issue 1
Cloud ERP and Wholesale Distribution How NetSuite Enables Wholesale Distribution Companies
Featuring research from
2
Welcome
3
From the Gartner Files: SWOT: NetSuite, Wholesale Distribution Industry
19
Customer Testimonials
24
About NetSuite
WELCOME Dear Colleague, As a wholesale distribution company, you continuously strive to grow your business and maintain a differentiated position in the market while delivering great value and service to your customers.
Cloud ERP and Wholesale Distribution
You may, however, be challenged in navigating the IT landscape and
NetSuite Corporate Headquarters: 2955 Campus Drive, Suite 100 San Mateo, CA 94403-2511 United States Voice: 650-627-1000 Fax: 650-627-1001 E-mail:
[email protected] www.netsuite.com/ wholesaledistribution
performance your wholesale distribution company needs to grow. To help you size up your options, NetSuite is pleased to provide you with this in-depth Gartner research report on the NetSuite Wholesale Distribution Edition. Gartner’s objective and extensively researched assessment details how NetSuite serves the needs of the wholesale distribution companies and can help you understand whether NetSuite is the right choice for you.
2 l Cloud ERP and Wholesale Distribution
As the industry’s only cloud-based business management suite built
locations: Canada, Australia, Europe/ Middle East/Africa, Brno, Czech Republic, Singapore, Hong Kong, Japan, The Philippines
Distribution Edition can help your company reach its next levels of growth
NetSuite and the Wholesale Disribution Industry is published by NetSuite. Editorial supplied by NetSuite is independent of Gartner analysis. All Gartner research is © 2011 by Gartner, Inc. All rights reserved. All Gartner materials are used with Gartner’s permission. The use or publication of Gartner research does not indicate Gartner’s endorsement of NetSuite’s products and/or strategies. Reproduction or distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and
landscape for wholesale distribution. If you’d like to learn more you can
your business. More than 10,000+ organizations use NetSuite to run their business
also visit us online at www.netsuite.com/wholesaledistribution.
interests in entities covered in Gartner research. Gartner’s Board Gartner research is produced independently by its research or their managers. For further information on the independence and integrity of Gartner research, see “Guiding Principles on Independence and Objectivity” on its website, http://www.gartner. com/technology/about/ombudsman/omb_guide2.jsp.
Sincerely, Roman Bukary, GM, Manufacturing & Wholesale Distribution, NetSuite
Research from Gartner RAS Core Research Note G00213981, Robert P. Anderson, Nigel Montgomery, Chad Eschinger, 28 June 2011
From the Gartner Files:
SWOT: NetSuite, Wholesale Distribution Industry NetSuite is the only pure-play cloud-based integrated business management suite vendor specifically targeting the wholesale distribution industry. This analysis examines the strengths, weaknesses, opportunities and threats that NetSuite faces in this industry.
ANALYSIS
Introduction This document analyzes NetSuite's key strengths, weaknesses, opportunities and threats, with particular respect to the wholesale distribution industry. The analysis is intended to assist decision making for the following audiences: UÊ /iV
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Ê>ÊÌiÀiÃÌÊÊ iÌ-ÕÌi The analysis identifies issues relating to NetSuite's core ERP software offering while particularly illuminating one of its key industry markets – wholesale distribution. We list only those characteristics that have the greatest potential impact on NetSuite's market position and strategy in the worldwide ERP software market.
SWOT Analysis The ERP software market is large and mature, with "megavendors," such as SAP and Oracle, dominating market Ã
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Ê Gartner defines as companies with up to 999 employees and/or between $5 million and $1 billion in annual turnover), vendors such as NetSuite maintain a healthy presence, serving thousands of customers by bringing competitive offerings to the market.
NetSuite is delivered as an on-demand service (SaaS); furthermore, setup can be greatly reduced over comparable on-premises solutions. Some of the savings Gartner attributes to SaaS-based business suites include predictable costs (not possible with licensed software) and paying for only what is used. Figure 1 gives an overview of NetSuite's SWOT characteristics with respect to the wholesale distribution industry, and Figure 2 provides a graphical representation of NetSuite's strengths, weaknesses, opportunities and threats in relation to one another. To create Figure 2, we analyze the strengths and weaknesses that are internal to the vendor and the opportunities and threats that are external to the vendor. For each category, we define a number of characteristics based on parameters such as company or market, product or services, finance, and operations. Each characteristic is examined in terms of the potential impact on the vendor's position in the market if this factor is acted on or ignored in the next 12 to 18 months. These impacts are then rated as high, medium or low to determine a final numbered rating for each quadrant in the figure.
Cloud ERP and Wholesale Distribution l 3
All characteristics within each strength, weakness, opportunity and threat (SWOT) category are considered to have a similar level of impact. This document does not cover political, economic, and social characteristics, which are seen as universal factors affecting all players in the industry.
NetSuite is currently the No. 1 software as a service (SaaS)based, pure-play ERP suite provider targeting wholesale `ÃÌÀLÕÌÀÃ°Ê iÌ-ÕÌiÊ>ÃÊÜ>ÃÊÀiViÌÞÊiÌi`Êʸ >}VÊ +Õ>`À>ÌÊvÀÊ ,*ÊvÀÊ*À`ÕVÌ iÌÀVÊ `>ÀiÌÊ «>ið¸Ê The NetSuite Wholesale Distribution Edition gives companies a single system to run their business, from accounting/ERP,
, Ê>`ÊÛiÌÀÞÊÌÊiiVÌÀVÊViÀViÊiViÀVi®°ÊÌÊ provides customer-facing sales force automation – including quotes and orders – marketing, and customer service processes linked with back-office inventory management, fulfillment and accounting processes. This edition of its business suite leverages the experience and lessons learnt from serving more than 1,000 `ÃÌÀLÕÌÀÊVÕÃÌiÀÃ°Ê i}ÊVÕ`L>Ãi`ÊÕ`iÀÊ>Ê->>-ViÃi]Ê ÌÊÃV>iÃÊivviVÌÛiÞÊÌÊiiÌÊÌ
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ÌÊLÕÃiÃÃÊ function integration – from front office to back office – matched with strong e-commerce capabilities.
Strengths Largest Pure-Play Multitenant SaaS Business Application Provider Focused on the Wholesale Distribution Industry The NetSuite Wholesale Distribution Edition is the only cloud-based integrated business suite specifically targeting wholesale distributors. Pure SaaS vendors offering suite-based ERP solutions are few in number, with NetSuite being the most notable vendor seeing substantial success and traction
4 l Cloud ERP and Wholesale Distribution
figure 1.
SWOT: NetSuite, Wholesale Distribution Industry, 2011
ÊrÊLÕÃiÃÃÊÌi}iVi -6ÊrÊ`i«i`iÌÊÃvÌÜ>ÀiÊÛi`À *>>-ÊrÊ«>ÌvÀÊ>ÃÊ>ÊÃiÀÛVi - ÊrÊÃÕ««ÞÊV
>Ê>>}iiÌ Source: Gartner (June 2011)
(revenue of more than $193 million in 2010). Of all the SaaS ERP suite offerings in the market, NetSuite's is the most developed in terms of functionality and customer count, ÜÌ
ÊVÃiÊÌÊ£ä]äääÊÀ}>â>ÌðÊÌÊvviÀÃÊ>ÊLÀ>`ÊÀ>}iÊ of application modules, including finance and accounting, global consolidation, purchasing, payroll, order management, inventory control, demand and production planning, material resource planning, shop floor control, engineering change VÌÀÊ>`Êi«ÞiiÊ>>}iiÌ]Ê>`Ê«ÀiÌi}À>Ìi`Ê , Ê and e-commerce capabilities, all on the same platform.
figure 2.
Graphical Representation of SWOT: NetSuite, Wholesale Distribution Industry, 2011
Source: Gartner (June 2011) Although most of NetSuite's customers are based in North America, it is increasingly broadening its sales and marketing efforts in Europe and Asia/Pacific. Few would challenge NetSuite's claim to be quicker, more flexible and robust than other cloud-based ERP vendors having general market `ÃÌÀLÕÌ°Ê>ÀÌiÀÊLiiÛiÃÊ "ÃÊÜÊVÀi>Ã}ÞÊLÕ`Ê cloud computing into their strategies as long replacement cycles come to an end, boding well for NetSuite, clearly the most experienced SaaS-based ERP solution provider in the market.
One of NetSuite's key strengths as a cloud-based ERP provider is OneWorld, which is both a global financial and consolidation engine. From a single dashboard, using OneWorld, customers are able to get a single global view of multiple offices across multiple countries using multiple currencies in multiple languages while moving back and forth across them and drilling down to the transaction level. This capability eases the integration of financials across national borders, giving localized business entities their own view of the business while enabling others to roll up all of the numbers to headquarters. A key
Today, OneWorld is in use in more than 80 countries (supporting 14 languages) and can handle sales tax, value>``i`ÊÌ>ÝÊ6/®Ê>`ÊÜÌ
`}ÊÌ>ÝÊV>VÕ>ÌÃ]Ê>ÃÊÜiÊ transaction form customization, if needed, to further meet legal and cultural requirements. Up until the release of OneWorld, NetSuite didn't have much leverage competing >}>ÃÌÊiÃÌ>LÃ
i`Ê«ÀiÃiÃÊ- ÊV«iÌÌÀÃÊÌ>À}iÌ}Ê ÕÌÀi}>Ê}L>ÊLÕÃiÃÃiðÊÊv>VÌ]ÊÌÊÜ>ÃÊÞÊ>vÌiÀÊ the release of OneWorld that larger enterprises and system integrators began to take an interest in NetSuite. OneWorld currently represents 31% of NetSuite's new business bookings as of the first quarter of 2011 and has an average selling price of about $100,000.
