gone down a similar path with an on premise strategy. Instead, they decided on a fresh and modern approach and go fully into the cloud. They selected NetSuite OneWorld and with 14,000 employees in 140 countries GBT will be one of the largest and most global companies running their core business on NetSuite.
At least as interesting to us is the fact that GBT’s service is integrated into the NetSuite platform, so that customers can book travel directly from NetSuite. Furthermore, NetSuite customers get a pre-negotiated group discount when buying travel services through GBT.
These could both be harbingers of new types of relationships between NetSuite and their customers. We see this trend emerging between technology providers and their online service provider customers.
In the first case, we can imagine a broader and richer set of products being directly integrated into NetSuite’s platform. In some cases, they would just be available to requisitioners within catalogs pre-integrated into NetSuite. But in other cases, the services and offerings might be integrated directly into specific NetSuite workflows, such as in this case in the booking of travel. Or imagine a background checking service integrated into the HR onboarding workflow. Or 3PL fulfillment services pre-integrated into ecommerce fulfillment workflows. But this is a musing, as NetSuite hedged the direct question we asked about developing a business network with GBT (or other customers).
In the second case, customers get a pre-negotiated discount on travel. NetSuite is in sense acting sort of like a group purchasing organization—negotiating favorable prices for its clients, leveraging their aggregate potential purchasing volume. It will be interesting to see the extent to which NetSuite continues to expand either or both of these new approaches and new types of relationships with their clients.
How Small Can You Get?
At the other end of the spectrum (in terms of company size) is NetSuite client Corkcicle. They are a manufacturer of about a dozen different products (many of which can be customized) mostly for cooling and aerating different beverages. They sell through a blend of wholesale distribution to retailers and single SKUs sold direct to consumers via ecommerce. If they had their own factory, you might expect them to have perhaps 50 or more employees. But in today’s outsourced world, they can get by with far fewer than that; you might guess as few as a dozen employees. Guess again. They are successfully running and growing their business with just four employees. Their philosophy is extreme outsourcing, and NetSuite is one of the keys to keeping their footprint agile and light. Whether for logistics, marketing, customer service, accounting, or other functions, they hire external expertise to run those areas. They actually have 15 NetSuite One World licenses, which their extended team of partners uses extensively on Corkcicle's behalf.10
This approach gives them flexibility and agility. They can more quickly grow or adapt to seasonal spikes, such as ramping up more customer service people during the Christmas selling season. And they can do sophisticated integrations, such as EDI with retailers or ecommerce fulfillment with 3PLs. Corkcicle and Amex GBT provide good ‘bookends’ illustrating the extreme scalability of NetSuite’s platform and their commitment to not lose their head in the mega company size market—running both a 4-person and a 14,000-person company.
Disruption and Transformation: Conclusions
Whether extending wholesale to become custom manufacturer and service provider or retailer: globalization manufacturing; Omni-channel; or entrepreneur with a whole new idea on how to serve the market, NetSuite’s message was that the world is changing rapidly. New ideas are disrupting all ways of working—old business models are giving way to new approaches. They clearly showed a lot of examples of not only new business ideas that took NetSuite customers from start-ups to major brands, but revamping of major brands and traditional businesses going through transformation.
As attendees, the dual messages were clear—technology runs the world and that transformative thinking can have a big impact on your business success. And of course NetSuite wants to be your partner to make that happen.
5 a NetSuite customer -- Return to article text above 6 At the conference in fact, we all received Fitbits and during our stay we participated in a fund raising, aggregating our steps to achieve a goal for charity. -- Return to article text above 7 Today several cloud providers such as GT Nexus, Internet Truck Stop and others leverage this data as a service to support their customers. Read more on this concept in: Who Owns the Data? -- Return to article text above 8 Ariba and Concur were NetSuite partners too, until each were bought by ‘mortal enemy’ SAP -- Return to article text above 9 We will highlight more of NetSuite’s Omni-channel retail in an upcoming retail spotlight report. -- Return to article text above 10 This is a progressive idea we would like to see more brand companies adopt. Often they are frustrated by their manufacturer lack of technology. The cloud allows a brand company to support a supply chain of partners to act as one entity. -- Return to article text above
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