NetSuite

Oracle Delivers New Release of Next-Generation Cloud Applications

 

Today Oracle announced major innovations across its Oracle Cloud Applications, further extending what is already a suite of cloud applications that is both broad and deep. Release 13 includes hundreds of new features, several new products that are extensions to the current solution, and improvements to the user experience.

If Oracle customers are like the survey respondents to our 2017 Mint Jutras Enterprise Solution Study, Oracle is hitting on all cylinders in terms of what users want.

What Users Want

In our latest study we asked survey respondents to prioritize five different approaches to innovation on a scale of 1 to 5, where 5 was the highest priority. This was a stack ranking, so they were not allowed to give any two the same ranking.

Table 1: How do you want your application vendor to prioritize?

Source: Mint Jutras 2017 Enterprise Solution Study

Table 1 is sorted by the first column, which includes all respondents. While not every respondent selected “enhance existing functions” as their top priority, it clearly came out on top. Improving the user experience and extending the solution were number 2 and 3 respectively. Release 13 hits on all 3.

Note: We did have 54 Oracle customers represented in our total pool of about 600 participants, but given the size of the Oracle customer base, we don’t consider that sample size sufficient to be truly representative.

Given this is an announcement of Oracle’s Cloud portfolio, we also have to consider whether priorities are any different when looking at SaaS deployments, hence the additional 3 columns in Table 1. The short answer is no. While there are some slight variations in the relative priority, enhancing existing functions remained at the top regardless of deployment. Those running hybrid deployments (where parts are on-premise and parts are in the cloud) are a bit different, but it is a little harder to draw conclusions from this because of the high degree of variability across hybrid deployments.

We presume that many of these hybrid deployments resulted from a cloud strategy that leaves existing systems in place but surrounds them with cloud/SaaS solutions. This was in fact the top cloud strategy for two years running in our 2016 and 2015 studies, although not by a wide margin (Figure 1).

Figure 1: What best describes your cloud strategy?

Source: Mint Jutras 20176 and 2015 Enterprise Solution Studies

While we didn’t ask this question in 2017, we will continue to watch plans and preferences moving into the future as we observe a lot of movement away from legacy on-premise solutions (finally!)

Some Highlights

So what are some highlights of Release 13? Here are some provided by Oracle:

Oracle SCM Cloud

Oracle SCM Cloud Release 13 extends the SCM suite with the introduction of more than 200 major features and six new products that cover Sales and Operation Planning, Demand Management, Supply Planning, Collaboration, Quality Management and Maintenance. The new innovations are introduced “to help organizations transform their operating models to meet rapidly changing business demands by evolving from traditional supply chain systems to connected, comprehensive, agile, and customer-oriented supply chain management capabilities.”

Oracle CX Cloud Suite

Oracle CX Cloud Suite Release 13 introduces new innovations to Oracle Sales Cloud, which include enhanced mobile and data visualization capabilities, as well as a range of new capabilities that increase sales rep productivity. In addition, Oracle has extended Oracle CX Cloud Suite with the introduction of Oracle Engagement Cloud. The new solution combines sales and service capabilities to enable organizations to increase customer satisfaction, loyalty, and up-sell opportunities.

Oracle ERP Cloud

Oracle ERP Cloud Release 13 builds upon the solution with extended depth and breadth across FinancialsProcurement, and Project Portfolio Management (PPM) and adds deeper domain functionality including Dynamic Discounting and Multi-Funding. In addition, industry coverage for higher education, financial services, and manufacturing, as well as expanded country localizations for India and Brazil are included.

Oracle HCM Cloud

Eighty percent (80%) of enhancements to Oracle HCM Cloud Release 13 were customer driven, extending Oracle’s commitment to customer success. Release 13 enhances Oracle’s complete, end-to-end solution for all HCM processes and introduces expanded user experience personalization and branding, making it easy for everyone to connect on any device. It also includes improved capabilities to support the needs of customers with unionized workforces, such as retail and healthcare, with flexible work models.