Cloud ERP and Wholesale Distribution l 5
Global Financial Engine With Multicompany, Currency and Language Support
iiiÌÊvÊ"i7À`ÊÃÊ-ÕÌi Õ`Ê iVÌ]Ê>Ê«À`ÕVÌÊ>`Ê a service offering that, in essence, bridges the divide between NetSuite data and SAP reporting, enabling general ledgers, revenue information, and so forth, to be consolidated into SAP for aggregated reporting.
Comprehensive Integrated Solution for Small to Midsize Distributors The NetSuite Wholesale Distribution Edition has traditionally targeted smaller to midsize companies and like-sized business units of larger companies. One of NetSuite's key strengths is Ì
>ÌÊÌÊViÃÊ>ÃÊ>ÊV«iÌiÞÊÌi}À>Ìi`Ê«>V>}i°ÊÌÊ`iÿÌÊvÀViÊ VÕÃÌiÀÃÊÌÊ«ÕÀV
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>Ì° After more than 11 years in the market, NetSuite possesses a respectable balance of functional breadth and depth for most - Ê`ÃÌÀLÕÌÀÃÊÜÌ
ÊL>ÃVÊÌÊ`iÀ>ÌiÊÀiµÕÀiiÌÃ]Ê>`ÊiÜÊ partner-delivered capabilities can extend that depth and breadth even further. While "good enough" in many cases (and much better in e-commerce scenarios, in which multiple Web stores are managed needing to be tied back to front- and back-office systems), it has been challenged when complex industryspecific distribution requirements are requested. Generally speaking, however, it remains comprehensive; sales leads can be converted to orders, orders to shipments and shipments to ÀiÛiÕi°ÊÌÃÊÛiÌÀÞÊ>>}iiÌÊVÕ`iÃÊ`i>`L>Ãi`Ê stock replenishment, advanced bin and lot management, and Ài>ÌiÊÛiÌÀÞÊÌÀ>V}°ÊÌÊÃÕ««ÀÌÃÊÌi}À>Ìi`ÊÃ
««}Ê>`Ê order fulfillment for multiple channels, and it can handle partial ship and drop-shipping. Returns management is available, as is serialization, lot tracking and landed costs. Distribution businesses can also use NetSuite for product packaging, demand planning, bin and lot tracking, assembly creation, and pickpack-and-ship processes.
6 l Cloud ERP and Wholesale Distribution
Role-Based, Tailorable, User Interface and Dashboards With Real-Time BI NetSuite's dashboards are the showpiece of its ERP business suite. These dashboards are closely aligned with the SuiteAnalytics module (comes as part of the standard product) Ì
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iÊ`>Ì>L>ÃiÊ>VÌÃÊ>ÃÊÌÃÊ own data repository, so that all users see a single version of the truth. NetSuite's dashboards are role-tailorable and can ÃÕ««ÀÌÊÕÌ«iÊiÞÊ«iÀvÀ>ViÊ`V>ÌÀÃÊ *®]ÊÌÀi`Ê}À>«
ÃÊ >`ÊVw}ÕÀ>LiÊ«iÀvÀ>ViÊÃVÀiV>À`Ã°Ê *ÃÊV>ÊÃÕ««ÀÌÊ key variances and period-on-period trends and may even be displayed as threshold-type gauges. Any view of information across the application can be embedded in a dashboard, and each user is able to manage his or her own custom views
without administrator intervention. Dashboards are typically configured by selecting attributes from the repository and then dragging and dropping them, as well as any measurements required, to the user work space. Users can also employ NetSuite's saved search functionality to access information on, for example, top-selling products, the number of support cases in a queue, or, customers who have overdue invoices. Finally, calendars, tasks, reminders and even real-time RSS feeds can also be tagged to a NetSuite user's dashboard. Maturing PaaS for Development, Integration, Customization and Workflow iÞ`ÊLi}Ê>ÊLÕÃiÃÃÊ>««V>ÌÊ«ÀÛ`iÀ]Ê iÌ-ÕÌiÊ>ÃÊ offers a development platform that partners and customers can use to extend NetSuite functionality, integrate third-party software or even build applications. Partners that embed iÌ-ÕÌi¿ÃÊ ,*]Ê , Ê>`ÉÀÊiViÀViÊV«iÌÃÊÊÌ
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iÊ multitenant model, such as NetSuite, offer configuration and personalization capabilities rather than customization to end users. NetSuite is no exception, but additionally provides a rich «>ÌvÀÊvÀÊ`iÛi«iÀÃÊ>ÃÊÜi°Ê1ÃiÀÃÊV>Êi«ÞÊ-ÕÌi Õ`iÀÊ and SuiteFlow, a set of easy-to-use, point-and-click tools, to leverage a graphical interface for personalization, configuration and tailoring of basic workflows. These tools allow them to configure and personalize dashboards and tweak basic things, such as changes to order forms and expense reporting notification workflows in which they have permission, without ÜÀÌ}ÊV`i°Ê-6Ã]ÊVÃÕÌ>ÌÃÊ>`ÊÛ>Õi>``i`ÊÀiÃiiÀÃÊ 6,îÊiÛiÀ>}iÊÌ
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in the customization, testing and debugging of applications; SuiteScript, a JavaScript-based language supporting branching }VÊ>`ÊÌiL>Ãi`Ê`iVÃÊÌÀiiÃÆÊ>`Ê-ÕÌi Õ`iÀ]ÊÜ
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ÊÃÊ used for packaging and integrating newly created applications with NetSuite. NetSuite's SuiteTalk – the vendor's own SOAPbased Web services – can integrate with any exposed third-party Web services. NetSuite's architecture also provides a layer of abstraction between the core application and any customizations or extensions that are made, ensuring they can automatically carry forward to newer versions of the business suite without intervention.
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iÊvÕVÌ>ÌÞÊ}>«Ê with SAP, Oracle and other established ERP providers seeking to address two-tier opportunities while competing more aggressively for upmarket opportunities, will depend on the efforts of a strong NetSuite partner community. Fortunately, this has been one of its strong suits during the past few years.
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During the past few years, NetSuite has recruited a number vÊ>``Ì>Ê`ÃÌÀLÕÌÊ`ÕÃÌÀÞÀiiÛ>ÌÊ-6ÃÊÌÊÌÃÊ«>ÀÌiÀÊ network, including: UÊ Ó >ÌiÜ>Þ° iÌÊ}L>ÊiiVÌÀVÊ`>Ì>ÊÌiÀV
>}iÊQ RÊ provider) UÊ >ÃÌÊvi`iÀ>ÊV«>Vi®
UÊ 6>}ÝÊÛiÌÀÞÊ«>}Ê>`Ê«Ìâ>Ì® UÊ 6iÀÌV>Ê-ÕÌÃÊÃiÀÛViÊ>>}iiÌÊÃÕÌ® NetSuite's platform plans reflect what is becoming a natural progression for SaaS vendors, because the ability to offer strong application extensibility and a wide variety of complementary products gives them the potential to capture a larger percentage of VÕÃÌiÀÿÊ/Êëi`}°Ê>ÀÌiÀÊ
>ÃÊÃiiÊ>VÌÛiÊ«>ÀÌiÀ}ÊÌiÀiÃÌÊ from third-party solution providers during the past few years with respect to market-leading cloud-based solutions. This bodes well for NetSuite, and we expect that the platform will continue to be improved in multiple ways over time, including support for teamL>Ãi`Ê`iÛi«iÌÊ>`Ê>Ê>««V>ÌÊ«À}À>}ÊÌiÀv>ViÊ*®Ê vÀÊ>>ÞÌVÃÊÌ
>ÌÊÜÊ>iÊÌÊiÛiÊÀiÊ>ÌÌÀ>VÌÛiÊÌÊ-6ð Strong Marketing Compensates for Size When it comes to marketing, NetSuite always has and continues to maintain a reputation for "outpunching its weight." As much as promoting its own capabilities, its guerrilla marketing technique include lots of swagger and an almost }iivÕÊÜ}iÃÃÊÌÊ}ÊvÀÊÌ
iÊÕ}Õ>ÀÊvÊÌÃÊV«iÌÌÀðÊÊ the past, NetSuite's marketing team has projected "its edginess"
Cloud ERP and Wholesale Distribution l 7
As mentioned, its development platform is very attractive and is ÞÊ}iÌÌ}ÊLiÌÌiÀ°ÊvÊ>Ê-6ÊV
ÃiÃÊÌÊ`iÛi«ÊÌÃÊ>««V>ÌÃÊ on NetSuite's platform, ultimately provisioning it as part of the -ÕÌi Õ`ÊiVÃÞÃÌiÊqÊÌ
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iÃiÛiÃÊ>ÀiÊV>i`Ê SuiteApps – the applications are then immediately deployable on NetSuite's multitenant, on-demand architecture, minimizing the startup costs of traditional on-premises software. These partners can also take advantage of a range of technical product management, collaboration, co-marketing and lead generation «À}À>ÃÊ>`ÊÃiÀÛViðÊÀÊiÝ>«i]Êi â /Ê-ÕÌÃ]Ê>Ê close NetSuite partner, has recently done this itself and now has become the vendor's de facto advanced warehouse management solution. That said, others can simply become solution partners by integrating with NetSuite. SmartTurn from RedPrairie, for example, recently allied with NetSuite, which enhances NetSuite's own inventory management capabilities.
by pulling off pranks, such as the "SAP for the Rest of Us Party" during SAP's own annual conference. Today that tradition gets V>ÀÀi`ÊÊÊvÀÕÃ]ÊÃÕV
Ê>ÃÊÌÃʸ>ÀL>ÊÃÌÌÕÌiÊvÀÊ ÕÃiÃÃ]¸Ê allowing it to focus on how NetSuite "detangles" the hairball that companies develop when using complex ERP software.
