digital economy

NetSuite to Leverage Oracle’s Global Resources and Reach

Massive Global Expansion Initiatives Planned

Back in December 2016 Mint Jutras posed the question: Does Oracle’s Acquisition Mean More, More, More for NetSuite? And if it represents more, is it more of the same or something new? The answer back then was, “Yes.” While this is one of a long list of acquisitions by Oracle (i.e. more of the same), there were indeed some new twists. The first new twist was the declaration that NetSuite would continue to enjoy an unprecedented level of independence as a separate global business unit (GBU). Secondly, the NetSuite products will “live forever.” Oracle would not only continue to invest in these products, but invest heavily. And finally, NetSuite would gain entrance to global markets instantly.

“Globalization” was indeed one of three major announcements at the 7th annual SuiteWorld in Las Vegas. Suiteworld 2017 was NetSuite’s biggest event ever, providing the perfect stage from which to announce its global strategy, along with two other initiatives: Suite People and SuiteSuccess. More on those other two announcements in separate reports. Here we focus on the massive global expansion initiatives planned for the Oracle NetSuite Global Business Unit.

Where Does NetSuite Fit?

Because NetSuite’s products are now part of Oracle’s (extensive) product portfolio, it is important to first understand where they fit, not only within the Oracle portfolio, but also the market as a whole. The NetSuite GBU will be positioned for businesses with 1,000 employees or less, although the product will be designed and available for anyone from small business to enterprise. Oracle’s eBusiness Suite will be positioned for those with more than 1,000 employees. While these are not the only two ERP products in the Oracle portfolio, they are clearly the two most strategic. Other ERP solutions (acquired from Peoplesoft and JD Edwards) live on but do little to help Oracle achieve its publicly stated goal to be the first company to reach $10 billion in cloud revenue.

While Oracle has drawn a line in the sand in terms of number of employees, that line is indeed drawn in the sand and not in concrete. It will be allowed to shift based on specific customer/prospect requirements or preferences.

It is in that context that we observe NetSuite OneWorld is already in use in more than 100 countries around the world. That might sound like NetSuite already had quite a global reach. However, much of this global reach was attained through selling to multi-national companies headquartered in the United States. Yes, it had some (physical) presence outside the United States, but not enough to fuel the kind of explosive growth Oracle feels is possible.

It also might sound like targeting small to mid-size enterprises (SMEs) is a big change for NetSuite GBU. Indeed, some of its competitors used these multi-national deals as proof that NetSuite was abandoning the small to midmarket. The reality was (and is) a bit different. While a good chunk of NetSuite’s revenue came from a few large enterprises, the bulk of its customers have always been firmly planted in the midmarket.

Even the midmarket is driving software companies to go global these days. It used to be only large companies that were multi-location, multi-national enterprises. But the Internet has leveled the playing field, allowing even small companies to be able to build a global brand. Operating across a distributed environment has become a way of life for a large percentage of businesses today, even smaller ones.

Figure 1: Environments Are More Distributed and Remote

Source: Mint Jutras 2017 Enterprise Solution Study

In fact 81% of all survey participants in the 2017 Mint Jutras Enterprise Solution Study had more than one operating location served by ERP (Figure 1). This percentage has been growing steadily over the past few years and even those with annual revenues below $25 million average 3.53 operating locations. In addition, almost half (47%) are already multi-national, dealing with the complexities of multiple legal entities.

The digital economy has created unprecedented opportunities. To capitalize on this opportunity, small to mid-size companies will need to take some chances and be willing to fail, but fail (or succeed) rapidly in order to move on to the next opportunity. They will need to leverage technology in order to simplify, manage, control and reduce risk, but they will also need to move quickly. They will not have the deep pockets or the time needed to build out infrastructure. They can’t afford to take years to implement solutions to run the business.

Cloud ERP to the rescue. No capital expenditure required; no need to build out a data center, or even put hardware or a huge information technology (IT) staff in country. And the market seems to be increasingly receptive to cloud and SaaS.