Summary

All told, it looks like Oracle’s interest in being the biggest and best cloud solution provider for enterprise applications has not waned. First the acquisition of NetSuite and now what seems to be a very major release as a result of its own development efforts. Combined these efforts indicate Oracle is moving ahead full throttle.

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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.

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Oracle’s Cloud Journey… Accelerated

It is quite clear Oracle has set out to be the undisputed leader in cloud computing. Chairman and CTO Larry Ellison publicly stated his goal of Oracle becoming the first company to reach $10 billion in cloud revenue. The acquisition of NetSuite late last year certainly gave Oracle a big boost in meeting that goal.

In fact, in welcoming attendees to SuiteWorld 2017, CEO Mark Hurd declared Oracle to be in a class alone – the only IT company capable of co-existing on-premise or in the cloud. I have to admit this statement confused me a bit, since there are lots of software solution providers that have taken their on-premise solutions to the cloud, priding themselves in offering choice in deployment models. But I with other, more pressing questions to ask, I never got clarity on this statement while I was at SuiteWorld.

However, the week after SuiteWorld, I had the opportunity to visit Oracle’s Redwood City campus and attend an Oracle Media Day. The theme of the day was cloud and I think I “get” it now.

In the context of NetSuite and SuiteWorld, we’re talking about software as a service (SaaS), and more specifically, enterprise application software. That’s the world I live in and where my mind immediately goes when I think of cloud and “as a service.” I suspect I am not alone here. But that is obviously not all Oracle does. Oracle also provides infrastructure (database and middleware) and a development platform. And more recently it has ventured into the world of data as a service, recognizing data is an important key to unlocking better business outcomes.

Other vendors might offer one or two of these categories…

  • Many of its ERP competitors might offer enterprise applications on-premise or as SaaS solutions.
  • Salesforce offers enterprise applications, along with a development platform (PaaS). But Salesforce is exclusively SaaS and PaaS and doesn’t offer anything on-premise.
  • Amazon is focused exclusively on infrastructure (IaaS).

Oracle is the only company to offer all three (infrastructure, platform and enterprise application software) both on-premise and as a service.

Why is this significant? To quote Mr. Hurd, “We will lead a decade long transition to cloud. The hybrid world will last a long time.” I would agree that this hybrid world will last a long time. While preferences for software deployments have shifted dramatically, there is still a lot of software installed on premise today and my research indicates it will take longer than a decade to replace it. This shift of software to the cloud can’t happen without supporting infrastructure and platforms.

Preferences Have Shifted to SaaS

While years ago ERP could have been called the last bastion of resistance to SaaS, this resistance has been dissipating quite rapidly over the past several years. We have been asking the following question for years now: If you were to consider a new solution today, which deployment options would you consider? Participants are allowed to select as many as they wish. A summary of aggregated answers is shown in Figure 1. We start in 2011 and skip every other year just to fit it on the chart. SaaS is currently the option most likely to be considered and the willingness to consider traditional on-premise solutions dropped off dramatically between 2011 and 2013.

Figure 1: Deployment Options that would be Considered Today

Source: Mint Jutras Enterprise Solution Studies

*Option added in 2015

This year we added a follow-on question, displaying back the deployment models the participant selected and asking which was the first choice. Over half (51%) of all respondents selected SaaS. Furthermore, out of the 325 that would consider SaaS, 225 (~70%) selected it as their top choice.

But even with this level of interest, the actual shift to the cloud can’t happen overnight. We asked our 2017 Mint Jutras Enterprise Solution Study participants to estimate the percentage of all business application software they have running in the cloud today and we also asked them to project that into the future. Even 10 years out (and beyond) we still see over 30% of business software will not have transitioned to SaaS (Figure 2).

Figure 2: Percentage of Business Software Deployed as SaaS

Source: Mint Jutras 2017 Enterprise Solution Study

Yet with 40% of business software deployed as SaaS today, the shift has definitely begun. So this begs the question: How will they get there? What path will companies take? Our 2015 and 2016 studies asked this question (Figure 3). The results validate Mr. Hurd’s conclusion that the hybrid world will last a long time.