8 l Cloud ERP and Wholesale Distribution
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ÊiÀV>®ÊqÊvviÀ}Ê>Ê>ÌÌÀ>VÌÛi]ÊvÕÊVÕÌÕÀiÊ that harkens back to days gone by, and that one is not likely to w`ÊÌ`>ÞÊ>ÌÊ-*]ÊvÀ]Ê"À>ViÊ>`Ê VÀÃvÌ° Recently, NetSuite sponsored its first user conference, drawing nearly 2,000 people to SuiteWorld 2011 in San Francisco. The event was a remarkably well-run effort, given the resources available to a company with $193 million in annual revenue. As it matures and moves up market, NetSuite will face a balancing >VÌ\ÊÌÊÜÊii`ÊÌÊ>Ì>ÊÌÃÊ>ÀiÌ}ÊÛÕiÊ>`ÊÌi>VÌÞÊ while toning down the number of confrontational attacks Õi>Ã
i`Ê`ÀiVÌÞÊ>}>ÃÌÊV«iÌÌÀðÊÌiÀiÃÌ}Þ]ÊiÊÀ>ÀiÞÊ hears any negative competitive mention of Oracle by NetSuite qÊÌ
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"Ê >ÀÀÞÊ ÃÊÜÃÊi>ÀÞÊxx¯ÊvÊ NetSuite stock. Regardless, as NetSuite moves up market, it will likely find a business culture favoring a higher sense of decorum in its dealings and associations. We fully expect that NetSuite will adapt to these circumstances, spending more time communicating its strengths versus dwelling on the perceived weaknesses of its competitors – allowing for an occasional ëÀÌi`Ê>LÊÕÃÌÊÌÊii«ÊÌ
iÊ
iÃÌ°Ê iÞ`ÊÌ
Ã]Ê iÌ-ÕÌiÊ continues using its marketing and communications vehicles very effectively, coming across as an intelligent, quality company that can get things done while having lots of fun along the way.
Weaknesses Lacks Mature SCM Capabilities Compatible With Advanced Midmarket and Enterprise-Class Distribution Environments ÊÌ
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iÊ sophistication needed to effectively manage more complex inventory and distribution processes. While NetSuite has ÀiViÌÞÊ>``i`ÊVÀÌV>Ê- ÊV>«>LÌiÃ]Ê«À>ÀÞÊ`iÛi«i`Ê
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>ÌÊ is as rich as many other established on-premises ERP vendors targeting midmarket and enterprise-class wholesale distributors. As it proceeds toward its stated goal to move Õ«Ê>ÀiÌ]ÊiÛiÊiÜÞÊÌi`Ê«>ÀÌiÀ`iÛi«i`Ê- Ê solutions that address demand planning (from JustEnough) >`Ê>`Û>Vi`ÊÜ>Ài
ÕÃiÊ>>}iiÌÊvÀÊi â /®]ÊÜ
iÊ a significant improvement, could be considered only "good iÕ}
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ÌÞÊÌi}À>Ìi`Ê qÊi â /¿ÃÊÃÕÌÊÃÊ>VÌÕ>ÞÊLÕÌÊÊ-ÕÌi Õ`ÊqÊÌ
iÞÊ>ÀiÊ iÌ
iÀÊ`iÛi«i`ÊLÞÊÀÊÜi`ÊLÞÊ iÌ-ÕÌi°ÊiVi]ÊÜ
iÊ one would presume these solutions would remain in lock step with NetSuite and its evolving customer requirements, there are no guarantees. While the products themselves offer a good starting point for extended functionality, it's just too early to tell how successful these products will be. NetSuite also lacks supplier relationship management, another important area for distributors. Well-matched to the needs of companies with basic needs, NetSuite, on its own, lacks the richness and depth of more-established vendors offering, for example, comprehensive supplier performance management (vendor scorecarding) and strategic sourcing. NetSuite offers a third-party solution from partner Enporion, but this adds yet another outside solution to the mix. NetSuite also has only loosely coupled partnerships in the area of transportation >>}iiÌÊÃÞÃÌiÃÊ/ -îÊ>`Ê}L>ÊÌÀ>`iÊ>>}iiÌ°Ê 7
iÊLÌ
Ê>ÀiÊÌÊ>ÃÊVÀÌV>ÊÌÊ- ÃÊqÊÃ>iÀÊLÕÃiÃÃÊÕÌÃÊ typically don't have large fleets to manage or ship goods to and through multiple global locations – they will likely grow in importance as NetSuite moves further up into the enterprise. Gartner is aware that NetSuite is trying to quickly strengthen ÌÃÊ- ÊvÌ«ÀÌ°Ê/
iÊÕiÀÕÃÊ«À`ÕVÌÃÊ>`Ê«>ÀÌiÀÃ
«ÃÊ introduced recently point to the fact that it is aware of Ì
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i>`°ÊÊ many cases, NetSuite and its partner solutions may be perfectly sufficient for distribution businesses that have only moderately complex industry-specific and subsector ÀiµÕÀiiÌðÊiVi]ÊÜiÊ>ÀiÊiVÕÀ>}i`ÊLÞÊÌ
iÊ«À}ÀiÃÃÊ – and NetSuite should be commended for efforts to date. >ÀÌiÀÊiÝ«iVÌÃÊÌ
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iÛiÊ independent market awareness and credibility and continue to scale functionality, NetSuite's weaknesses – both real and perceived—will convert to strengths.
Lacks Some Important Advanced Procurement and Sales Process Optimization Features
Product Not Well-Recognized in Wholesale and Distribution Industry Compared With Midmarket Competitors
ÛiÌÀÞÊ«>}]Ê«ÕÀV
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iÊVÀÕV>Ê activities for many businesses, are of central importance to distributors. NetSuite does a decent job serving most of the needs of small to midsize distributors requiring streamlined order-to-cash and procure-to-pay processing, such as eliminating double entry and unnecessary customer record ÀiVV>Ì°ÊÊv>VÌ]ÊÌÊ>ÃÊvviÀÃÊL>ÃVÊÕÌV
>iÊÀiÌ>Ê sales capabilities (for example, checking inventory across many stores), and its e-commerce shopping cart may be the best integrated solution found across any SaaS-based ERP solution – but larger distributors with specialized needs may still find that NetSuite falls short of many requirements without either extensive customization or the purchasing of a cacophony of third-party solutions or modules.
NetSuite is distinguished among distributors primarily because it is the only generally available SaaS business suite targeting their market. While NetSuite has upmarket intentions, with few exceptions, most of its distribution customers are in units with iÃÃÊÌ
>Êf£ääÊÊÊ>Õ>ÊÀiÛiÕi°ÊÌÊViÀÌ>ÞÊÃ
Õ`ÊLiÊ considered by most distributors in that range as an appropriate ÃÕÌ°Ê iÞ`ÊÌ
>Ì]Ê
ÜiÛiÀ]ÊÌÊÃÊÌÊ}iiÀ>ÞÊÜ]Ê recognized or understood as being able to support the needs of the broader category of central midmarket to enterprise-class V«>iÃÊÊÌ
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Ê `ÃÌÀLÕÌViÌÀVÊvÀÊ ,*Ê-8°iÌiÀ«ÀÃiÊ>`ÊÜÊÌ
iÊiÜÞÊ >VµÕÀi`Ê >ÜÃÊ ÎÊQÜ
V
Ê>ÃÊÃÕ««ÀÌÃÊ>ÊÛ>ÀiÌÞÊvÊ>À}iÊ `ÃÌÀLÕÌÊ`ÛÃÃÊvÊ}L>ÊiÌiÀ«ÀÃiÃR®]Ê>ÃÊÜiÊ>ÃÊ-*Ê>`Ê Oracle, despite any other faults they might have, are all seen as being much more competitive in the market when it comes to meeting industrial-strength distribution functionality and industry subsegment requirements.
The point is, as a vendor moves upward in wholesale distribution, the "devil is in the details." Richer requirements are inevitable as they face increasingly complex business scenarios. NetSuite has improved tremendously during the past few years, and it will have to keep improving to maintain the competitive leverage needed to gain the confidence of larger enterprises.
