Find Research
Our World View
Industry Perspectives
Research Program
Parallax View Magazine
> stay tuned
View our collections of research around key subject areas:
>
>
>
>
ERP
>
>
>
>
>
>
>
SRM
>
>
WMS
 
 
Article
SuiteWorld 2012

At this year's SuiteWorld, NetSuite announced key architectural changes, their version of an omni-channel strategy, many new capabilities by vertical industry, and a new IDE for their SuiteCloud platform. In addition, I discuss NetSuite's approach to getting deeper vertical functionality for their ERP customers.


Full Article Below -
Untitled Document

Fun, Loyalty, and Growth

NetSuite’s annual user conference, SuiteWorld, has a more relaxed and light-hearted vibe than the conferences of more traditional enterprise software providers. Who else would start off their opening keynote with their two top executives dressed in wigs and costumes to look like Wayne and Garth of Wayne’s World following this Wayne’s World parody video? This is a reflection of NetSuite’s culture and their customers seem to love it. Attendance, at about 3,300, was up 50% from last year. NetSuite actually had to turn away people who wanted to attend. It also seemed to me, from talking to NetSuite’s customers at the show, that they display a level of enthusiasm and excitement rarely seen from the customers of NetSuite’s longer-established competitors. Starting from a much smaller size, NetSuite has grown at a much faster pace (84% over the past three years) compared with the larger and more established players. Q1 2012 revenue for NetSuite was $69.3M, with cash flow of $10.6M, 15% margins, and estimates of $300M revenue for FY12. They also grew their R&D headcount by 50% last year1 and will grow it another 50% this year.

F500 vs. F5M

NetSuite’s CEO, Zach Nelson, likes to say their focus is the ‘Fortune 5 Million.’ NetSuite added 300 new companies last quarter, most of them under $1B firms. But they also have seen success with large companies such as Knowledge Universe and Groupon, as well as subsidiaries of larger companies running SAP, Oracle, and other legacy ERP systems at corporate headquarters. Examples include P&G, J&J, MetLife, Fujitsu, Qualcomm, Pitney Bowes, and Land O’ Lakes. These companies are seeking a faster and less expensive way of deploying subsidiaries than just implementing another instance or extension of their corporate-level ERP system.

During his keynote address, Zach made a dramatic announcement that NetSuite just signed a deal with the subsidiary of a well-known Global 2000 technology company … (dramatic pause) … which is SAP.  The reaction of many was “Wow, really? That gives you some serious bragging rights.” It turns out that subsidiary is SuccessFactors,2 recently acquired by SAP, who was already a NetSuite customer. In fact, according to SuccessFactors, they are in the process of switching to SAP’s Business ByDesign. Still, it made for an entertaining and attention-getting announcement and chance for NetSuite to rub it in a bit to their rival.

NetSuite’s Omni-Channel Strategy—From Deep Ecommerce Roots

SuiteCommerce

The central announcement of Zach’s opening keynote address was the launch of SuiteCommerce, which Zach also referred to as Commerce-as-a-Service. This reflected a focus on supporting omni-channel business. I saw a similar theme central at both JDA’s Focus and Manhattan’s Momentum conferences this year. Whether B2B or B2C, almost every company now deals with multiple channels—direct sales/brick and mortar, eCommerce, call center/catalog, etc—and integration of the customer’s experience across those channels is becoming more and more of a base requirement to compete. Of course NetSuite comes at this from a quite different direction than their more traditional peers. JDA (with its Manugistics, i2, and E3 acquisitions) and Manhattan were started in the pre-internet era, focused on brick and mortar issues. NetSuite started at the height of the dot com frenzy and has had a strong focus on eCommerce from the start. While this eCommerce front end is integrated with their financial back end and CRM front end, NetSuite has historically had less strength in deep supply chain and logistics functionality compared to JDA or Manhattan. Each company’s heritage has influenced its approach to providing omni-channel integration by leveraging their strengths. 