Figure 3: What Best Describes Your Cloud Strategy?

Source: Mint Jutras 2015 and 2016 Enterprise Solution Studies

No single strategy dominated, but less than one in four operate predominantly in the cloud today. Few (8% in 2015 and 11% in 2016) are taking specific action to move directly to the cloud, and many more prefer instead to supplement existing solutions with cloud applications and perhaps replace on-premise solutions over time.

We didn’t see all that much change in cloud strategies from 2015 to 2016, so we moved on to other questions in 2017. But we will likely revisit this question in 2018 or 2019. We anticipate that even those not anxious to make any move today might be influenced by the cloud momentum, as well as the growing number and variety of options available.

Oracle Building Cloud Momentum

In the meantime, Oracle is building its own cloud momentum. In its latest quarter, cloud bookings of annual recurring revenue (ARR) were up 73%. Current run rate of cloud revenue puts it at $5 billion (annualized), which means Mr. Ellison is at least halfway to his goal. This includes 1,125 new SaaS customers and 908 SaaS expansions. With the NetSuite acquisition, the number of SaaS customers grew from 13,103 to over 25,000.

Yet interestingly enough, while you might think the differentiation of Oracle as the only IT company capable of supporting on-premise and cloud throughout the full stack might be most appealing to its existing customers, Oracle says most cloud customers are net new. This bodes well for Oracle being able to grab more cloud market share. But it will be even more interesting to watch and see if this cloud momentum starts to permeate through its own installed base. This would serve to further accelerate cloud revenue growth.

And Oracle’s current capacity, with 21 data centers, supported by a flat, wide network with fast storage and huge bandwidth, seems like it should be quite appealing to its own customers, comparatively speaking. In fact Oracle presented one comparison between Oracle and Amazon Web Services (AWS) done by one of its customers, showing Oracle was three to seven times faster, at half the cost. And the workload portability to an Oracle data center should be simpler and easier because Oracle can offer a choice of deployment with the same software, the same APIs, and the same commercial terms.

Oracle has outlined six different “journeys” to the cloud, five of which start with existing (legacy) on-premise solutions. This might involve optimizing on-premise before shifting to either a public cloud or a cloud at the customer’s site. It might involve lifting and shifting workloads to a public cloud, creating a new solution with PaaS or modernizing functions by moving to a new SaaS solution. The final journey is one of a new company (or division or business unit), born in the cloud.

Trek Bicycles is an example of one customer that created a new cloud solution to address a specific pain point: processing claims (repairs). Service is a huge part of Trek’s business, and dealers were spending 6-7 minutes in submitting claims, and the average retailer submits about 2,000 claims per year. Retailers renting bikes in the mountains of Europe were rising early and getting in long before the shop opened simply to enter claims. They needed a better way. So Trek created a cloud-based mobile app. Now, whether partners are in their shops or at a trade show or event, they login to TREK claim entry, send a photo, registration of the bike, and easily enter a claim in under two minutes.

Trek is one example of this hybrid world. In the back office, it is running JD Edwards on premises.

One More Stop on the Cloud Journey: The Data Cloud

There is one more piece of the cloud puzzle, or rather one more step along the cloud journey. This one involves data – not the kind of data stored in and managed by Oracle enterprise applications, but the kind of data that lets you truly understand your industry and your customers. Oracle posed a good question during the Media Day: Would you rather spend money working on ERP or getting to know your customers better?

This is a no-brainer for most companies. They would much rather invest (time, effort and money) directly in growing the business, rather than in back-office solutions that offer more indirect benefits. By putting your ERP in the cloud you are relieved of much of the burden of managing the ERP installation. By tapping into the Oracle Data Cloud you take advantage of the investments Oracle has made, investments in companies like Moat, Blue Kai and Datalogix to make big data available to fuel marketing campaigns and strategic business decisions.

Summing Up

Oracle has made very significant progress in attacking its goal of cloud domination through both organic development and acquisitions. It is the only company on the planet today that can claim to have a “full stack” including IaaS, PaaS and SaaS, while also maintaining the same categories on-premise. And it adds DaaS as frosting on the cake.