NetSuite will have to work very hard over time as it evolves Õ«Ü>À`Ê>`Ê>``ÀiÃÃiÃÊvÕVÌ>ÌÞÊ}>«Ã°ÊÌÊ
>ÃÊ>ÞÊÌ
}ÃÊ going for it, including cloud momentum in the current economy and its status as the most mature provider of a SaaS-based ERP environment. When it comes to industry-specific functionality that scales up market to more complex environments, however, there remains quite a bit of room for improvement. Lacks On-Premises Alternatives/Capabilities While it is true that many prospects are running from their costly, hard-to-maintain on-premises ERP environments into NetSuite's open arms, just as many prospects are looking for an application platform that provides maximum on-premises and off-premises deployment flexibility. NetSuite probably doesn't see many of these scenarios, but they exist. This is simply because many enterprises seeking a Tier 2 deployment layer want maximum deployment flexibility to meet the requirements at hand based on any number of variables: size, location, complexity, maturity, future disposition of the business ÕÌ]Ê>`ÊÃÊvÀÌ
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Ê>ÃÊ , Ê>ÃÊ>ÊVÕ`ÞÊ solution may be tolerated, back-office systems offering just a cloud deployment option could eventually be limited to those businesses with specific sets of requirements.
Cloud ERP and Wholesale Distribution l 9
Support for things such as chargebacks and special pricing agreements, complex inventory allocations, order processing that takes into account date-sensitive pricing (for promotions), and configurator options for orders that have many features and options, are simply not as rich in NetSuite as they could be. Additional areas that could be strengthened include adding alerts for whenever an order price or multiplier has been edited, or, adding the ability to make automated substitutions for order iÊÌiÃÊÌ
>ÌÊ>ÀiÊÕÌÊvÊÃÌV°Ê ÛiÀÃiÞ]ÊÌ
iÊÃÞÃÌiÊ}
ÌÊ automatically suggest other products that could complement an À`iÀ°Ê >ÞÊ`ÃÌÀLÕÌÀÃÊ>ÃÊÜ>ÌÊÌ
iÀÊÃÞÃÌiÃÊÌÊ>ÕÌ>ÌV>ÞÊ calculate profitability in real time for each line item on a customer quote or order based on rebate agreements in place LÞÊiÌ
iÀÊÌ
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>ÃiÀÊÀÊÌ
iÃiÛiÃ°Ê ÕÃÌiÀÃÊ>ÀiÊ>ÃÊ asking help with pricing optimization and for customer-specific complex pricing that takes advantage of a range of criteria: formulas, breakpoints, units of measure, contracts, rebates and promotional pricing. Others want support for maintaining a number of distinct order fulfillment paths, based on payment method, stock availability and other variables.
Up until a few years ago, NetSuite was the only solution provider offering true multitenant ERP SaaS. SAP and many Ì
iÀÃÊ
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iÀÊiÌiÀi`ÊÀÊÃÊÜÊiÌiÀÊÌ
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ÊÌÃÊiÜÊ ÕÃiÃÃÊ Þ iÃ}Ê Þ ®ÊÜÊ become NetSuite's first worthy global competitor having both the necessary marketing horsepower and an existing customer base to sell into. SAP also has other on-premises solutions it can offer distribution enterprises, but more importantly, it's likely that its architecture will eventually support a flagship solution set that can be deployed anyway a customer wants it – from multitenant to hosting and on-premises. Oracle's Fusion ÕÌ>ÌiÞÊ«ÀÃiÃÊÌ
iÊÃ>iÊÌ
}°Ê «VÀ]Ê VÀÃvÌ]ÊvÀÊ>`Ê others are quickly moving in the same direction, hoping to offer solutions that can be deployed the way customers wish. The only constraint on the success of these competitors will be their relative immaturity and lack of experience scaling their products, sales, marketing and support to deliver SaaS-based offerings in volume. That said, when the day arrives that they can offer maximum deployment flexibility, all other things being the same or better than NetSuite, NetSuite may have to adapt itself or accept the consequences.
10 l Cloud ERP and Wholesale Distribution
Lacks a Strong, Emphasized Reseller Channel iÌ-ÕÌiÊ
>ÃÊ`iÊÜiÊÊ`iÛi«}Ê-6Ê«>ÀÌiÀÃ]ÊLÕÌÊ}ÛiÊÌÃÊ longtime direct sales orientation, it could do better recruiting, >>}}Ê>`ÊiVÕÀ>}}ÊÀiÃiiÀÃ°Ê >ÞÊi>ÀÞÊ->>-Ê>`ÊVÕ`Ê companies, such as NetSuite, have grown by developing a direct sales culture. The problem is, once that culture is entrenched, it's hard to dislodge. Not long ago in NetSuite's publicly filed 10-K report; it stated, "We generate sales directly through our sales team and, to a lesser extent, indirectly through channel partners." NetSuite lost its largest reseller at the time, Skyytek, due to a mutually agreed on separation in which both decided to ¸Ì>iÊÌ
iÀÊLÕÃiÃÃiÃÊÊ`vviÀiÌÊ`ÀiVÌð¸ÊvÊ iÌ-ÕÌiÊ
«iÃÊ ÌÊVÌÕiÊÌÊ}ÀÜÊÌÃÊL>ÃiÊvÊ- ÃÊ}L>Þ]ÊÌÊÜÊii`ÊÌÊ
ÀiÊ more sales staff or do a much better job with its reseller channel. ÃÊÜÌ
Ê>ÞÊÛi`À]Ê iÌ-ÕÌiÊV>¿ÌÊ}iÌÊÌÊ- Ê`i>ÃÊÌÊ`iÿÌÊ know about, and after more than 11 years in business, it doesn't
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Ê>ÃÊ VÀÃvÌÊ Þ>VÃ]Ê->}iÊ>`ÊiÛiÊ-*Ê>ÀiÊ in a better position with respect to reseller capability. Recent activity suggests that things may be changing due to NetSuite’s upmarket and global targets, but excelling at constructing and managing a reseller channel requires persistence, commitment and a track record established over
Ìi°Ê- Ê ,*ÊÃ>iÃÊÀi>ÃÊ>ÊÕLiÀÃÊ}>i]ÊÜÌ
ÊV>ʸviiÌÊ on the street" needed to service clients that often demand as much help as larger businesses. To NetSuite's credit, two to three years ago, channel sales were only 20% of revenue. Today, it is nearing 40%, but one wonders whether those sales are dispersed across its reseller base or come from a few partners that have secured Ì
iÊ>À}iÀÊ`i>ÃÊ iÌ-ÕÌiÊëi>ÃÊv°ÊÊ`}ÊÀiÃi>ÀV
ÊvÀÊ this report, we couldn't even find a list of NetSuite reselling partners on its website. NetSuite recently unveiled "NetSuite SuiteStart Service," a channel incentive program that gives solution providers 100% of the first year's margins, as well as free training and warm leads to prime their sales engines. Additionally, a global enablement team led out of NetSuite's vwViÊÊ/ÀÌ]Ê >>`>]ÊÃÊÜÊ`ÀÛ}Ê>ÊÀiÊÃÌ>`>À`âi`Ê partner onboarding process. All of this, points to renewed Û}ÀÊÊÌ
iÊ«>ÀÌÊvÊ iÌ-ÕÌiÊÊÌ>À}iÌ}ÊÌÊÕÃÌÊ-6ÃÊLÕÌÊ>ÃÊ 6,ðÊ/
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iÀÊivvÀÌÃÊÊ>Ê- ÊÃ>iÃÊV
>iÊÜÊ likely continue to provide better long-term opportunities for resellers than NetSuite. While NetSuite has reinvigorated ivvÀÌÃÊÌÊLÃÌiÀÊ>`Ê«ÀÛiÊÌÃÊ6,ÊV
>iÊ`ÕÀ}ÊÌ
iÊ«>ÃÌÊ six to eight months, it remains to be seen how spirited this commitment will last over the longer term.
Opportunities Move Up Market by Aggressively Pursuing a Two-Tier Strategy Targeting Divisions of Multinational Corporations iÞ`ÊÜÀ}ÊÜÌ
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Ê>ÃÊVViÌÕÀi]Ê iÌ-ÕÌiÊ
>ÃÊ the opportunity, noted earlier, to further enrich its solutions and strengthen its internal operations to support the requirements of larger divisions within global enterprises. Gartner is clearly seeing more enterprises considering moving applications to the VÕ`]ÊiëiV>ÞÊ}ÛiÊÌ
iÊÃ
vÌÊÊ/Ê>`ÊVÀ«À>ÌiÊëi`}Ê strategy caused by the recent tough economy. As the recovery begins to take hold and divisions begin replacing legacy ERP systems, they're likely to find the cost and deployment speed vÊ->>-L>Ãi`Ê ,*ÊÛiÀÞÊV«i}°ÊÊÌÜÌiÀÊÃÌÀ>Ìi}iÃ]ÊÊ which smaller systems are used to manage regions, countries or product divisions, NetSuite OneWorld could be deployed in a subsidiary or in offices around the world in which SAP or Oracle is running at headquarters. NetSuite could become the ideal satellite solution for midsize and smaller divisions of large companies that don't want to inherit or operate the same /iÀÊ£Ê>««V>ÌÃÊ>ÃÊÌ
iÀÊ«>ÀiÌÊV«>iÃ°Ê iÜÃi]Ê>ÞÊ traditional divisions of large enterprises running legacy versions
of SAP or Oracle have learned over time that, in some cases, they don't need the level of complex processing that justifies the expense of an on-premises system.
opportunity in developing its own industry footprint, with the distinction of doing so via the cloud as opposed to today's onpremises, traditional applications.
Recently introduced NetSuite Unlimited gets NetSuite started moving in this direction by offering an unlimited number of supported users (but starting at 500 users), all available modules, support for an unlimited amount of global subsidiaries, unlimited number of partner-provided SuiteApps, and unlimited customization support and data storage. NetSuite has also begun to roll out Oracle's Exadata Database >V
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ÊÜiÊV>ÊiÝ«iVÌÊÌÊ to end up supporting larger NetSuite customers' application instances. Finally, it has formed integration partnerships with V«>iÃÊÃÕV
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Ê`>Ì>Ê transfers between headquarters and subsidiaries in two-tier ERP scenarios.