Mint Jutras has been following perceptions and preferences for SaaS versus on-premise software for years now. Between 2011 and 2013, the demand for traditional on-premise deployments went over a cliff. Since then, prior concerns over reliability and security have been addressed and the preference for SaaS (versus hosting) has continued to climb.

Figure 2 shows the progression of preference over the past several years. The question posed to survey respondents was this: If you were to select a solution today, which deployment options would you consider? Respondents are allowed to select all that apply. Today, SaaS is the top choice.

Figure 2: Which Deployment Options Would You Consider?

Source: Mint Jutras Enterprise Solution Studies

* Option added in 2015

And this year we added a follow-on question, displaying back the options that would be considered and asking respondents to select a single first choice. Seventy percent (70%) of those that would consider it also selected SaaS as their first choice.

But with this opportunity also comes challenges in satisfying the specific needs of new geographies, and also in maintaining governance and control. In the past all these different operating locations may have been left to their own devices to select and implement a local operational solution. Those days are long gone. Today, most all companies define and adhere to corporate standards for enterprise solutions (Figure 3).

Figure 3: What kind of standards do you have?

Source: Mint Jutras 2017 Enterprise Solution Study

While Oracle hopes to be the standard at corporate headquarters, NetSuite is trying very hard to establish its OneWorld product as that corporate standard in the operating divisions. But this places an added burden on the local solution to play nicely in a multi-national corporate setting. Mint Jutras has long been a fan of cloud solutions as an enabler of growth, particularly when it comes to expansion beyond national boundaries. And yet cloud alone isn’t enough. Not only might you have multi-language requirements, but also the solution must be localized to meet the tax and regulatory requirements of the new location. And finally, you need special functionality to handle multi- company financial and operational needs once you establish multiple legal entities.

NetSuite is currently localized for eight different countries and has long been planning to expand to more. Those plans have now been accelerated. With the new infusion of capital, it has an additional 22 on the drawing board.

NetSuite has also been working on that added functionality. New features announced at SuiteWorld 2017 include new advanced intercompany journal entries, complete with a new auto-balance button and automated currency conversion. In keeping with the theme of SuiteWorld – Next Starts Now – NetSuite also laid out what’s next for global functionality:

  • Global customers, employees and projects (think global master data management)
  • Global business process configuration (think interoperability between operating sites)
  • Automated inter-company accounting (not a simple task and while the devil is in the details, Oracle has a lot of experience to bring to bear)
  • Suite Tax (think of all the different tax methodologies around the world)
  • Cash management
  • Enhanced Suite GL and Suite Segments
  • Year end closing journal

These plans represent a lot of work ahead, but NetSuite is planning on adding a lot of new employees to pitch in and help. In fact in fiscal year 2018 (which is starting soon), NetSuite plans to hire more people than were working at NetSuite in 2012. However, don’t expect the pace of innovation to ramp up instantaneously. NetSuite first has to find the talent, train the new hires on its technology and its solution, and only then will they be productive. Once that happens, we expect the pace of development to increase sharply.

But that pace will be needed in order to deliver on the additional plans NetSuite has laid out. Note these come directly from Oracle + NetSuite’s press releases:

Data Centers

NetSuite plans to more than double its data center footprint from five data centers globally to 11. NetSuite currently operates five data centers, three in North America, one in Amsterdam, Netherlands and one in Dublin, Ireland. NetSuite expects to add a fourth North American data center in Chicago. As part of the global expansion plans, NetSuite will leverage existing Oracle data centers in Europe and Asia. In Europe, NetSuite is scheduled to open a data center in Frankfurt, Germany. In Asia Pacific, NetSuite plans to initially launch facilities in Australia and Singapore, followed by Japan and China.

Field offices

NetSuite expects to double its global presence, expanding from offices in 10 countries to 23 spread across the globe. NetSuite is establishing a new presence in Argentina, Brazil, Colombia, Chile, Mexico, France, Germany, Sweden, Dubai, China, India, Malaysia and New Zealand. In addition, NetSuite is expanding headcount in existing field offices by over 50%.