However, in order to meet its goal of being the first to reach $10 billion in cloud revenue, it will have to continue its momentum of adding new customers, but will likely need a good portion of that revenue to come from transitioning its own on-premise installed base to the cloud. Before that happens, those customers will need to see the value of the move and be confident that Oracle is the best choice to get them there.

Many companies today, including many Oracle customers, have invested a lot of blood, sweat and tears (not to mention dollars) in their current on-premise implementations. They may be loath to make any changes, particularly if they are heavily customized.

Many still view enterprise applications, like ERP, as they would brain surgery: You don’t do it unless the patient is dying. Mint Jutras has long been trying to change that way of thinking, preferring to treat it more like joint replacement. When do you replace a knee or a hip? When it becomes too painful or when it prevents you from doing what you need (or want) to do. But joint replacement is still major surgery and there is some downtime and a recovery period involved. Nobody volunteers for it without the promise of significant improvements. Oracle’s challenge will be twofold. First it must convince customers that the journey is worth the effort. And secondly, it must prove that transitioning to the Oracle cloud is less invasive surgery, with a quicker recovery period. Of course if a company just wants to lift and shift its current implementation to the cloud, its current solution provider will be its first and best choice. But this is more akin to a hosted environment. While there will be some value in doing this, it will leave many of the benefits of a true SaaS solution on the table. Of course not all of Oracle’s ERP solutions are available as SaaS today and NetSuite is the only multi-tenant SaaS ERP solution in its portfolio. But the breadth and diversity of Oracle offerings provides many different paths that might be taken. The task at hand will be to pick the right path, the one that brings the most value to the customer.

If Oracle can accomplish this, it is certainly well positioned to accelerate its own cloud journey and be the first to reach its goal.

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Does Oracle’s Acquisition Mean More, More, More for NetSuite?

Something New or More of the Same? Yes

On December 7, 2016 Oracle completed its acquisition of NetSuite. While Oracle acquisitions are nothing new – the company has executed dozens and dozens of them over the years – this one is indeed a unique mix of new and “more of the same.” NetSuite is not the first Enterprise Resource Planning (ERP) player to be acquired by Oracle, but there are some “firsts:”

  • The first ERP acquired that was born in the cloud, bringing along that all-important cloud revenue (not to mention SaaS DNA)
  • The first time Oracle has openly and loudly declared the “products will go on forever”
  • The first time the acquired company will be run as a separate global business unit, preserving the brand identity and keeping the leadership largely in tact

Oracle and NetSuite have always had close ties. Larry Ellison invested early in the company and owned close to 40% of the stock prior to the acquisition. Zach Nelson, former CEO of NetSuite, has a very close relationship with Mr. Ellison. And the foundation on which NetSuite’s products are built takes advantage of the “Oracle stack.” That said, they were still rivals. In fact, prior to closing, both companies claimed they were the #1 Cloud ERP company. By combining the two, Oracle is now declaring victory in that battle.

But there are also a couple of “softer” firsts. Perhaps because of the Ellison-Nelson relationship, or perhaps because of NetSuite’s proven success in the market (or both), never before have we seen such respect from Oracle for the accomplishments of the target company or such a welcoming embrace. Mark Hurd, in addressing a group of influencers (including press, industry and financial analysts) lauded NetSuite for “serving a community we have not served well.” That statement alone is one for the record books: Oracle (the company which previously claimed to be the #1 Cloud ERP company) admitting it had not served a market well.

All combined, this bodes well for the NetSuite community.

What “More” Did NetSuite Gain?

When the announcement of Oracle’s intent to acquire NetSuite first hit the wire in July, it was quite clear what Oracle was looking for: more share of the cloud market. “Cloud” is where it’s at today. 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, preference for SaaS (versus hosting) has continued to climb.

Figure 1 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.

Figure 1: Which Deployment Options Would You Consider?

Source: Mint Jutras Enterprise Solution Studies

*Option added in 2015

Combine these preferences with Mr. Ellison’s publicly stated goal of being the first company to reach $10 billion in cloud revenue and you have a pretty good idea of what Oracle was looking to achieve.