Continue Picking Up Market Share From SMBs Seeking to Replace Legacy Applications
VÀÃvÌ]Ê «VÀÊ>`ÊÌ
iÀÊ ,*ÊÛi`ÀÃÊ>ÀiÊ>ÃÊÌ>À}iÌ}ÊÌÜ tier scenarios, so NetSuite won't have this opportunity to itself. As stated earlier, some of these competitors are functionally superior when supporting the wholesale distribution industry. That said, cloud-based solutions remain very attractive in a range of situations, and if NetSuite's cloud experience and maturity can be married to an ever-expanding functional footprint, the rewards over time could be substantial. Improve Wholesale Distribution Industry's Functional Footprint
Ì
Ê`i«i`iÌÊ- ÃÊ>`Ê}L>Ê`ÛÃÃÊvÊ>À}iÊ enterprises are now seeking scalable, easily deployed ERP solutions that don't require a multitude of partner extensions ÀÊVÕÃÌâ>ÌÃÊÌÊ
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ÀâÌ>Ê- Ê>`ÊiÌiÀ«ÀÃiV>ÃÃÊ ,*ÊÃÕÌÃ]Ê securing a place for their offerings, whereby a business may have many industry-specific demands but doesn't require the scale of an SAP or Oracle deployment. NetSuite has a similar
While ripping out and replacing an ERP system is not an option vÀÊ>ÞÊLÕÃiÃÃiÃ]Ê- ÃÊÌ
>ÌÊ>ÀiÊÀÕ}Êi}>VÞÊ>««V>ÌÃÊ dating back between 10 and 15 years are likely ready for a Ài«>ViiÌ°Ê>Û}Ê>Êi>`iÀÃ
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iÊ->>-Ê ,*Ê business suite market, NetSuite can offer a strong alternative for smaller companies that are unable to suffer through painful deployments and upgrades, or are unable afford a large capital expense in a tight economy. As it seeks to move up market, NetSuite should not shift its vVÕÃÊ>Ü>ÞÊvÀÊÃiÀÛ}Ê`i«i`iÌÊ- ðÊÌÊ>ÃÊÃ
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Ê>ÃÊ VÀÃvÌ]Ê «VÀÊ>`Ê Sage – all actively planning their own cloud launches – begin to gain traction, before turning up the heat up on its own efforts. Reinvigorate Emphasized Marketing of CRM as "Significant" Part of the Platform ¿ÃÊÃÌÌÕÌiÊvÀÊ ÕÃiÃÃÊ6>ÕiÊ``Ê>ÊÃÕÀÛiÞÊvÊ£]xääÊ
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Cloud ERP and Wholesale Distribution l 11
Wholesale distribution is one of NetSuite's six targeted vertical markets. While its Wholesale Distribution Edition has evolved each year, adding capabilities relevant to industry requirements, there remains many opportunities to deliver even-richer industry-oriented capabilities, including addressing the needs of specific distribution subsectors. Doing so will help NetSuite be more successful as it moves further up market.
NetSuite also has a prime opportunity to further strengthen >`ÊiÝ«>`ÊÌÃÊÀi>V
Ê>}ÊÌÃÊÌÀ>`Ì>ÊL>ÃiÊvÊ- ðÊÃÊ mentioned, the recent economic upheaval has caused businesses of all sizes to re-evaluate the traditional ways they've deployed ÌiV
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ÜÃÊ a 50% increase in businesses considering SaaS.
ÃÌ>ÀÌi`ÊÕÌÊ>ÃÊ>Ê , ÊiÛ>Õ>ÌÊvÌiÊi>`ÃÊÌÊ>Ê ,*ÊÃ>iÊ>`Ê vice versa. Fortunately, NetSuite comes complete with ERP and
, ÊÌ}
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iÊÌÊÜÊÃÕ««ÀÌÃÊ ERP options, it is not particularly noted in that regard. NetSuite should continue to promote and stress the importance of having a tightly integrated combined offering, with specific emphasis on Ì
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>ÌÊ NetSuite has recently toned down its marketing efforts related to
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iÊÃÌÊÛÌ>Ê«>ÀÌÃÊ that it is offering. At the recent SuiteWorld 2011 conference, many noticed that Ì
iÀiÊÜiÀiÊviÜÊ>ÕViiÌÃÊ>`ÊiÌÃÊvÊ , ÊÊÌ
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iÊvÀÌ]ÊiëiV>ÞÊÊ tough economic times. Out-Innovate Competitors Trying to Leverage NextGeneration Technologies
12 l Cloud ERP and Wholesale Distribution
The pace of business change continues to quicken, as does the evolution of new technologies trying to keep pace with it. The ability of a solution provider to quickly embrace and find the proper applications for new technologies is rapidly becoming a competitive differentiator. Arguably, pure-play cloud solution providers have a foot up on traditional vendors, because they are unencumbered by the need to maintain faith with large on-premises installed bases often tied to outdated versions of Ì
iÀÊÃvÌÜ>Ài°Ê Õ`Ê«ÀÛ`iÀÃÊV>Ê«ÀÛÃÊV>«>LÌiÃÊÀiÊ quickly and get the instant feedback that they need to refine and improve capabilities. Going forward, NetSuite will continue to have a great opportunity to showcase leadership in business suite innovation. One example of this is NetSuite's newly announced SuiteSocial, which leverages the current trend in social networks. SuiteSocial enables microblogs and activity streams to be integrated into its applications, as well as leverage integration with Yammer to allow Facebook-like collaboration and notification of activity and events across the enterprise as well as partners, suppliers and customers.
If Eventually Neutralized: Merge With Oracle or Another Vendor vÊiÛiÀÊ iÌ-ÕÌiÊÀi>V
iÃÊ>Ê«ÌÊÊÜ
V
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ÊÃÊÀ>`V>ÞÊ impeded because of lack of scale, or, if the competitive forces lined up against it become too difficult to overcome (such as -*ÊÜÌ
Ê ÕÃiÃÃÊ Þ iÃ}®]Ê iÌ-ÕÌiÊVÕ`Ê«ÕÌÊÌÃivÊÊ>Ê position to be acquired. Of course, a company such as Google might take matters into its own hands for its own purposes, launching a unilateral bid. Doing that, however, would likely ÀiµÕÀiÊëiV>Ê`ëiÃ>ÌÊLÞÊ >ÀÀÞÊ Ã¿ÃÊv>Þ]ÊÜ
Ê controls more than half of NetSuite. NetSuite's more likely options would include being brought back into the fold by Oracle to match up with SAP, or merge with salesforce.com, which, even with portfolio overlaps, would bring together the two most notable players in SaaSL>Ãi`Ê ,*Ê>`Ê , ° Either opportunity, if they can be considered that, is unlikely to necessitate consideration, unless NetSuite finds itself held back by the aforementioned constraints. While merging with Oracle or another vendor is defined as an opportunity, buyers should also be cognizant of NetSuite's close ÌiÃÊÌÊ"À>Vi°ÊvÊ iÌ-ÕÌiÊÜiÀiÊÌÊiÀ}iÊL>VÊÌÊ"À>Vi]ÊÌ
iÊ Ì`>Þ¿ÃÊVÕÃÌiÀÃÊVÕ`ÊiÛiÌÕ>ÞÊLiÊLÕÞ}ÊÌÊ"À>Vi°ÊÊ many cases, it was the Oracle-type business culture that they were trying to flee. NetSuite has to remain cognizant of this sensibility if the option is ever evaluated.
Threats Vendors Eventually Offering Strong On-Premises and OffPremises Applications While NetSuite took the early ground in SaaS-based ERP, many other well-established business suite providers are quickly mobilizing to enter the cloud. This could threaten NetSuite, particularly as it seeks to move upstream to larger businesses. As noted earlier, large enterprises considering a Tier 2 strategy might consider vendors providing maximum deployment flexibility while also meeting a range of business and industry requirements. Additionally, Gartner research has identified that SaaS turns out to be no less expensive or risky than onpremises, perpetual licensing over the midterm to long term.
