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Summary:

The mid-market is the last great business application opportunity, says Zach Nelson, president and CEO of the recently IPOed NetSuite. (That’s his market, but he promises his presentation will not be too self-serving. We shall see!) The cloud makes it economical to reach the Fortune 5,000,000. […]

Zach Nelson, NetSuiteThe mid-market is the last great business application opportunity, says Zach Nelson, president and CEO of the recently IPOed NetSuite. (That’s his market, but he promises his presentation will not be too self-serving. We shall see!) The cloud makes it economical to reach the Fortune 5,000,000.

The cloud does not solve the problem of application integration, says Nelson. Things won’t all magically work together. The web is very good for loosely coupled things, and the business world needs very tightly coupled applications.

Just like software before it, there’s a world of hurt for traditional services companies based on cloud computing and the expectations of customers. Accenture, PwC and the like.

But no clear mid-market leader, and few examples of moving down market. When you’re talking about synchronizing data, suites win. (Self-serving check: did I hear a “suite”?)

If you’re building applications, and you’re building on a platform, it behooves you to think of which platform ultimately wins. (Self-serving check: He’s still on topic, but NetSuite is nowhere to be found on his slides illustrating the market.)

The cost of delivery (yes, at NetSuite) is now at 6 percent of revenue, down from 35 to 40 percen in 2003. Still, 99.99 percent availability over the last four quarters. Most SaaS companies will have their own infrastructure going forward. Cost of sales going down too.

Which VC is going to invest in the Accenture of the mid-market?

Coming around to his big point again: Service economics will be fundamentally changed, just like software economics were. What’s happening is service as software. This is where we’re really switching our platform; the cloud makes it possible. One-off services will become reusable, re-sellable software.

(Now he’s just completely in NetSuite territory, talking about their model, but he’s making sense so I’ll give him a break.) You can actually charge more for vertical applications, because it’s actually what the customer wants to buy.

  1. [...] Rating: None Thumbs Up Thumbs Down gigaom:http://gigaom.com/2008/06/25/live-coverage-of-structure-08/ Share/Send Print Previous [...]

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  2. VERTICAL APPLICATIONS – yes, customers are asking for industry-specific applications such as a sales forecasting solution for the semiconductor industry. I worked in the ERP space for 17 years and I believe in SAAS and industry-specific apps.

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  3. I am big proponent of cloud computing and SaaS but NetSuite has some growing up to do before they should be considered a legitimate contender in the SMB or mid-market space. Anyone considering NetSuite should look into their customer service record and data lock in tactics. You start your research here http://www.d-toolsblog.com/?cat=60

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  4. I got involved with the SAAS concept five years ago by subscribing to NetSuite, then called NetLedger. The software has performed well and my experiences with NetSuite have been positive. One of the greatest challenges for any CRM/ERP implimentation is the methodology you use to integrate business process and product features, and the critical success factor is who you choose as an integration partner or partners.

    Adam, I read your blog and like you I chose NetLedger because Larry Ellis of Oracle was behind it, and I did not imagine he would let it fail. I have not had the heavy handed tactics for renewal that you had, but I purchased direct from NetSuite and used an outside firm for leasing, so I could have montlhy payments on a multi-year lease.

    One NetSuite benefit is that Evan Goldberg, one of the founders and designers, is very involved in the User Group. Not many users take advantage of the User Group, but it is a great place to read about what other users are doing and to see advice from the pgrammers and designers. I always read Evans comments with great interest.

    Compared to my experience with AS-400 and SAP, I found the overhead and technical skills required for a solution like NetSuite to be more manageable for a small or medium business.

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  5. I am a 5 year+ user of Netsuite and I never experienced anything close to your situation. Netsuite customer service is always there for us when we need assistance, which is rarely. They have an excellent manuals and an active customer forum.

    Netsuite was and continues to be a critical component in our company’s success. As a leading online distributor, we rely on Netsuite for our e-commerce, CRM, accounting, ERP applications to smoothly run our 1000+ daily webstore orders. Without Netsuite, we would need to add at least 50+ employees to operate. The system delivers 98% of the functionalities we need to run our business. The other 2% will be released shortly. Any and all support cases we filed have been replied to in less then 24 hours.

    Your comments don’t truly reflect my experience with Netsuite nor the experience of many users I know. Better luck on the next program you choose.

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  6. In response to Adam Stone’s post attacking Netsuite (I followed the link to his own blog as well) my first thought was “Wow, we’re not the only company with customers like this guy!” Fortunately, we don’t have many, but I think it is safe to say that we all have a few customers we’ve been unable to satisfy no matter how hard we try. As the CEO of a highly regarded software company in the pharmacy industry, I personally accept calls from disgruntled customers from time to time. The vast majority of the time the customer is happy to speak with me and we can usually turn things around. However, every once in a great while I run across somebody that doesn’t really want to be happy, they just want to complain to anyone who will listen — There isn’t much that frustrates me more. The thing that is curious to me in this situation is this appears to be a Netsuite reseller-owned relationship. In that case I would think the reseller is responsible for overall customer satisfaction. Why is the customer pointing the finger back at NetSuite?

    I am happy to say that our experience with Netsuite is completely the opposite of Adam Stone’s in every way. We’ve been with them for 6 years and watched the software grow and evolve. We use virtually every feature of the product and I can honestly say I’ve never been more impressed with a software application (including our own which is widely considered the best in the industry we service). When we first joined the Netsuite family (it was originally called Netledger) we were running our business using Upshot.com for Sales Force Automation, a system we wrote in house for case management, Peachtree for Accounting, Outlook for CRM and a couple of other systems for specific processes related to our niche. Nothing was integrated and with employees in different parts of the country, communications was a nightmare. Today we have one solution – Netsuite. We would need at least 8 additional administrative staff without Netsuite and we still wouldn’t be able to do the things we do today. Not only is the product exceptional – it is easy to use, extremely reliable, and easily customizable — the online help and customer service are terrific. I scratched my head when I read Adam’s comments about the software and service. Many of his comments are so ridiculous I am convinced this isn’t about software or service – there must be another side to the story he isn’t telling.

    The bottom line: I couldn’t be happier with Netsuite! The product is amazingly powerful and robust. The customer service is world class. We offer our customers across the country 24/7 support and we require a system with exceptional reliability. In the 6 years we’ve been with Netsuite, I don’t think we’ve been down for more than a couple of minutes total! I pitch Netsuite to my board and potential investors as a strategic competitive advantage because of the incredible functionality it provides. When we show business partners, investors, and new employees what we do with the product, they are awestruck. I would be happy to talk with anyone looking to purchase Netsuite – we couldn’t operate without it!

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  7. I am not sure that Adam has his facts straight. I have been a Netsuite user for nearly a year and do not have the same reaction to my customer service experience. The projects we have done with Netsuite have been strongly supported by their service team and we have had a good experience. I think Adam may have a hidden agenda here. I agree with Brad although his experience is far greater than ours. But, the reality is that Netsuite is a very solid solution for mid-market companies and they are a very responsive organization for our company.

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  8. [...] Om Malik’s Structure 08 event, Zach Nelson from NetSuite touched on this very [...]

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  9. [...] articles by Zemanta STRUCTURE 08: Zach Nelson, NetSuite Mid-Sized Companies In the Services Industry Switch From Microsoft Great Plains to NetSuite For [...]

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