SuiteWorld Spotlights Oracle NetSuite’s Vertical Ambitions

With 16,000+ customers, Oracle NetSuite is on a tear with an estimated $1.5B run rate

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Oracle NetSuite is doubling down on its vertical strategy after solidifying its presence in the midmarket ERP space. The accelerated push comes after its $9.3-billion purchase by Oracle nearly 30 months earlier, capping one of the top 10 software purchases in recent years, as shown in Exhibit 1 below.

Exhibit 1 – Top 10 Software Deals

Acquirer Target Value, $B Completion Year
IBM Red Hat $34.0 2018
Microsoft LinkedIn $26.2 2016
Facebook WhatsApp $19.0 2014
Oracle PeopleSoft $10.3 2005
HP Autonomy $10.3 2011
Oracle NetSuite $9.3 2016
SAP Concur $8.3 2014
SAP Qualtrics $8.0 2019
SAP Business Objects $6.8 2008
Salesforce Mulesoft $6.5 2018

Source: Apps Run The World, April 2019

NetSuite has become one of the bright spots for Oracle, accelerating its Cloud applications revenue growth, expanding in markets where its parent lacks presence, and delivering customer successes that could serve as a template for the rest of the company.

At its recent SuiteWorld event, Oracle NetSuite laid out an extensive roadmap to capture additional revenues from such verticals as apparel, fashion and accessories, retail, manufacturing, nonprofit and distribution. Company executives also disclosed that it achieved 30% revenue growth in 2018 after picking up 3,500 new logos. That results in a total of 16,000 customers in more than 200 countries.

CEO Mark Hurd and EVP Evan Goldberg strengthen Oracle NetSuite’s vertical push
CEO Mark Hurd and EVP Evan Goldberg strengthen Oracle NetSuite’s vertical push

Our estimate – after remapping Oracle NetSuite’s historical revenues to sync up with the Oracle fiscal reporting period that ends on May 31 – is that Oracle NetSuite is on an annual run rate of more than $1.5 billion in fiscal 2019, more than 50% from what it was experiencing prior to its purchase by Oracle two and a half years earlier, as shown in Exhibit 2 below.

Exhibit 2 – NetSuite’s Run Rate Soaring

Source: Apps Run The World, April 2019

Mark Hurd, CEO of Oracle, said on the three most recent earnings calls that Oracle NetSuite’s revenues grew anywhere between 25% and 28% in each quarter, while its bookings jumped as much as 70% in any given period. Suffice it to say that Oracle NetSuite is now among the key pillars of Oracle – along with its Cloud CX/ERP/HCM products, database and vertical applications.

A quick look at Oracle NetSuite’s installed base of thousands of customers underscores its ability to penetrate verticals and microverticals where Oracle has not been able to address properly, according to our analysis of 6,110 Oracle NetSuite customers – a subset of our Buyer Insight Master Database that covers nearly 200,000 unique organizations.

Source: Apps Run The World’s Buyer Insight Master Database

As shown in Exhibit 3 below, Oracle NetSuite has done exceedingly well in professional services, which include everything from software and IT vendors to accounting, engineering, and business services firms to align with our taxonomy of 21 verticals. That is followed by CPG companies with a growing number of apparel, fashion and accessories as well as food and beverage up-and-comers. Some of the companies that Oracle NetSuite targets or sells into didn’t even exist a decade ago, while its parent primarily focuses on established customers such as AT&T and GE.

Allison Auclair, VP of Product Management of Oracle NetSuite, said the key is to provide seamless user experience for a range of applications – all built on top of a single data model – from ERP to CRM and online selling for both B2C and B2B environments.

Today, Oracle NetSuite has invested significantly in developers enhancing these products, as well as customer and partner support and services. Altogether, the amount of resources at Oracle NetSuite has grown considerably. Prior to the acquisition, Oracle NetSuite’s headcount was 4,603 at the end of 2015. Since then, we estimate it has grown by about 2,000 with many hires being added to expanded facilities in Santa Monica staffing up its content marketing operations including the newly-launched Brainyard and Grow Wire. That doesn’t take into account the resources it can draw from its parent, which has been on a hiring spree especially in cities like Santa Monica by adding inside salespeople, some of whom are responsible for Cloud apps including Oracle NetSuite.