The benefit to NetSuite was perhaps not quite as clear. The company was already successful on its own. While it never seemed to record a profit under GAAP reporting, it did show positive cash flow and was profitable by non-GAAP measures. This was largely due to the way GAAP treats stock-based compensation and the fact that just about every employee owned a little piece of NetSuite. So NetSuite was able to invest in the development of its products and was already making steps to expand globally.

But that’s the key to unlocking the motivation… from the NetSuite point of view they couldn’t do either fast enough. As a public company, the leadership was often forced to focus on metrics other than those most conducive to growth. As a business unit of Oracle, the team can focus on what matters most to them, not Wall Street. And it is clear, what matters most is bringing more products to more markets faster.

Being part of the Oracle family means NetSuite gains access to Oracle resources in the form of:

  • Supporting products (think platform and infrastructure). This includes Oracle’s Platform as a Service (PaaS), Infrastructure as a Service (IaaS) and Data as a Service (DaaS).
  • More applications to sell (think complementary extensions like supply chain management, human capital management, enterprise performance management and configure-price-quote). NetSuite already had some of these and partnered for others, but this significantly adds product to the bags the sales representatives carry.
  • More people to develop NetSuite products. Oracle has pledged increased funding. It is not clear whether these will be new hires or people who already work for Oracle today on other products. It is likely to be some combination of both.
  • Global presence (think people and business infrastructure around the world) – instantly. NetSuite had started to expand, but only offered support in English and Japanese. Oracle not only has the additional language skills in support, but many more support locations. It also has far more data centers around the world to address the issues (both real and perceived) of where data must be stored when operating in the cloud. This of course, also puts additional feet on the street globally, not only to support, but also to sell.

Conclusion

We go back to the initial question posed: Does the Oracle acquisition of NetSuite represent something new or is it more of the same? The answer is yes. While Oracle is an old hand at acquisitions (so more of the same), this one does have some “firsts,” so there is indeed something new. Oracle has declared the NetSuite products will “live forever,” so this is an instance of “more of the same.” Yet 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.”

While there may have been some initial trepidation, particularly from NetSuite customers who specifically chose not to purchase a solution from Oracle, it would appear that Oracle is intent on allaying those fears. By operating the acquired company as a global business unit, it preserves the perceived value of NetSuite as a pioneering SaaS vendor. By committing to the continued development of the products while adding depth and weight to its offerings, it would appear product development will be accelerated. And NetSuite gains entrance to global markets instantly. From the outside looking in, Mint Jutras is actually surprised (and pleased) to say that it seems like a win-win.

PS: For those of you not familiar with NetSuite, here is a quick primer:

NetSuite is a leading provider of cloud-based business management software, delivered exclusively as software as a service (SaaS).

Some quick facts about NetSuite at the time of the acquisition:

  • Founded in 1998
  • Publicly traded on NYSE: “N”
  • 5,350 employees
  • $741.1 million in annual revenues for FY 2015, ending 12/31/2015
  • Grown by 30%+ in each of the last 16 consecutive quarters, as of June 30, 2016
  • Used by 30,000+ organizations (includes subsidiaries and affiliates) in more than 100 countries
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Oracle and NetSuite: Separate Fact from Speculation

Since last week when Oracle announced it had entered into a definitive agreement to acquire NetSuite, I have been amazed at the volume of incorrect information and speculation and opinions thrown around as fact. Just this morning I read an article referencing the projected $9.3 billion transaction as the largest acquisition by Oracle since the Peoplesoft acquisition for $10.4 billion in 2014. Well… the author was only off by about a decade. Oracle announced the proposed merger in 2004 but the deal was not consummated until 2005. The article also stated that Oracle would run NetSuite as an independent company. That too is inaccurate. What Mark Hurd was quoted in the press release as saying was, “Oracle and NetSuite cloud applications are complementary, and will coexist in the marketplace forever. We intend to invest heavily in both products—engineering and distribution.” That is a far cry from saying the company would stay independent.