Ê iÌ-ÕÌi¿ÃÊv>ÛÀ]Ê
ÜiÛiÀ]ÊÃÊÌ
>ÌÊÌ
iÊVÃÌÃÊvÊiÌiÀ}ÊÌ
iÊ->>-Ê business application market are quite sizable for technology providers, including data center infrastructure investments, temporary revenue reduction as a result of product cannibalization that might occur, and higher initial marketing and sales expenses. Ì¿ÃÊ>ÃÊ`vwVÕÌÊÌÊëÞÊÃÜÌV
ÊÌÊ>ÊiÜÊLÕÃiÃÃÊ`iÊÜ
iÊ all internal organizations, systems and processes have been geared «À>ÀÞÊÌÜ>À`ÊÃi}Ê«ÀiÃiÃÊ«iÀ«iÌÕ>ÊÃvÌÜ>Ài°Ê iV>ÕÃiÊvÊ the hurdles, we expect many traditional providers won't be able to >iÊÌ
iÊÌÀ>ÃÌ°Ê ÕÌÊÌ
iÊ>À}iÃÌÊ>`ÊÃÌÊ««Õ>ÀÊÊÜ]Ê>`ÊÌ
iÞÊ will ultimately make the market more challenging for NetSuite. VÀÃvÌÊÃÊVÕÀÀiÌÞÊÛ}ÊÌÃÊ Þ>VÃÊ ,*Ê>««V>ÌÃÊÌÊ the Azure platform, which will enable its customers, in the words vÊ VÀÃvÌÊ
"Ê-ÌiÛiÊ >iÀ¿ÃÊÜÀ`Ã]ÊÌʸÛiÊÌÊÌ
iÊVÕ`Ê on their own terms." The first Dynamics ERP solution to get the cloud treatment – supporting multitenancy – will be Dynamics 6ÊÊÓä£Ó]ÊLÕÌÊ VÀÃvÌ¿ÃÊÌ
iÀÊ ,*ÊÃÕÌÃÊÜʵÕVÞÊ vÜ°Ê VÀÃvÌÊiÛiÊ«ÀÃiÃÊ>ÊiÜÊVw}ÕÀ>ÌÀÊÌÊvÀÊ Þ>VÃÊ8ÊÓä£ÓÊ>Û>>LiÊÊÌ
iÊVÕ`ÊÊÓä£Î®ÊÌ
>ÌÊÌÊÃÌ>ÌiÃÊ will provide enormous power for tweaking the software without ÜÀÌ}ÊV`i°Ê VÀÃvÌÊÃÊiÜÃiÊ`ÃVÕÃÃ}ÊÜÌ
Ê«>ÀÌiÀÃÊ
ÜÊ they can profit from the Azure deployment model by selling "cloud-enabled" vertical applications, services and add-ons. We LiiÛiÊ VÀÃvÌ¿ÃÊiÝ«iÀiViÊÊ`iÛiÀ}Ê , Ê"iÊ>ÌÊÃV>iÊ Ã
Õ`Ê
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>ÌÊ VÀÃvÌÊ
>ÃÊi>ÀÞÊ>ÃÊ>ÞÊ«>ÀÌiÀÃÊ as NetSuite does customers, only bolstering its opportunity.
vÊ iÌ-ÕÌi¿ÃÊVÕ`Ê>`Û>Ì>}iÊÃÊ}i]ÊÌ
iÊ«ÃÃLÌÞÊvÊiÕÌÀ>â}Ê its current advantage certainly becomes much more considerable, especially if competitive offerings offer richer functionality and a user experience as compelling as it currently offers.
While NetSuite holds SaaS-based ERP leadership and is VÌÕ>ÞÊLi}Ê«ÀÛi`]Ê>ÞÊÌ
iÀÊ- Ê ,*ÊÛi`ÀÃÊ provide point tools and solutions that are functionally richer when it comes to serving the needs of wholesale distributors. Apart from NetSuite being a cloud ERP suite solution provider ÜÌ
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ÌÞÊÌi}À>Ìi`Ê , Ê>`ÊiViÀVi]ÊÌÃÊvviÀ}ÊÜÌ
Ê respect to the complexity of upmarket wholesale distribution isn't extremely compelling on its own merits alone. NetSuite has even itself admitted being challenged with respect to - ÊqÊÀiViÌÊ«>ÀÌiÀÊ>``ÃÊvÀÊÕÃÌÊ Õ}
Ê>`Êi â /Ê notwithstanding. As noted earlier, there are other areas, such as configuration management, supplier relationship management and transportation management, which are either Õ`iÀ`iÛi«i`ÊÀÊ
>`i`ÊÃiÞÊÛ>Ê«>ÀÌiÀÃ
«Ã°Ê iÜÃi]Ê there are areas in which NetSuite's processing depth could be improved. For a good functional comparison of different Ûi`ÀÊ ,*Ê>`Ê- ÊÃÌÀ>Ìi}iÃÊÜÌ
ÊÀiëiVÌÊÌÊÃÕ««ÀÌ}Ê Ü
iÃ>iÊ`ÃÌÀLÕÌ]ÊÃiiʸ6i`ÀÊ-ÕÀÛiÞÊ>ÞÃÃ\ÊÊ ÃiÀÊ Ê>ÌÊ ÀÌ
ÊiÀV>Ê ,*Ê>`Ê- Ê-ÕÌÃÊvÀÊ7
iÃ>iÊ Distributors." Being Unable to Match Competitors' Efforts in Important Emerging Global Regions As previously noted, NetSuite has already broken out globally. Ì¿ÃÊ>Û>>LiÊÊ£{Ê>}Õ>}iÃÊ>`ÊÃÕ««ÀÌÃÊÕÌ«iÊVÕÀÀiViÃÊ and international tax methods, such as goods and services tax -/®Ê>`Ê6/°ÊÌÊ
>ÃÊ>ÊÃ`Ê«ÀiÃiViÊÊÃ>É*>VwV]ÊÜÌ
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>ÃÊiÛiÊÀiViÌÞÊLiiÊViÀÌwi`ÊÊ Germany – SAP's backyard. That said, the fastest-growing global >ÀiÌÃÊÌ`>ÞÊ>ÀiÊ À>â]Ê
>Ê>`Ê`>]Ê>`Ê iÌ-ÕÌiÊ
>ÃÊ notably little current activity in any of these countries. -*]ÊÜ
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iÊi>ÀÞÊÃÌ>}iÃÊvÊÀ}ÊÕÌÊ ÕÃiÃÃÊ Þ iÃ}]Ê «>ÃÊÌÊ>VÌÛiÞÊ>ÀiÌÊÌÃÊ->>-L>Ãi`ÊLÕÃiÃÃÊÃÕÌiÊÊ À>âÊ >`Ê`>°ÊÌÊ>ÃÊÀiViÌÞÊ>ÕVi`Ê>Ê«>ÀÌiÀÃ
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iÃiÊ emerging countries – many of them already having substantial country experience from their on-premises efforts – and the local brands also shifting to the cloud, NetSuite could find considerable resistance if it doesn't mobilize for the opportunity ðÊÛiÊÌ
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iÊvÕÌÕÀiÊÜÊ come from these areas, this could pose a serious threat to
Cloud ERP and Wholesale Distribution l 13
Other vendors, such as Epicor, are moving in the same direction. Epicor Express shares the same code base as the vendor's Epicor 9 flagship suite and inherits all of its functionality, albeit with many functions intentionally disabled. Epicor also claims that the process models developed by newly acquired Activant can be carried to Epicor 9 and will enable it to deliver best-ofbreed strength wholesale distribution capability in the future within the Epicor product. Gartner believes that Epicor is also ÜÀ}ÊLi
`ÊÌ
iÊÃViiÃÊÜÌ
Ê VÀÃvÌÊÌÊ`iÛiÀÊ «VÀÊÊ on the Azure platform, allowing larger-scale deployment and further enhancing existing developments focused on industry ÛiÀÃðÊiVi]ÊÜ
iÊ «VÀÊ Ý«ÀiÃÃÊÞÊvVÕÃiÃÊÊÜi`Ê manufacturing today, we expect it to release other versions in the future, such as one with more warehouse functionality for distribution-intensive companies.
Vendors Offering Functionally Richer Solutions
NetSuite longer term. NetSuite must plan now to gain a foothold in these countries, including localization, sales channels, marketing and support. Direct Sales and Support Staff Inexperienced in Selling Enterprise Deals
14 l Cloud ERP and Wholesale Distribution
One of the clear messages coming out of SuiteWorld 2011 was that NetSuite will seek bigger deals and move further into the enterprise market. To bolster its claim, it announced an agreement with Accenture, a reputable, highly regarded system integrator to help build an enterprise practice. Accenture knows how to handle the integration between "i7À`Ê>`Ê>À}iiÌiÀ«ÀÃiÊ
i>`µÕ>ÀÌiÀÃÊÃÞÃÌiÃ°Ê iÞ`Ê the partnership, however, NetSuite is very thin itself on the sales, support and rich vertical back-office experience to ÃÕ««ÀÌÊÌ
iÃiÊ`i>Ã°Ê iÜÃi]Ê>ÊvÊÌÃÊÌi}À>ÌÊ«>ÀÌiÀÃÊ VÕ`}Ê,- Ê V>`ÀiÞÊ>`Ê >iÀÊ/ÞÊÊÌ
iÊ`>ÀiÌ®Ê don't have exclusive agreements with NetSuite, putting them in a position to aggressively market new opportunities. All of them also support and resell competitor products – not necessarily cloud-specific but certainly ERP – and have similar commitments with the vendors behind them. NetSuite should be commended for solidifying these partnerships; despite our critique, these partnerships certainly provide some degree of street credibility and help NetSuite enter the game – but don't confuse that with being in a position to support that objective without substantial help. Once NetSuite begins to aggressively target the up market, it will likely soon encounter prospects that exhibit a level of complexity and need for personalized as well as uniformly available global support beyond what it has encountered before. Ultimately, NetSuite will have to devote many resources internally to delivering on ÌÃÊiÌiÀ«ÀÃiÊ>ëÀ>ÌÃ°Ê ÃÌÊ>À}iÊVÀ«À>ÌiÊVÕÃÌiÀÃÊÜ>ÌÊ to see the faces of those behind their ERP systems – not just the system integrator. Any major investment in sales and technical support resources with complex enterprise system backgrounds will also require hiring resources with high price tags, which also should not be overlooked. While respecting NetSuite's accomplishments, the company still has some maturing to do to be considered a strong upmarket business suite provider servicing multiple global enterprises simultaneously. Until it can strengthen this, other competitors will continue threatening their upward expansion.