Updated Architecture

Building on their ERP, CRM, eCommerce, global3 foundation, NetSuite has re-architected their solution. Previously, customers’ options for customizing their eCommerce solution from NetSuite were somewhat limited. For example, you had to use NetSuite’s built-in checkout page. About 18 months ago, NetSuite started working on exposing a new series of APIs,4 called SuiteCloud Commerce APIs,5 enabling a much higher degree of customization and control. Further, these APIs enable plugging in NetSuite’s back end to other front ends, including POS, mobile apps and even, in the future, other machines. This re-architecting coincided with NetSuite’s hiring Andy Lloyd, former CEO of Fluid (a digital agency) bringing substantial eCommerce user experience design sensibilities into the mix.

These new APIs and functionality enable some of the key omni-channel objectives of SuiteCommerce, including the ability to mix and match all varieties of customer touchpoints and business models, integrated with a common back end.  Further, Zach said this new architecture has resulted in the following five new capabilities:

  1. ‘Responsive Design’—Anywhere, any device, support
  2. Dynamic merchandising
  3. Pixel-perfect control over website designs—overcoming some previous limitations on the control customers had over the layout, look and feel of sites.
  4. Enhanced search— indexing/search all data, all fields and eliminating differences between keyword search and parametric filters/faceted navigation.
  5. Speed improvements—using AJAX6 the system now sends only the data instead of serving up whole pages. The data is streamed and the page is assembled on the client. 

Responsive Design—Anywhere, Any Device

Responsive design is where the same page (same HTML code) responds to the characteristics of the device it is displayed on so that it is optimized for that desktop, tablet, or phone. This can work with future still-to-be-designed devices as well. The code is aware of the device’s screen size and resolution, and adapts the layout, images, and content dynamically. For example, larger buttons will appear on a tablet; swiping is supported where appropriate; content automatically re-positions for vertical layout; and so forth. A future version will be aware of the processor speed and other platform parameters as well, to make further adjustments in the UI based on those characteristics, too.  


Figure 1 - Responsive Design

Dynamic Merchandising

Dynamic merchandising is an eCommerce capability where the NetSuite system dynamically decides what to display on the page being shown to the customer, based on data from any field in the NetSuite system. For example, you could offer a special promotion based on several factors such as a) how much the customer has spent, b) what items you have in excess inventory or that have higher margins, c) types of items the customer has purchased in the past, d) items in their cart or their top search terms, and so forth. One example given by NetSuite Example was if the merchant offers free shipping on orders above $150, it might create a rule that if the shopping cart is over $100, then it will suggest merchandise to get the customer’s order to over $150, based on the customer’s past buying, what products you want to move this week, and so on.  Of course this can be done with other e-commerce systems, but NetSuite’s advantage is all of the data is already in their system and does not have to be integrated from another system. This type of dynamic capability might normally be beyond the reach of smaller firms who lack the resources to do that type of integration or customization project.

Creative Agency Partnerships

Reflecting its emphasis on e-commerce, NetSuite has created a whole new “NetSuite Agency Program” to recruit creative agencies as partners and train and support them on SuiteCommerce and SuiteCloud platforms. They already have some of these next generation design firms as partners, such as Fluid, Pod1, LiveAreaLabs, Salt Digital, SysIQ, FastPivot, High Seas Consulting, and Sweden Unlimited. I would speculate that Andy Lloyd had a hand in this as well. It gives NetSuite customers access to digital creative agencies that are trained on the platform, which should further stimulate the building of more diverse, unique, innovative, and interactive sites on the NetSuite platform.

NetSuite’s Path to Deeper Domain-specific Functionality

Partners + Customizability

NetSuite has a different approach to providing deep vertical or domain-specific functionality than the larger and more traditional ERP and best-of-breed supply chain vendors such as Oracle, SAP, JDA, and Manhattan. The traditional vendors lean towards building that deep vertical functionality themselves, or acquiring companies with those assets. In contrast, NetSuite relies on a combination of in-house development, the customizability of their solution (proving that you can be a multi-tenant single-instance solution and still be highly customizable) and best-of-breed partners. NetSuite offers industry-specific solutions across the following key verticals: Wholesale Distribution, Manufacturing, Service, Software, and e-commerce (though I think it is a bit odd that they consider e-commerce to be a vertical … it seems to me it is a horizontal capability across industries). In fact each of their five verticals has its own dedicated sales, marketing, support, professional services, development, and product management teams, so in that sense they do take those sectors seriously with significant market traction and customers.   

