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NetSuite vs. SAP Business ByDesign at London SaaS Conference

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NetSuite's CEO Zach Nelson made a forceful, possibly combative, appearance at the London SaaS conference. In an effort to differentiate the NetSuite hosted CRM and accounting software system from the traditional software giants of SAP, Microsoft and Oracle, who seemingly have recently found SaaS religion, Nelson seemed to emphasize the following points:

  • SAP and Microsoft do not understand the hosted software marketplace, however, their marketing and public relations messages substantiate the market.
  • SAP and Oracle enter the software as a service industry without focus and instead run their hosted solutions as a "side business."
  • SAP and Microsoft find themselves in a precarious position as any success they incur with online software will likely also result in cannibalization of their flagship non-hosted software.
  • The SAP software as a service solution - Business ByDesign - is inherently weak due in large part to its restrictive customization capabilities. Nelson claims that "every customer needs customization" and suggested SAP either doesn't understand this or simply chooses to ignore this market demand.
  • Nelson scoffed at what he calls the “you host, we host, everyone hosts” option offered with the Microsoft CRM product. However, Nelson did not elaborate on the fact that NetSuite has only one data center with no redundancy to a fail-over data center.
  • Nelson refers to NetSuite's target market as the "Fortune 5 million", points out that the information system needs of small businesses can be complex and suggests that the one-size-fits-all approach is short sighted and cannot be successful.
  • Nelson emphasized this point further by stating “Every one [of NetSuite's clients] has customized the application; no one is using 'vanilla' NetSuite. [Hosted] SAP is a non-starter if it's non-customizable.” He went on to say “The minute you customize SAP or Great Plains you never want to touch it again for fear of blowing it up.”
  • NetSuite will continue to evolve vertical market and industry specific hosted solutions.

Nelson was quick to point out SAP's much delayed software as a service offering. Despite lavish announcements and media press events, the Business ByDesign SaaS product remains unavailable. As commented by Nelson, “I've heard this is the most complete product ever, with one exception: you can't buy it. Are they going get their $3 million sales reps to sell it? Good luck!”

Although NetSuite has its own partner channel, Zach Nelson predicted "a world of pain" for partner channels desiring to work with hosted software companies. It's no secret that NetSuite itself has incurred frequent executive turnover of channel management positions and repeat complaints from partners who claim to find themselves competing with the company's direct sales force. However, it is a surprise when the CEO of a company that claims to operate with an indirect channel suggests that SaaS solutions are better delivered from a direct sales force rather than an indirect channel such as VARs (Value Added Resellers) as according to Nelson, the indirect partner channel is slow and unresponsive to customers. Nelson predicted this NetSuite's direct sales force would grow to 200 staff this year. I suspect the NetSuite partner and VAR channel will shrink in about the same proportion.

Posted by: Jeffrey on 04.20.08
Posted in:
NetSuite
Comments (0) | Jeffrey[at]erpblogger.com
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