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.
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.