Having said that, if you look at, say, the transportation management functionality of JDA or Oracle, or the industry-specific functionality of SAP, or the warehouse management functionality of Manhattan, NetSuite’s built-in functionality trades off some of these deeper features for greater flexibility, extensibility, and ease-of-use. NetSuite relies on partners to provide that depth of functionality.7 As one NetSuite product manager put it, “Partners are a very strategic and deliberate compliment to our own development team.” Over the last 6-9 months, they have added more training, up-front integration, and combined project management capabilities for their partnerships.

Customization is Core Capability

Just as important as partners are the customization capabilities of NetSuite provided by the SuiteCloud platform. NetSuite’s customization capability is one of the critical differentiator of its offering, allowing customers the ability to create significant customizations that automatically upgrade with future versions of NetSuite. Customers can add their own logic using SuiteScript (server-side JavaScript). Customization can also be done without writing any code, through a combination of Saved Searches and SuiteFlow. Saved Searches are no-code, forms-based queries (which can be arbitrarily complex) that end users can create. For example, you could create a dynamic segmentation of your customer base, using any data/criteria NetSuite has, such as sending a special promotion to all customers who have a lifetime spend over $1,000 in a specific category of products and have not had any transactions within the last 45 days. Customers can also build queries that zero in on specific inventory or orders or anything in the system. When combined with SuiteFlow, NetSuite’s graphical workflow editor, power users can extend and customize the system, similar to the way they might build their own Excel spreadsheet today, but with the advantages of integration with the company’s ERP core. 

In talking to NetSuite customers at the conference, it seemed all of them do customization. One customer put it succinctly, “Whenever we have a problem, instead of creating a new standalone spreadsheet, we put it on [i.e. we customize] NetSuite, where it is available to everyone using the shared corporate database.” Another customer described how they had just bought a new repair service company and to get them up and running turned their work order system into a repair order system in just a couple of weeks. Because SuiteScript is based on JavaScript, which is widely taught in universities, it is not hard to find relatively affordable resources that can do the customization. This type of customization capability enables affordable and maintainable differentiation, to a level not previously feasible or attainable for most small and medium businesses, and available only at a high cost8 to larger enterprises.

Evan’s Keynote—Accelerating Development

In Founder and CTO Evan Goldberg’s keynote on day two, he framed his key points around “accelerating development.” For example, they developed a new capability called Transaction Timeline (see Figure 2) that provides a visual timeline of the steps in the opportunity-to-cash and procure-to-pay processes.

Figure 2 - Transaction Timeline

This process-oriented view of the end-to-end transaction streams allows the user to drill down and back up. Evan made the point that this feature was not developed through NetSuite’s normal scrum process,9 but rather through their ‘sprint of dreams’ where they assemble teams from all over the world, give them a few days to present an idea, and then a panel of judges including Zach, Evan, and Jim McGeever10 vote on it. Transaction Timeline was the winner this year.

New Capabilities for Software Companies

Since NetSuite was founded by a software engineer, and they run their own company on NetSuite, it is not so surprising that they are more focused on software company clients than any other significant ERP vendor I’m aware of. Although the software sector is only about 2% of the size of wholesale, manufacturing, and service sectors,11 yet it is considered a key sector by NetSuite. In his keynote Evan announced (to enthusiastic applause) the introduction of NetSuite Recurring Billing to address many of the challenges of ‘as-a-service’ billing such as: billing in advance vs. arrears; recognizing SaaS revenue; billing for usage; and contract renewals. This integrates the necessary ERP financial functions (General Ledger, revenue recognition, payments, item fulfillment) with eCommerce (web storefront, ‘Billing Commerce Center,’ ‘My Subscriptions,’ payment, renewals, account management) and CRM (forecasting, managing renewal opportunities, commissions, email campaigns). It supports the ability to mix and match different rules in a single subscription and to customize and use any billing basis (“if you can count it, we can bill it”).