Development centers

The NetSuite global business unit is leveraging existing Oracle development centers across India, China and Japan. The development centers will be able to accelerate the development of international, regional and local features and functionality within NetSuite OneWorld.

Summary and Conclusions

We go back to the initial question posed: Does the Oracle acquisition of NetSuite represent more, more, more for NetSuite? The answer is clearly yes. These announcements represent a massive expansion plan to accelerate its international growth. The expansion initiatives will enable Oracle NetSuite Global Business Unit to launch more data centers, more field offices and more development centers globally, which will help to bring the suite to more organizations around the world.

This expansion will no longer be led by the US-based NetSuite customers, but instead by a carefully planned strategy. And as a result, we will believe NetSuite customers will benefit from Oracle’s vast global scale and resources. While NetSuite has poured as many resources as it could afford into developing the products, Oracle has deeper pockets and can also bring its own resources to bear in terms of products, people and global reach. So NetSuite will enjoy “more of the same” …but “more” is a relative term. In this case, we believe “more” means “lots more.”

As one customer puts it: “Oracle’s increased investment in all areas of the NetSuite product and operations offers more opportunities to customers, particularly growing international businesses like PageGroup,” said Mark Hearn, Finance Director of recruitment company PageGroup. “As we continue our global roll-out of NetSuite OneWorld, I am reassured by the even greater capabilities and resources behind the product. A commitment to strong and sustained investment in OneWorld functionality will enable international companies like us to continue to grow with NetSuite in the future.”

While many in the industry have pointed to Oracle’s prior acquisitions as proof positive that NetSuite will fade into the sunset, Mint Jutras believes this will be very different. Thus far, it has had little impact on NetSuite employees, except to add strength to future plans. As Oracle CEO Mark Hurd said to SuiteWorld 2017 attendees, “We didn’t spend $9.3 billion to kill it.” Instead Oracle is looking for NetSuite to pay for itself quickly with this massive global expansion.

Tagged , , , , , , , , ,

New Group at Infor Helps Customers Navigate Digital Disruption

Hook & Loop has been part of Infor now for several years. It is the “creative lab” inside of Infor. Notice I didn’t say “creative agency.” That is a term that is typically associated with advertising agencies, full of those creative types like writers and graphic artists, even filmmakers. There are a lot of those creative types at Hook & Loop, but its charter goes way beyond that of the typical agency. In their own words, Hook & Loop’s is “a collaborative team of designers, information architects, developers, project managers, writers, and filmmakers who are redesigning the user experience for Infor’s software products and envisioning the future of the Infor brand itself. Our mission: change the way people work and think about work.”

Back in early 2015, Diginomica’s Jon Reed did a great job of describing what Hook & Loop was setting out to accomplish. If you aren’t up to speed, you might want to take a moment and review Jon’s Inside the Enterprise UX revolution – a day at Infor’s Hook & Loop. But for here and now, it suffices to say that the Hook & Loop charter went beyond a fresh new user interface (UI). It set out to create a whole new “holistic” user experience (UX) using a unified design methodology.

Infor is now taking this a step further and spinning out a new group from Hook & Loop. It’s called H&L Digital and its proclaimed mission is to create “Differentiation through personalized digital experiences at scale that help enterprises outpace digital disruption and unlock digital growth opportunities.” That’s a mouthful that exposes Hook & Loop’s “agency” lineage.

So let’s move beyond the “agency-speak.” The real purpose of the new group is to help customers navigate digital disruption and achieve a competitive advantage. How do they do that? At its recent Innovation Summit (really an industry analyst day held at corporate headquarters in New York City), Infor attempted to answer that question through examples. We heard about some of its biggest, best and most impressive projects.

Among them was Sports City, a large franchise of stores featuring sports apparel and accessories. H&L Digital helped them transform their brand from a big box retailer surviving on promotion-driven transactions to a branded, sporting goods community leader, attracting those with a passion for sports. This was as much of a branding exercise as it was an ecommerce project, but indeed there were many moving parts from store design to custom application development.