These are just a couple of examples. Many others are disclosing “the real reasons” for the acquisition as fact, when in fact these are just opinions and personal conclusions. I stayed silent because I never simply regurgitate a press release, and beyond the price of the offer and a few quotes by Oracle co-CEOs, NetSuite founder, CTO and chairman, Evan Goldberg and NetSuite CEO Zach Nelson, everything else is just speculation. NetSuite can’t talk about it and Oracle won’t. But with all the commentary, I feel compelled to remind my readers not to misinterpret opinions as fact.

I consider myself somewhat of a reluctant expert in M&A. During my 40+ year career I have survived 15 of them, sometimes as the acquirer, sometimes as the one acquired. Sometimes I was intimately involved in the details; other times I simply observed from the sidelines. Acquisitions often generate excitement, but also fear, uncertainty and doubt. Sometimes they go smoothly, but more often they are disruptive – to the companies involved, the individuals (employees) and even sometimes the market. In the end, they can be very unpredictable.

There are a few very common motivations for one company acquiring another:

  • Grab market share: Some companies would prefer to acquire new customers in blocks of hundreds or thousands, rather than closing them one by one. This can apply to grabbing more share of your existing market or entering a new one.
  • Fill a product and/or talent gap: It can be far easier to acquire functionality than to develop it yourself. This can make the company more competitive, provide cross-sell and up-sell opportunity, or both. But don’t assume there is any M&A pixie dust that will magically integrate products overnight.
  • Upgrade technology: Similar to filling a product gap, but at the foundational level. It is much easier to build a new product from scratch with newer technology (or acquire one) than to retrofit new technology into old products.
  • Eliminate a competitive threat: If you can’t beat ‘em, buy ‘em.

So… what do I think is the motivation behind this acquisition? I think it is mostly about cloud market share. Of course, this is my opinion, but Larry Ellison’s stated goal of being the first company to reach $10 billion in cloud revenue is a pretty good hint. A secondary factor may very well be the cloud DNA, so to speak, that would come with a company and solution born in the cloud.

And there is no doubt in my mind that is the direction most prospective buyers are pointed in as well. I have been asking the same hypothetical question in my enterprise solution studies for the past 10 years: If you were to select a solution today, which deployment options would you consider? While back in the 2006-2007 time period less than 10% would even consider SaaS ERP (back then I called ERP the last bastion of resistance to SaaS), those preferences have slowly shifted. Between 2011 and 2013 the percentage that would even consider a traditional on-premise deployment dropped off a cliff and today SaaS is the most widely preferred option (Figure 1). And while Oracle was late getting out of the SaaS gate, NetSuite was a pioneer.

Figure 1: Deployment Options That Would be Considered for ERP

SaaS Fig 1Source: Mint Jutras Enterprise Solution Studies

But I also believe the other 3 reasons contribute to the attractiveness of NetSuite to Oracle.

Oracle probably already has all the different pieces that NetSuite brings to the table (and more), but NetSuite brings them all together in a seamlessly integrated, end-to-end solution. When I ask my survey respondents to stack rank 10 different selection criteria for ERP, fit and functionality still takes the top spot, but is followed closely by completeness of solution. This is particularly important for small to midsize businesses that don’t have deep pockets or the IT staff to roll their own solution or even integrate different parts. While Oracle does play in the SMB space, NetSuite plays better, as evidenced by some competitive wins against Oracle (usually in the upper midmarket). And it is built on a solid architecture of advanced technology.

So there is a lot on the plus side of the equation for Oracle. What’s in it for NetSuite? If you can believe Zach Nelson’s enthusiasm (his quote: “NetSuite will benefit from Oracle’s global scale and reach to accelerate the availability of our cloud solutions in more industries and more countries. We are excited to join Oracle and accelerate our pace of innovation.”), NetSuite will be able to expand its solution footprint and its global reach faster. Only time will tell on both aspects and a lot depends on how and how well the acquisition is executed and the companies are integrated.

