Buoyed by its recent acquisitions, Oracle NetSuite is expanding rapidly into asset-heavy industries while continuing to capitalize on Cloud ERP displacement opportunities.
At last week’s SuiteWorld, NetSuite introduced new CPQ applications for high-tech manufacturers or anyone that requires easy selling and configuring of physical goods after its January 2022 acquisition of Verenia’s NetSuite CPQ (Configure, Price, Quote) software business.
At the three-day event that attracted several thousand attendees in Las Vegas, NetSuite also made its foray into workforce management following its June 2022 purchase of Adi Insights for scheduling and time and attendance applications.
Evan Goldberg, co-founder and executive vice president of NetSuite, said the gating factor behind these acquisitions has to do with how easy it is for them to be integrated into the NetSuite platform. Other priorities for NetSuite in its fiscal 2023 include better onboarding and user experience, along with its plans to expand into fast-growing countries like Brazil.
Under the slogan Full Suite Ahead, Oracle NetSuite is trumpeting its increasingly extensive product portfolio, essentially bridging the gaps between ERP systems designed for users that sell widgets as opposed to others that cater to those that only deliver services. If it succeeds, the strategy will help NetSuite leapfrog many ERP vendors that have done well in certain industries but not others.
Despite the threat of a looming recession, NetSuite has grown its installed base 19% from 27,000 to more than 32,000 over the past year. The strong showing of this year’s SuiteWorld underscores its growing momentum in its traditional stronghold of services industries because of the professional service automation products it acquired earlier from OpenAir and QuickArrow in 2009. The subsequent launch of OneWorld for light manufacturing has paved the way for its latest expansion into multi-mode manufacturing, retail and other verticals that handle a complex combination of assets, labor components, as well as customer, tax and compliance requirements.
In our latest survey of nearly 7,000 NetSuite customers, more than 80% of them are in the United States, and SMBs between 1 and 1,000 employees and under $100 million in revenues constitute the bulk of its installed base. The makeup of these customers is skewed toward services industries like professional services and communications, as shown in the following exhibit.
Exhibit 1 – NetSuite Customer Profiles By Geo, Industry, and Company Size
Source: Apps Run The World, October 2022
The SuiteWorld 2022 event presented a new narrative that the NetSuite offerings are capable of supporting myriads of financial and order management business process components like those that operate in multiple industries and regions, while serving the needs of users that run NetSuite for a full spectrum of ERP functionality from AP Automation to payment processing and from eCommerce and fulfillment to budgeting and planning.
A more in-depth examination of current customers of NetSuite also revealed its recent successes in displacing legacy ERP vendors because they were too limiting for fast-changing market conditions exacerbated by the pandemic and hyper-inflationary pressures.
As the following exhibit demonstrates, NetSuite has been displacing scores of competing vendors over the past decade with the biggest takeouts happening to Intuit QuickBooks. That is based on our examination of 433 customers and their use of different ERP systems after replacing them with NetSuite since 2012. In particular, more recent displacements appeared to have helped NetSuite edge out Xero in Australia and Microsoft Dynamics in North America.
Rick Bauerly, founder and CEO of Granite Partners, a holding company in St. Cloud, MN, with $800 million in annual revenue, said its portfolio of 10 companies – mostly in manufacturing – has been replacing different legacy ERP systems with NetSuite after inheriting them from such providers as Epicor, Intuit, Made to Manage and Microsoft Dynamics.
Bauerly said the overarching vision is to standardize its enterprise applications environment on NetSuite for more robust financial management to better control costs and attract technical talent as it embarks on a three-year digital transformation to sustain its growth and profitability at the same time.
Craig West, VP Alliances & Channels of NetSuite, attributed the 27% growth logged by NetSuite in its most recent quarter to its growing successes in recruiting and nurturing resellers and implementation partners such as FMT Consultants and RSM US LLP, both of which were previously heavily involved in Microsoft Dynamics projects.