Underscoring the synergy is NetSuite Planning and Budgeting, which is based on Oracle EPM Cloud to enable Oracle NetSuite customers to access off-the-shelf connected planning capabilities tailored for their particular vertical in less than 30 days, said Jason Maynard, senior vice president of Global Field Operations of Oracle NetSuite.

Case in point is LogMeIn, which manages to cut time for planning and budgeting while mitigating risks from four days to 30 minutes after running NetSuite Planning and Budgeting from Oracle NetSuite.

Another positioning advantage for Oracle NetSuite is to help address attrition. After running Oracle E-Business Suite for years, sound equipment maker LOUD Audio, under restructuring pressures, was able to migrate to NetSuite in seven months with help from Dell Boomi and SuiteSuccess best practices. A growing number of such best practices including 28 new editions are now standard deliverables in every Oracle NetSuite deal.

To ensure these companies are going to thrive, Maynard said one new initiative is Brainyard, a dynamic repository of subject matter experts, video quick takes and industry-specific KPIs that help guide customer successes for these entities as well as for Oracle NetSuite.

After all, what better way for Oracle to drive Cloud growth than leaving Oracle NetSuite to go after an eclectic set of customers from global brands such as Billabong to obscure entities like Betterbee for beekeeper equipment and OhMiBod for iPod vibrators?

According to company insiders, while Oracle NetSuite has built a franchise in the midmarket ERP space with thousands of customers including many venture- or PE-backed entities, the challenge is to make sure that these companies are not going to fail, not repeating the scenario during the financial crisis in 2008 when its growth almost stalled.

Mitigating the risks of an inevitable wave of consolidation among these young companies is another challenge as Oracle NetSuite seeks to bolster its product portfolio with a range of cost-saving and tactical solutions to meet their near-term needs.

Exhibit 3 – Oracle NetSuite Customers By Vertical

Analysis of 6,110 Oracle NetSuite customers derived from ARTW’s Buyer Insight Master Database, Source: Apps Run The World, April 2019

Catering to those within the professional services vertical – amounting to one in three of its customers – now has Oracle NetSuite ramping up its new offerings such as cash and global trade management, lease accounting and revenue recognition tools. All these new products will help Oracle NetSuite maintain its lock on companies that require easy to use applications to meet new rules and regulations.

Company executives said its products have been used by 60% of pre-IPO companies such as Kyriba, MongoDB and Qualtrics to run their finance and other mission-critical operations.

Additionally, recent changes to accounting rules such as IFRS 16 and ASC 842 are making lease accounting a strategic imperative for lessors to measure the financial implications of the amount and timing of cashflows stemming from leases. More importantly, lessees, which apply to many companies that lease real-estate, heavy and office equipment to run their operations, now require a better tool to track existing assets or contracts.

As Oracle NetSuite continues to expand in its strategic verticals by adding new modules like fund accounting for nonprofit and warehouse management and traceability enhancements for food manufacturers, the question is how will such moves impact its add-on partners that have been instrumental in scaling out its ISV ecosystem.

During SuiteWorld, Oracle NetSuite has set its sight on adjacent markets like cash management and lease accounting, which are also mainstays of its partners like Kyriba.

Evan Goldberg, executive vice president of Oracle NetSuite, said the decision to bolster its cash management and lease accounting offerings is to meet its evolving customer demands and the company is committed to strengthening relationships with more than 550 of its ecosystem partners. In fact, company executives said the Oracle NetSuite channel now accounts for half of new sales to customers, a huge improvement from its early days when it was primarily selling direct.

Banking on more channel business, the vendor at SuiteWorld unveiled SuiteLife whereby new partners will be able to start selling and delivering Oracle NetSuite to customers in only 90 days, while existing partners will benefit from new offerings to widen their reach into more verticals.