While it is true that NetSuite never achieved a GAAP profit, that was heavily influenced by stock-based compensation and it did not really suffer from cash flow problems. As a result, it also didn’t suffer from a lack of innovation. And there is more overlap between products than some enthusiasts would lead you to believe.

And what about global scale? NetSuite could benefit from Oracle’s global reach. But integrating sales efforts might prove tricky. So the jury is still out on that front as well.

And then there is customer sentiment. Anecdotally, you can find NetSuite customers that made a conscious decision to avoid doing business with Oracle. When the acquisition actually happens, will that cause NetSuite customers to jump ship rather than become Oracle customers? My guess is no. ERP is just too big an investment (of time and money) to make such an emotional decision. Will there be some attrition over time? Probably. But again, a lot depends on how the acquisition is managed and the net impact on support, prices and contracts. NetSuite has never been the cheapest date, so there is not likely to be any immediate sticker shock.

All told, I think there are a lot more questions than answers right now. In the meantime keep your ear to the ground, but be wary of those who think they already have all the answers.

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Top 10 Quotes from NetSuite’s SuiteWorld 2016

It has been an extraordinarily busy spring conference season. I personally attended 10 events over the past eight weeks and missed a few more because of scheduling conflicts. Of all those I attended, I think NetSuite’s gets the prize for the best sound bites produced in an event. Here are my top 10 favorite quotes from SuiteWorld 2016.

“I love the smell of GL systems in the morning.”

Not. Of course this was said tongue in cheek by Zach Nelson, CEO, and was actually a veiled reference to the context of the next quote. Zach (somewhat proudly) noted that Gartner’s ranking of NetSuite’s Financial Management System (FMS) had progressed from #8 in 2014 to #6 in 2015.

“We didn’t set out to build a Financial Management System (FMS). Our goal was to build a system to run the business.”

Actually NetSuite originally started with three goals: to build an end-to-end system, deliver it only over the cloud, and include ecommerce natively. Of course, in order to deliver an end-to-end solution, it needed a back office accounting solution, but that was just one piece of the puzzle, not the end game. Through the years they were tempted to put servers on premise, especially in the early days before Software as a Service (SaaS) had come into its own. But they resisted. And they made sure even the early solution had a web store.

“We spent $1 billion so you didn’t have to.”

Continuing on the theme of including eCommerce, Zach touted the speed of Suite Commerce, giving some statistics on how it outperforms other leading sites. In a follow-on to Zach’s opening keynote, CTO Evan Goldberg (also one of the original NetSuite founders) noted they had delivered a 33% faster sales order save and 40% faster Suitecommerce advanced page load time. Obviously there is a cost associated with delivering speed and performance, but not a cost that comes directly out of NetSuite customers’ pockets.

“Security bugs? We find ‘em; we fix ‘em. The next morning, all are running with the appropriate patches.”

The reference to security bugs was in the context of a security bug, purportedly reported to and fixed by rival SAP three years ago. Yet some customers had yet to apply the patch and were therefore still vulnerable. My tweet with this quote sparked a bit of a push back from someone coming to SAP’s defense:

This was an SAP API fix that broke ISV integrations if applied, hence SAP made optional. Cloud companies have similar probs

To which I responded: would venture to say in a #SaaS environment, problems don’t linger 3+ years

His response: API fix is a little different, SAP gave customers option because fix could break ISV integrations – it was a useful defect

“Useful defect?” Is there really such a thing? And have we really become so inured to fixes of any kind “breaking” integrations? I hope not.

But the real point here is the value of a multi-tenant SaaS environment. First of all, the customer is relieved of the burden of applying patches. The SaaS vendor pushes them out in (hopefully) a timely manner. And with only a single line of code to maintain, more innovation should come along faster.

The other implied benefit is the value of a platform that allows partners and customers to customize and extend the code without fear of it breaking when fixes and enhancements are delivered.

“Customization is not a dirty word at NetSuite.”