West added that NetSuite is aiming to sign up at least 40 to 50 new partners in the United States every year, expecting many of them would be switching from Microsoft to NetSuite because of its favorable revenue-sharing arrangements, which offer up to 50% in subscription fees paid out to its partners. Currently, the NetSuite channel ecosystem covers more than 850 organizations, about two-thirds of which are resellers and the remaining implementation partners.
Gary Wiessinger, senior vice president of product management of NetSuite, said his priority is to continue to drive additional benefits for its customers, citing that they will be able to get better insights from every aspect of their operations from sales to accounting and from production to inventory because all of their associated data, insights and increasingly mission-critical workloads are now residing on a single platform. Already, half of NetSuite customers have migrated to the Oracle Cloud Infrastructure from hosting and infrastructure services developed by NetSuite prior to its purchase by Oracle in 2016, Wiessinger added.
Another catalyst behind the full suite ahead messaging is NetSuite’s decision to offer AP Automation capabilities to those that want to have an unobstructed view of their invoicing, payment and reconciliation processes, all of which would require no data cleansing and migration.
Even though that raises the thorny issue of NetSuite’s ending up competing with some of its partners that deliver AP Automation and other capabilities like API integration, Goldberg said the company’s philosophy is to be pre-emptive with its suite approach by preventing erosion of its wallet share among customers, while continuing to collaborate with its partners to tackle challenges that cannot be solved by NetSuite alone.
Kim Loughead, vice president of product marketing at Celigo, which was among more than 150 exhibitors at this year’s SuiteWorld, offers API integration products that often compete with those from NetSuite. Loughead said her company has done its part to identify its sweet spot after navigating the dynamics between the all-encompassing ambitions of NetSuite and what partners like Celigo can bring to the table – lower costs, faster time to market as well as easy integration into non-NetSuite products like Salesforce.
Through the years, Celigo has benefited from its longstanding ties with NetSuite. Compared with last year’s SuiteWorld where attendance was lower amid Covid surges, Loughead was pleased with this year’s turnout and the quality of attendees, especially those that are responsible for IT and back-end integration between NetSuite and other products that Celigo aims to win over.
While the better turnout at this year’s SuiteWorld was encouraging to partners and NetSuite amid fears of a protracted recession in 2023, sentiments among the attendees were mixed.
Bauerly of Granite said his plan is to double his IT spend – including investments in NetSuite – to about 2% of its revenues in the coming years as it anticipates acquiring another five companies to shore up their internal systems.
Meanwhile, Ben Argov, president of IWA Wine Accessories in Petaluma, CA, said his wine accessory company is expected to see a deceleration of its IT spend by taking a defensive approach over the next 12 months because of ongoing supply chain challenges and inflationary pressures, neither of which could be addressed by better technology alone.
Goldberg insists that NetSuite and many of its mostly SMB customers are expected to weather the downturn because of the efficiency gains its products are capable of delivering. With proven solutions that improve business processes and mitigate their risks, Goldberg refuted any suggestion that NetSuite is vulnerable in a weak economy because its software is overpriced. Competitors like FinancialForce are citing contract renewal negotiations between NetSuite and its customers especially those recently-IPOed companies entailing up to an eight-fold jump in their subscription fees after they went public.
On the other hand, Argov said his 2021 renewal of another five-year agreement with NetSuite resulted only in a single-digit increase in subscription fees even though its user count has risen from eight to 32 through the years.
Nick Schwartz, CIO of Happy Feet International in Ringgold, GA, considers the pricing factor less of an issue, compared with the complexity involved in migrating from a home-grown system that was heavily customized and inflexible to a standardized and more user-friendly NetSuite for hundreds of users in 2020.
The benefits of running NetSuite, according to Schwartz, lie in delivering better results for users that are now running an intuitive system that can scale as well as adapt – by relying on support from NetSuite’s Advanced Customer Support for custom scripting – to its multi-dimensional manufacturing and sales requirements with a dizzying array of installation, thickness, and finish options including at least 400 colors available for its flooring dealer customers.
Schwartz sums it up this way: “People using (NetSuite) products need to get something out of it. The value is to be able to make them happier employees.”
Excerpts from ARTW Buyer Insight Master Database ERP Displacement Survey
Source: Apps Run The World, October 2022