Part of the project was developing an app for coaches of clubs, community and school teams. Through this app, coaches can share online all the equipment kids on the team will need, including specific product options and recommendations within different price ranges and even a pre-owned marketplace. Equipment fitting and a fitting room app also help take the guesswork out of shopping for equipment. That results in Sports City brand loyalty and increased sales. Coaches also can set up their own dashboards for player performance and team optimization, making Sports City the “go to” online destination for all their needs – a far cry from a big box retailer.

H&L Digital also helped transform Nutritious Feed Co. from an animal feed supplier to an animal health provider. Several different customer-facing applications emerged from that project, including Connected Cow Tracker, Total Farm Management, Farmer App, and Animal Health – hardly apps that are in the typical enterprise app portfolio. But the project also attacked more universal challenges like employee engagement and operational efficiency.

Through these presentations and others I was struck by how truly innovative this approach is. H&L Digital helped these companies not only with tools to help them run their businesses; they helped them uniquely re-brand themselves in a completely new light within a digital economy. But I also walked away thinking, these are very big, very custom projects. Translation: very expensive.

In a way it felt like déjà vu all over again. These “custom” projects were reminiscent of the homegrown apps of the 70’s and 80’s. Nobody believed you could have pre-packaged apps back then. Companies believed themselves to be unique and therefore built their own applications. And of course only large companies with deep pockets could (can) afford something with this kind of “Wow!” factor. So the big companies got bigger and stronger and smaller companies “made do.”

Of course, we all know what happened after the 70’s and 80’s. Over time vendors were able to package more functionality and more flexibility, at a more affordable price, so the playing field was leveled and virtually everyone began using pre-packaged solutions. But sitting through these presentations I was beginning to feel like the playing field was no longer level. There would definitely be the “haves” and the “have nots.” Somehow I don’t see Connected Cow Trackers and coaching dashboards becoming part of a standard enterprise application portfolio. So is H&L Digital destined to simply be a high-end provider of custom “luxury” apps?

That’s what I thought at first, but a visit to the H&L Garage (where all this stuff is built) made me think differently. The “creative” teams at H&L Digital do indeed start with a pretty blank sheet when they start to strategize and design. But when it comes to delivering new applications, it is very much an assembly process. The teams talk a lot about creating “wizards.” Wizards essentially assemble a series of components – some custom, some standard (re-usable) under a unique, custom-designed skin, so to speak. This is what makes each project look and feel entirely unique and custom. But if you look under the covers, the components of many of these “unique” processes share a lot of common components.

Outfitting a little leaguer is really just a standard configure-price-quote function and Infor has standard products that deliver that functionality. Is managing player performance really all that different from a sales manager monitoring sales rep performance? The metrics used might be different, but the dashboards probably look and behave quite similarly. Couldn’t you use a lot of the capabilities of monitoring movement of a fleet of trucks to help track cows? I bet “maintenance” schedules of equipment and cows share some common components as well, even though the user interface might appear very different.

So far all these projects have a healthy dose of custom development. But the more of these components Infor develops, the more it will have on the shelf. Over time, more and more components will be standard. This is crucial because companies of all sizes face risk of digital disruption.

Our 2016 Mint Jutras Enterprise Solution Study asked survey respondents to identify the level of risk of their industry (and their business) being disrupted, citing examples like Uber, Airbnb, NetFlix, etc. Almost two thirds (63%) face medium to high and imminent risk and the risk level of small companies (those with revenues under $25 million) is only slightly lower.

Figure 1: How much risk do you face in your industry being disrupted?

Infor fig 1Source: 2016 Mint Jutras Enterprise Solution Study

And yet small to mid-size companies are not nearly as well prepared to face these challenges.

Figure 2: How prepared are you for today’s digital economy?

Infor fig 2Source: 2016 Mint Jutras Enterprise Solution Study

So if Infor is able to successfully come down market and satisfy the needs of both large and small companies – even those with small budgets – there is certainly a big market waiting for it. I, for one, am routing for the little guys and hope to see H&L Digital continue to leverage Infor’s vast tool set and product portfolio to become the “go to” vendor for all companies facing the challenges of digital disruption.

 

 

Tagged , , , , , , , , , ,