NetSuite May Be Unable to Achieve Long-Term Profitability NetSuite has yet to achieve profitability by commonly accepted measures (for example, generally accepted accounting «ÀV«iÃÊQ*R®°ÊvÊÌ
iÊ->>-L>Ãi`Ê ,*ÊÃÕÌiÊ>ÀiÌÊ becomes populated with both a range of new and established vendor participants offering highly competitive products and prices with business operations that match or beat NetSuite's offerings, it could find itself in a very precarious, threatened position. Additionally, it might find it difficult to enrich functionality or expand fast enough if its financial position worsens rather than improves during the next few years. Gartner estimates that even partners building off NetSuite's platform are unlikely to deliver substantial revenue to NetSuite. The overall result, as previously stated, could be a narrowing of NetSuite's target markets and opportunity. SAP May Block NetSuite's Strategy and Take SaaS ERP Business Suite Leadership With Business ByDesign At this time, the largest looming competitive threat to NetSuite ÃÊ-*¿ÃÊ ÕÃiÃÃÊ Þ iÃ}°Ê"vÊVÕÀÃi]ÊÌÊVÕ`Ê>ÃÊLiÊ>À}Õi`Ê that any success by SAP in the SaaS-based ERP market would only validate and bolster NetSuite's own popularity. Regardless, vÊ-*Ê`iÃʵÕVÞÊÃÕÀ«>ÃÃÊ iÌ-ÕÌiÊÊÀiÛiÕiÊÜÌ
Ê ÕÃiÃÃÊ Þ iÃ}]ÊÌÀÕV}ÊÌÊ>ÃÊÜiÊÜÌ
ÊÀiëiVÌÊÌÊÛ>Ì]Êvi>ÌÕÀiÊ and functionality, user interface, support, global reach, and so forth, SAP could seriously neutralize and impact NetSuite's future business opportunities. NetSuite would likely survive and remain an active contender, but simply as one of many. ÌÊV>¿ÌÊLiÊ`ëÕÌi`ÊÌ
>ÌÊ iÌ-ÕÌiÊ
>ÃÊÌ>iÊLÕÃiÃÃÊ>Ü>ÞÊ from SAP, largely due to SAP's own delays and other limitations >ÃÃV>Ìi`ÊÜÌ
Ê ÕÃiÃÃÊ Þ iÃ}°Ê"À}>ÞÊÃ
ÜV>Ãi`ÊÊ 2007, it was already a functionally rich solution at the time – in fact, many called it "the most complete SaaS suite customers VÕ`¿ÌÊLÕÞ°¸Ê ÕÌÊ}ÛiÊÌ
iÊiÛiÊvÊÛiÃÌiÌÊ-*Ê
>ÃÊ>`iÊ in the solution, once it decides that it will put its foot on the gas pedal, we can expect prospects to have a worthy choice between at least two well-integrated SaaS ERP suite offerings. *iÌiÀÊ Àiâ]ÊiÝiVÕÌÛiÊÛViÊ«ÀiÃ`iÌÊ>ÌÊ-*]ÊÀiViÌÞÊÃ>`]ʸ7iÊ have to succeed at on-demand – this is not a hobby." What is known is that SAP has already started "baking" potentially `vviÀiÌ>Ì}Ê>>ÞÌVÃÊÌÊ ÕÃiÃÃÊ Þ iÃ}]ÊÜ
iÊ leveraging innovations such as in-memory computing for its *>>-°Ê7iÊÜÊÌ
>ÌÊ ÕÃiÃÃÊ Þ iÃ}ÊÓ°ÈÊÜÊvviÀÃÊV«iÌiÊ functionality for manufacturing operations, integrated quality control and supply chain planning. SAP also has begun actively recruiting a developer ecosystem.
Fortunately, NetSuite claims that it never actually runs across -*Ê ÕÃiÃÃÊ Þ iÃ}ÊÊ`i>ÃÊÌ`>Þ°ÊÃÌi>`ÊvÊ«Õ}ÊÕÌÊ>Ê the stops, SAP appears to be pouring resources into ensuring its first 1,000 customers are successful and referenceable. That said, by 2012 and 2013, we fully expect NetSuite to run smack dab into SAP and finally encounter its nemesis in waiting – especially among divisions in which SAP is already running at headquarters.
>À}iÀÊLÕÃiÃÃiÃÊÌ
>ÊÌÊ
>ÃÊiÝ«iÀiViÊÌÊ`ÊÊÌÃÊÜ®°Ê-6Ê partners tend to do real well with NetSuite, while reselling partners have a mixed track record. NetSuite has improved its reseller recruitment and support program significantly during the past 8 months; however, the jury is still out on whether it can, or will, sustain this effort long term. Partners should seek assurances of NetSuite's commitment and hold the company to it. Implications for Competitors
Implication for NetSuite ÊÌ
iÊiVÞÊÌ
>ÌÊ
>ÃÊÌ>iÊ
`ÊvÜ}ÊÌ
iÊÀiViÌÊ}L>Ê recession, many businesses have re-evaluated the traditional way they have adopted and consumed mission-critical business software. SaaS-based ERP business suites and the acceptance of cloud-based delivery models mean vendors such as NetSuite will be actively increasing their presence in the market. Established on-premises providers have also begun to develop and deliver SaaS-based products. Our SWOT analysis and assessment of NetSuite in the wholesale distribution industry indicates that NetSuite has a reasonably balanced profile of strengths, weaknesses, opportunities and threats, with its strengths and opportunities slightly outweighing threats and challenges. The biggest improvement NetSuite could make, in the context of this report, would be to specifically strengthen both native and «>ÀÌiÀi`Ê- Ê>`ÊÜ
iÃ>iÊ`ÃÌÀLÕÌÊ`ÕÃÌÀÞÊÃÕ««ÀÌ]Ê enriching its business management suite so that it is more applicable across complex industry business scenarios and a LÀ>`iÀÊÀ>}iÊvÊÃÕLÃiVÌÀðÊÌÃÊ««ÀÌÕÌiÃÊ>ÀiÊVÃiÞÊÌi`ÊÌÊ ÌÃÊ>LÌÞÊÌÊVÀi>ÃiÊ`ÃÌÀLÕÌÊ>}Ê- ÃÊ}L>ÞÊÜ
iÊ continuing to move up market. Implications for Potential Partners
Implications for Investors Although NetSuite develops a significant amount of its own technology, it does rely on third-party software vendors, particularly Oracle, to deploy its technology. This strong tie to Oracle could be considered both a strength and a modest source of investment risk going forward. An additional potential conflict of interest is that Ellison helped to found the company and that currently more than 50% of NetSuite is owned by him and his family. That said, Ellison has placed these shares in a trust that has completely passive voting power, unless there is a change of control event. A change in control event could materially create issues for acquirers and investors. Where SaaS-based behemoth salesforce.com has built its reputation on its user-facing customer management software, NetSuite has focused on back-end systems that are preintegrated with its own front-office software. Finding itself gaining in market popularity, NetSuite hopes to move beyond ÌÃÊ>À}iÊL>ÃiÊvÊ«À>ÀÞÊÃ>iÀÊ- ÃÊ>`ÊV«iÌiÊÀiÊ
Cloud ERP and Wholesale Distribution l 15
iÌ-ÕÌiÊÀi>ÃÊ>ʸ
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ÃiÊ-6ÃÊÌ
>ÌÊ are looking to tie their cloud-based initiatives to a partner of scale in the SaaS-based ERP suite world, offering a great opportunity for those seeking to integrate as well as build on iÌ-ÕÌi¿ÃÊ-ÕÌi Õ`Ê - "-®Ê«>ÌvÀ°Ê iÌ-ÕÌiÊvviÀÃÊ>Ê elegant, innovative development platform and well-rounded co-marketing strategy. Traditional resellers (for example, 6,îÊÃ
Õ`Ê>ÃÊVÃ`iÀÊ iÌ-ÕÌi]Ê>ÃÊÌÊ
>ÃÊÀiViÌÞÊÃÌi««i`Ê up recruiting efforts. Resellers should weigh NetSuite's past emphasis on direct selling and consider its offer in conjunction with those of other competitors. NetSuite's recruiting efforts should be viewed in the light of "what's in it for them" as well as the potential partner (for example, what the partner brings to the table with respect to global reach, the ability to extend or deepen its vertical industry strategy, and the ability to target
As NetSuite has grown in size, it must be viewed as a significant competitor when targeting independent wholesale distributors and smaller divisions of large enterprises up to the midpoint vÊÌ
iÊ- Ê>ÀiÌÊÌ
ÃiÊÜÌ
Ê>««ÀÝ>ÌiÞÊfxääÊÊÊ annual revenue), depending on the depth and complexity of processing that they require. As the consideration and adoption of cloud-based solutions for business-critical functions occur, many competitors that have not seen NetSuite before will find it showing up on their radar. The continuing success of ->>-L>Ãi`Ê , Êi>`iÀÊÃ>iÃvÀVi°VÊ>`Êi>ÀÌiÀÊ>VÌÛÌÞÊ >ÀÕ`Ê-*¿ÃÊ ÕÃiÃÃÊ Þ iÃ}Ê`i>`ÊvviÀ}ÊÃ
Õ`Ê also provide increasing market validation for NetSuite. Gartner expects NetSuite to continue innovating with its products and competing up market more aggressively as it targets global VÀ«À>ÌÃ°Ê «iÌÌÀÃÊ
«}ÊÌÊÌ>iÊÊ iÌ-ÕÌiÊÃ
Õ`Ê keep in mind that the secret to success is having not only a functional product that competes on parity, but also the ability to market, distribute and support it profitably.