Customer Industry Empl. Revenue Country Vendor New Product
Activision Guitar Hero Manufacturing 6790 $4.35B USA Oracle Oracle NetSuite OneWorld
Advanced Drainage Systems Construction and Real Estate 3700 $1.55B USA Oracle Oracle NetSuite CRM
Align Technology, Inc. Manufacturing 6060 $1.15B USA Oracle Oracle NetSuite OneWorld
Baker Tilly Professional Services 2500 $475.0M USA Oracle Oracle NetSuite OneWorld
Bass Pro Shops Retail 4300 $1.10B USA Oracle Oracle NetSuite Commerce
BDO Seidman, LLP Professional Services 6057 $1.29B USA Oracle Oracle NetSuite OneWorld
CDI Professional Services 6300 $864.0M USA Oracle Oracle NetSuite OneWorld
Chapman University Education 2500 $700.0M USA Oracle Oracle NetSuite OneWorld
Clear Channel Outdoor Media 6400 $2.94B USA Oracle Oracle NetSuite OneWorld
CommScope Communications 12500 $3.48B USA Oracle Oracle NetSuite OneWorld
Commvault Professional Services 2315 $595.0M USA Oracle Oracle NetSuite OneWorld
Dicks Sporting Goods Retail 14600 $7.92B USA Oracle Oracle NetSuite OneWorld
EchoFirst Professional Services 6300 $2.00B USA Oracle Oracle NetSuite OneWorld
Fusion UV Systems Inc. Manufacturing 12500 $3.60B USA Oracle Oracle NetSuite OneWorld
GSI Commerce Communications 5000 $1.00B USA Oracle Oracle NetSuite Commerce
Gucci America Retail 4068 $407.0M USA Oracle Oracle NetSuite Commerce
Guys & St Thomas’ Hospital and Cancer Research UK Healthcare 13500 $1.84B UK Oracle Oracle NetSuite OneWorld
Hamamatsu Manufacturing 4482 $1.01B Japan Oracle Oracle NetSuite CRM
IDEXX Laboratories Manuacturing 7000 $1.80B USA Oracle Oracle NetSuite OneWorld
Informatica Professional Services 3600 $1.05B USA Oracle Oracle NetSuite CRM
Lexmark Professional Services 14000 $3.51B USA Oracle Oracle NetSuite OneWorld
Linear Technology Corporation Manufacturing 4200 $1.28B USA Oracle Oracle NetSuite Commerce
Mantech International Corporation Professional Services 7000 $1.60B USA Oracle Oracle NetSuite OneWorld
Maxwell Health Healthcare 100 $10.0M USA Oracle Oracle NetSuite TribeHR
Pottery Barn Consumer Packaged Goods 5000 $3.00B USA Oracle Oracle NetSuite Commerce
Pottery Barn Kids Consumer Packaged Goods 5000 $3.00B USA Oracle Oracle NetSuite Commerce
Randstad Technologies, Inc Professional Services 3738 $1.80B USA Oracle Oracle NetSuite CRM
REI Consumer Packaged Goods 5000 $2.00B USA Oracle Oracle NetSuite Commerce
ReneSola Media 6953 $1.56B USA Oracle Oracle NetSuite OneWorld
ResMed Inc. Life Sciences 6080 $2.07B USA Oracle Oracle NetSuite OneWorld
Service Rocket Media 170 $20.0M USA Oracle Oracle NetSuite TribeHR
Spencer Gifts LLC Retail 4000 $270.0M USA Oracle Oracle NetSuite CRM
Spherion Staffing Professional Services 4000 $1.00B USA Oracle Oracle NetSuite CRM
Square Professional Services 2338 $2.98B USA Oracle Oracle NetSuite OneWorld
Strike Construction Oil, Gas and Energy 6600 $1.80B USA Oracle Oracle NetSuite OneWorld
Sweet Tooth Communications 30 $3.0M Canada Oracle Oracle NetSuite TribeHR
Tanium Professional Services 130 $13.0M USA Oracle Oracle NetSuite TribeHR
Top Hat Monocole Professional Services 105 $11.0M Canada Oracle Oracle NetSuite TribeHR
Ultimate Software Professional Services 2350 $506.0M USA Oracle Oracle NetSuite OneWorld
Unify (formerly Siemens Enterprise Communications) Professional Services 6780 $2.30B USA Oracle Oracle NetSuite OneWorld
UW Madison Consumer Packaged Goods 3297 $149.0M USA Oracle Oracle NetSuite OneWorld
Vidyard Consumer Packaged Goods 60 $6.0M Canada Oracle Oracle NetSuite TribeHR
Wattpad Communications 260 $30.0M Canada Oracle Oracle NetSuite TribeHR
Wharton University of Pennsylvania Education 2500 $500.0M USA Oracle Oracle NetSuite OneWorld
Yellowpages.com Media 5000 $2.40B USA Oracle Oracle NetSuite CRM
Zoll Medical Healthcare 2500 $700.0M USA Oracle Oracle NetSuite OneWorld

Source: Apps Run The World, April 2019

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