New Capabilities for Manufacturing, Wholesale Distribution, Other Industries and Multi-nationals

Evan also announced capabilities for the other verticals. For example a ‘project dashboard’ for professional services companies that gives a holistic summary view of key project information such as: start/end dates, % complete, utilization, amount invoiced, margins, custom KPIs, and gantt chart views of project tasks’ current status. For manufacturing industries, NetSuite’s roadmap includes BOM12 component effectivity, routings, ABC13 cycle counting, and WIP inventory (currently NetSuite does not distinguish between raw materials and WIP inventory).  For wholesale distribution, Evan announced ATP (Available-to-Promise) business rules that can allocate and peg inventory against each order.  And for multi-division, multi-national companies, he announced multi-book accounting, where the underlying transactions can be automatically stored on two or more different books, based on the accounting rules that vary by country or region (e.g. US GAAP, vs.  UK GAAP, IFRS, Japan GAAP, etc.) to account for differences in revenue recognition, fixed asset depreciation, expense amortization, FX translation, inventory COGS, and so forth.

SuiteCloud IDE

Not unlike what SalesForce.com has done with Force.com, SuiteCloud is NetSuite’s platform for their customers and partners to develop extensions, applications integrated with NetSuite, and standalone applications. It includes things like application configuration, workflow engine, BI, JavaScript support (SuiteScript), web services to integrate with NetSuite, and SuiteBundler for creating and distributing application packages. To make developing on SuiteCloud faster and more efficient, Evan announced the launch of SuiteCloud IDE, a customized version of Eclipse,14 which has built-in intelligence about NetSuite. This allows the creation of NetSuite-specific projects, accounts, and environments. When you create a new project, the system knows about the different script types available in SuiteScript and event types and automatically creates template files. It has type-ahead when creating functions, knows the types of NetSuite records that can be applied in a function call and auto-fills these as well. In subsequent uses of the record, it shows only the fields available for that record type. It has similar intelligence with line items and does a lot of validation. The audience was particularly enthusiastic about these capabilities, which received resounding applause.

In my follow-on article about what I learned at SuiteWorld, I’ll talk about what some of NetSuite’s customers are doing, particularly in the Wholesale Distribution sector.

________________________________________________________

1 NetSuite opened a development center in the Czech Republic, presumably at a considerably lower cost per developer. -- Return to article text above
2 SuccessFactors is a SaaS HR / HCM (Human Capital Management) system that SAP acquired earlier this year as part of SAP’s push to become more of a cloud company. -- Return to article text above
3 multi-tax, multi-language, multi-currency support via NetSuite’s OneWorld -- Return to article text above
4 Application Programming Interface -- Return to article text above
5 SuiteCloud Commerce APIs can output data as JSON (JavaScript Object Notation), HTML, or XTML. -- Return to article text above
6 Asynchronous JavaScript and XML -- Return to article text above
7 Not unlike the approach SAP or Oracle or Microsoft takes in relying on partners for complementary solutions through a combination of their platform and partners' solutions to provide verticalization. -- Return to article text above
8 The high cost of customization with many systems is not just the initial investment, but also the cost of re-writing and maintaining that code when it is time to upgrade the ERP system to new revisions. -- Return to article text above
9 Scrum is an agile software development methodology that has become increasingly popular in the past few years. -- Return to article text above
10 Zach Nelson, President and CEO; Evan Goldberg, Founder, CTO and Chairman of the Board; Jim McGeever, COO of NetSuite -- Return to article text above
11 Source: U.S. Bureau of Economic Analysis Industry GDP data -- Return to article text above
12 Bill-of-Material -- Return to article text above
13 ABC cycle counting divides inventory into groups according to the degree of accuracy and control required. -- Return to article text above
14 Eclipse is an open-source IDE (integrated development environment). -- Return to article text above


To view other articles from this issue of the brief, click here.




MarketViz powered.