NetSuite furthers its platform play

Given that they operate in different markets while preaching the same software-as-a-service (SaaS) message, on-demand CRM supplier and on-demand financial applications supplier NetSuite might once have been allies.

But it was not to be. Instead the two companies have, for the sake of marketing or otherwise, developed something of a rivalry, every so often exchanging press releases berating one another’s technology or strategy.

And the announcement in October 2006 of both’s Apex hosted development platform and NetSuite’s customisation platform SuiteFlex appears to bring the two companies into even fiercer competition.

As far as NetSuite CEO Zach Nelson is concerned, the race is on to establish the killer software-as-a-service platform. He thinks that the company that does so first will dominate the developing SaaS market for years to come.’s Apex, unveiled at the Dreamforce user conference in early October 2006 , will allow software developers and end-user organisations to write new code for applications, or add new compatible applications, that will run on the company’s infrastructure.

Meanwhile, SuiteFlex is more of a configuration platform than a development platform: it does not grant third parties the right to alter the underlying logic of the applications.

But that is no shortcoming, according to Nelson.’s core product is a best-of-breed CRM application. For that to be integrated into transactional systems, argues Nelson, requires the kind of code-level programmability Apex allows. NetSuite’s product however, is the transactional system itself.

“The application that owns the business transaction becomes the brain, because in all applications you need transactional integrity and a permanent system of record. That’s why Siebel didn’t dominate the business applications market, despite having a great product, but SAP did.”

The argument has its merits, but not everyone will agree with Nelson’s logic: after all, SAP had a huge global user base even before Siebel started out; and there are many who will say that the ability to add new code or services is increasingly important in modern, open software.

“The application that owns the business transaction becomes the brain.”

Zach Nelson, NetSuite

Even so, NetSuite’s Suiteflex will allow for more advanced workflow and business process management functionality, which has to date been severely limited in SaaS products.

Many customers will welcome this new flexibility, but it is unlikely to help NetSuite graduate out of the SMB market into the enterprise – a clear and stated ambition of Unfortunately for NetSuite, most big companies have already made significant investments in their transactional (ERP) systems, and very few are likely to replace them in the next decade.

Indeed, it is exactly’s peripheral nature that has allowed it to creep into the enterprise as much as it has, in some cases through the back door of departmental provisioning.

So, instead, NetSuite is courting resellers and system integrators to tailor its product for as many vertical industries as possible.

Nelson: “Our view is that companies buy products according to the industry they are in. We dominate the toner cartridge world because the leader of the toner cartridge market chose NetSuite. All the other companies in the market followed its example.”

Whereas the community has built around its products consists of software developers building specific functionality, NetSuite is appealing through SuiteFlex to the services providers that know particular industries.

SuiteBuilder, part of SuiteFlex, “allows resellers to build their business process and industry knowledge into an application, and then sell it over and over again,” says Nelson.

Liz Herbert, analyst from IT industry adviser Forrester Research, believes this strategy will be key in spreading NetSuite out across the SMB market. “There is a lot of demand among SMBs to buy from resellers with industry specific knowledge,” she says.

This strategy will help NetSuite establish a solid position in certain markets, but it is unlikely to turn into a global SaaS giant. Salesforce, with annualised sales of nearly $400 million over the past four quarters, dwarfs NetSuite, with annual revenues nearer $70 million, according to Nelson.

Herbert of Forrester adds that it is too soon to call who will eventually dominate the world of SaaS, as there are many interested parties beyond and NetSuite.

“I think that more and more companies will come out with a bid to be the platform for SaaS, including Microsoft, Oracle and SAP. Then there are the telcos, who are looking at being SaaS aggregators.” Google, too, is circling, promising more sophisticated applications to follow its initial foray into productivity tools.

“I don’t believe the future of the industry will be decided on these two companies,” says Herbert.

Avatar photo

Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

Related Topics