closely with business software leaders, such as SAP. As NetSuite moves steadily up market, targeting divisions of Fortune 500 companies, it will bump up against more worthy competitors as traditional software firms begin to drive their own cloudL>Ãi`ÊvviÀ}ÃÊÕÌÊÌÊÌ
iÊ>ÀiÌ°Ê iV>ÕÃiÊvÊÌ
Ã]Ê>ÀÌiÀÊ favors NetSuite with respect to the opportunities and strengths, but moderates based on the significant challenges and threats NetSuite also faces. Regardless, NetSuite continues to be the fastest-growing SaaS-based ERP suite provider of scale and remains an ideal opportunity for many types of investors seeking to leverage this quickly emerging market opportunity. Company Overview
16 l Cloud ERP and Wholesale Distribution
NetSuite is a leading vendor of cloud computing business >>}iiÌÊÃvÌÜ>ÀiÊÃÕÌiðÊÌÊÜ>ÃÊvÕ`i`Ê>ÃÊ iÌ i`}iÀÊÊ 1998 by Evan Goldberg, current chairman and chief technology vwViÀ]ÊÜÌ
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"ÊvÊ"À>Vi]Ê -Ì>À6iÃÌÊ*>ÀÌiÀÃÊ>`Ê1 -Ê*>i7iLLiÀ°Ê iÌ i`}iÀÊÜ>ÃÊ>ÌiÀÊ Ài>i`ÊÌÊ"À>ViÊ->Ê ÕÃiÃÃÊ-ÕÌiÊ>`Êw>ÞÊ iÌ-ÕÌi°Ê Ellison's family remains NetSuite's major shareholder. NetSuite currently has approximately 1,000 employees and serves more Ì
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iÊ1Ìi`Ê }`ÆÊ/Þ]Ê>«>ÆÊ}Ê Kong; and Singapore. NetSuite enables companies to manage core key business operations in a single system, which includes ERP, accounting,
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L>À`¸Ê technology provides an easy-to-use view into up-to-date, rolespecific business information. NetSuite's mission statement focuses on its ability to provide Web-based integrated business systems with the power of traditional applications used by the world's largest companies, at a fraction of the VÃÌÊ>`ÊV«iÝÌÞ°ÊÌÃÊ«À`ÕVÌÃÊVÕ`iÊ iÌ-ÕÌi]Ê iÌ-ÕÌiÊ "i7À`]Ê iÌ-ÕÌiÊ , ³]Ê"«iÀÊ*ÀviÃÃ>Ê-iÀÛViî]Ê >`ÊÌ
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iÊLÕÃiÃÃÊÃÕÌiÊÌÃivÊVÛiÀÃÊ eight industries, 13 various business departments and offers ÈÊÛ>ÀÕÃÊÃÕ««ÀÌ}Ê`ÕiÃÊ>`Ê>««V>ÌðÊ7
iÊ ÌÀ>`Ì>ÞÊÃiÀÛ}Ê`i«i`iÌÊ- Ã]Ê iÌ-ÕÌiÊÃÊVÀi>Ã}ÞÊ considered a safe choice for evaluation by many of the world's largest enterprises as they look to consolidate and revise their midtier applications, especially in smaller divisions not requiring overly complex business processing capabilities.
Total revenue for NetSuite in the first quarter of 2011 was $53.4 million, representing a 21% increase compared with the prior year. Subscription and support revenue for the first quarter was $45.8 million, representing 20% growth compared with the same period in 2010. Figure 3 identifies quarterly revenue for NetSuite dating from the first quarter of 2008 through the first quarter of 2011. The two biggest user components across NetSuite's offering are Ì
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ÊÓä£ä° As mentioned earlier, NetSuite has offices across the globe and is available in 14 languages. That said, Gartner currently estimates that nearly 80% of NetSuite's customers remain based Ê ÀÌ
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>ÌÊ iÌ-ÕÌiÊLi}>Ê to expand internationally only with its rollout of NetSuite OneWorld in 2008. The Asia/Pacific region, in particular, is growing very fast. Figure 5 identifies Gartner's estimates of NetSuite's 2010 regional revenue distribution. Methodology The Gartner vendor SWOT analysis is designed for the use of providers as well as individuals in strategic planning, marketing and competitive analysis roles as a supplement to Ì
iÀÊ«>}Ê«ÀViÃÃiðÊÌÃÊ«À>ÀÞÊÛ>ÕiÊÃÊ>ÃÊ>Ê`i«i`iÌÊ analysis of the provider's competitive situation. The SWOT analysis provides a unique independent view of the strengths, weaknesses, opportunities and threats for a specific part of a provider's business in a specific market and geography. Gartner's research objective in evaluating the vendor designated in this report was to identify a publicly held SaaS-only ERP business suite with the stated objective of serving the wholesale distribution industry.
figure 3.
NetSuite’s Quarterly Revenue, 1Q08-1Q11
Note: These figures are Gartner estimates only. Source: Gartner (June 2011)
figure 4.
NetSuite’s ERP and CRM Market Breakdown
Cloud ERP and Wholesale Distribution l 17
Note: These figures are Gartner estimates only. Source: Gartner (June 2011)
figure 5.
NetSuite’s Revenue Distribution by Region, 2010
Note: These figures are Gartner estimates only. Source: Gartner (June 2011)
18 l Cloud ERP and Wholesale Distribution
Analysts involved in this evaluation have spent many hours, often over the course of many years, in multiple product briefings and demonstrations with NetSuite. Some analysts also >ÌÌi`i`ÊÌ
iÊ iÌ-ÕÌiÊ-ÕÌi7À`ÊVviÀiViÊ
i`ÊÊ >ÞÊÓ䣣°Ê The analyst team assembled initial high-level characteristics and commentary, focusing on issues the team believed to be rated highest and most prominent for today's market environment. Others were addressed but not included in the commentary. These can be discussed via analyst inquiry as required. Some general conclusions and implications were excluded from the final publication. >ÞÊvÊÌ
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iÊ-7"/Ê analysis can be applicable as an opposite category (a strength can be an opportunity; a weakness can be a threat, and so forth). >Ãi`ÊÊÌ
iÊVÃiÃÕÃÊvÊÌ
iÊ>>ÞÃÌÃ]ÊÌÊÜ>ÃÊ«>Vi`ÊÊÌ
iÊ category in which it was felt it had the most weight.
Prospective partners, competitors and others should use this analysis as a clearsighted and balanced examination of critical factors associated with the vendor. This SWOT analysis should be used only in the evaluation of NetSuite as it applies to the wholesale distribution industry and not construed as an evaluation of the vendor's capabilities in specific horizontal ÌiV
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Ê>ÃÊ , ÊÀÊ ,*]Ê>ÃÊÌ
iÞÊ>««ÞÊÌÊ other industry markets. The SWOT analysis methodology is explained in detail in "The >ÀÌiÀÊ6i`ÀÊ-7"/Ê>ÞÃÃ]Ê1«`>ÌiÊÓään°¸Ê
Source: NetSuite
Customer Testimonials We hope you found this report on NetSuite informative and
ACAL Consolidates 14 European Sales Operations Using NetSuite OneWorld:
help wholesale distribution companies at
“With NetSuite we all work on one system, and that means we can work together as a single team.”
www.netsuite.com/wholesaledistribution.
from using NetSuite. We hope that we can help your Wholesale
ACAL
Distribution company be successful. NetSuite Helps Digital Check Save $300,000 a Year in
NetSuite Saves $120,000 Yearly for König:
Maintenance:
“NetSuite lets us look into our suppliers’ workload, and lets our customers see our inventory. And it lets us monitor our entire business from anywhere in the world, all in real time.”
more responsive to customers, and more
Digital Check
Konig Wheels Antech Saved 75% On IT Costs While Growing 250% Using
NetSuite OneWorld Supports 50% Year-on-Year Growth at
NetSuite:
Fasten:
“NetSuite has a best-in-class system with controls that are tested and proven in the real world. A patchwork system doesn’t give you that, and creates a lot of potential for mistakes. On the integrated ERP system NetSuite provides, all of our accounting controls are built-in.”
“We’ve evaluated the competition and came to the conclusion that NetSuite is leagues ahead in terms of functionality, ease of use and price.”
Cloud ERP and Wholesale Distribution l 19
Antech Inc.
Fasten
About NetSuite NetSuite is the #1 web-based business management software suite giving companies one complete system to run their entire business, from accounting/ERP, Inventory, CRM and eCommerce. NetSuite’s integrated Software-as-a-Service (SaaS) suite, provides the essential visibility
CODIE 2011 Finalist
Strategic Partner of IMA
Best Financial Management Solution NetSuite OneWorld
CODIE 2010 Winner
Customer Interaction Solutions
Best Business Software Solution
Product of the Year
Best Relationship Management Solution Best Cloud Infrastructure
20 l Cloud ERP and Wholesale Distribution
Software
ISM Top 15 CRM Winner
Best Cloud Application 2010
AccountingToday The 2011
2011 CRN 5-Star Partner
Top New Products
Program Guide Winner
www.netsuite.com/wholesaledistribution.
