Wednesday, 18 May 2016 03:25

Zach Nelson explains the secrets of NetSuite's success

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NetSuite CEO Zach Nelson explained at SuiteWorld 2016 the differences in the design of his company's product that make it the fastest growing financial management software, taking market share from its more traditional rivals like SAP.

Nelson attributes NetSuite's explosive success — from revenues of $67M in 2006 to $415M in 2013, $741M in 2015, and on target for a run rate of $1B in 2016 — to the original vision by founder Evan Goldberg of running in the cloud.

He said the company had continued to grow profitably while still investing in the product; it was the fastest-growing company among the top 10 financial management system vendors worldwide.

NetSuite increased its market share by 45% in the last year. Over the same period, Microsoft grew 10.6% — "they must have acquired someone," Nelson joked — while Oracle grew 8.3% and SAP, once king of ERP, lost 12% market share.

The secret to the success, according to Nelson, is the design choices by Goldberg when he first started NetSuite. These choices have continued to serve the company well, he said, adding, "the founding vision of NetSuite is still the basis of everything we do today".

"The cloud has completely won, certainly in our space ... and will continue to win in every industry"

Nelson said that Goldberg had three goals when he conceived NetSuite. He wanted to build a system to run a business; deliver only over the cloud; and include native e-commerce.

NetSuite has hit achieved every goal, Nelson asserted.

With respect to system design, he said that if Goldberg had written his ERP system 20 years ago he would have likely adopted the model that all other ERP systems are based on – General Ledger in the middle, and key modules like fixed assets, cash management, accounts payable, accounts receivable, inventory, all based around it.

Yet, when you run a business, "nobody looks at the GL," Nelson says. "They look at the transactions that make up the business – orders, invoices, subscriptions, purchase orders. This is the heart of the system, not the General Ledger. That's what we built. Transactions are in the centre."

A further design choice of NetSuite, Nelson said, was that "customisation is not a dirty word", referring to the anecdotally-famed difficulty of customising alternate ERP systems to your own business processes. An old truism about SAP is that it is often easier to re-engineer your business to suit SAP than to twist SAP to suit your business.

Yet, Nelson says, "we don't know how to run every company on the planet".

Unlike traditional ERP systems where once you implement it, it is frozen in time, Nelson says all NetSuite customers have the same core product but no two NetSuite installations look alike. "There are more deep functions for industries vertically and horizontally," he says. "We continually innovate on the core but allow customers to extend, connect and integrate to anything ... and we have over 260 certified apps developed by the partner network."

Vertical apps can also be built by developers, building their own apps and processes on NetSuite, with Nelson referring to a business that developed a specialised system for craft beer brewers in Colorado, that sits on top of NetSuite.

To further illustrate the point that NetSuite and customisation fit together, Nelson said the two most used features in the product were custom fields and custom records, respectively. Custom fields allow all sorts of information to be added, and custom records give NetSuite users the ability to change the data model for their business and add entities.

(For the curious, the next most-used features are journal entries, invoices, sales orders, purchase orders and items shipped.)

Turning his attention back to the cloud, Nelson said NetSuite's cloud-only delivery made it inherently more secure. If an issue was found, a fix was implemented and every NetSuite user benefitted immediately. By contrast, SAP has issued security patches in years past which still remain unapplied by customers. Last year, research indicated 95% of SAP installations are insecure.

A further benefit of the cloud, Nelson said, is the access it provides. A traditional ERP system is designed as a closed system, with controlled access. Yet, "NetSuite allows anyone in your company to access it through a browser – and not just your internal staff, your customers and vendors and other third-parties too," Nelson states.

The built-in native e-commerce facilities mean "every one of our customers can now deliver an Amazon.com-like experience", he said.

"The cloud is the last computing architecture," Nelson says. "All your personal and business data on every device, everywhere – what else is there?"

The cloud is also "the last business architecture. If you aren't building a business that gives your customers access to all their data anytime, everywhere on any device you're going to have trouble..

"It's easier for companies that started in the last five years, but more difficult for bigger, established companies. So one of NetSuite's other goals is to 'help big companies act small' to help them go where they need to go in the cloud economy."

David M Williams is attending SuiteWorld 2016 as a guest of NetSuite.

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David M Williams

David has been computing since 1984 where he instantly gravitated to the family Commodore 64. He completed a Bachelor of Computer Science degree from 1990 to 1992, commencing full-time employment as a systems analyst at the end of that year. David subsequently worked as a UNIX Systems Manager, Asia-Pacific technical specialist for an international software company, Business Analyst, IT Manager, and other roles. David has been the Chief Information Officer for national public companies since 2007, delivering IT knowledge and business acumen, seeking to transform the industries within which he works. David is also involved in the user group community, the Australian Computer Society technical advisory boards, and education.

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