The caveat to this is obviously… as long as you can upgrade. NetSuite customers are all running the same code, yet all are a little different. One of the unique features of NetSuite’s platform (unique for a SaaS-only solution anyway) is the ability to make even complex changes to the data model with no negative impact. This feature is becoming more and more popular among NetSuite’s customers. Within the last year, the ability to add custom fields went from the 5th most used feature to number 1. This actually comes as no surprise to me. My 2016 Enterprise Solution Study asked survey participants what type of customization they required. Fifty-seven percent (57%) selected user-defined fields. Only custom and ad hoc reporting were more widely selected (63% and 62% respectively).

In fact much of the “customization” that is typically required by NetSuite customers does not require you to muck around in code at all. Much can be done through tailoring and configuring, or personalizing screens. But let’s say you want to develop a whole new function that is either very industry-specific or helps you differentiate your individual business. NetSuite does provide development tools for this, including SuiteScript. Per NetSuite: SuiteScript is a JavaScript-based scripting solution for sophisticated coding and debugging within NetSuite that enables developers to build new applications, processes and business rules.”

In addition, a beta version of SuiteCloud Development Framework has recently been released after a multi-year effort. This framework includes all the tools for coding that you know and love, now with team development collaboration, richer code completion, version control, change and dependence management (i.e. discover what code might break if you make this change).

“SuiteScript allows you to do anything your wife wants you to do.”

This quote came from Evan Goldberg, one of the original NetSuite founders. When not performing his duties as NetSuite’s chief technologist, his alter-ego manages his wife’s ecommerce site, which she happens to run on NetSuite SuiteCommerce. The new release of the NetSuite Development Tools has had a profound impact on all developers, including Evan and his alter-ego as both took the stage. While it was quite hard to decipher everything going on (the font was way too small for my eyes, and I haven’t written code in almost 4 decades), it was clear the new code created for Mrs. Goldberg’s web storefront was a lot shorter and faster..

“Our goal is to stay out of your way [to innovate] in your business.”

While first spoken by Evan, this phrase proved to be thematic, popping up in other keynotes and sessions as well. Revamped developer tools were just the beginning. What the NetSuite development team has accomplished with the tools is equally important, if not more so. Among the new features and enhancements were many in the finance area, a new SuiteBilling module, complete with support for new revenue recognition rules for ACS 606 and IFRS 15, and “intelligent” order management. NetSuite places the dual goals of streamlining the development process and customers’ business processes on equal footing.

Disruption caused by today’s digital economy makes digital transformation compelling and the need for agility crucial. Traditionally ERP solutions were more likely to hold you back than to enable transformation. Can NetSuite be an enabler? They can certainly try. And trying is even more important than ever as business complexity increases.

“In the cloud economy everything gets more complex.”

Actually I would say it is the digital economy that makes things more complex. Perhaps in this quote, “the cloud economy” was meant to be synonymous with “the digital economy.” Indeed, it is hard to have a digital economy without the cloud. But I think there is a subtle difference. Cloud is an enabler in helping us participate in the digital economy, both as consumers as well as enterprises. On the one hand, the cloud has made our personal lives simpler. We can order dinner, entertainment, or a taxi ride online. We can shop online and have goods delivered right to our doors. But we can also still shop in a store. Or we can order online and pick up the goods in a store. This is the very definition of “omnichannel.” As we simplify our personal consumer experience, we complicate matters for the enterprise.

“Hybrid business models are the new black.”

Can one system handle all these different ways of conducting business? Certainly traditional ERP solutions made this difficult. They either catered to a retail/cash sale environment or an order-to-pay environment. But today blended environments are becoming more and more common. Many try to accomplish this with different systems. But when these systems don’t talk to each other the customer experience suffers.

But this isn’t the only example of a hybrid business model. We are rapidly entering a subscription-based economy. The software industry led the charge here. Enterprises and consumers alike used to license software and bring it on premise. While this didn’t really mean they “owned” it, as they might own a pair of shoes, in some ways they did own a copy of it. Today, these same software companies are much more likely to sell a subscription to the software.

Now even companies that sell and ship physical products are likely to sell a subscription either along with the product, or instead of it. Consider the water filter company that ships you a device that filters your water for free and then invoices you monthly based on how much water you filter. After a certain period of time, the filter needs to be changed and they charge you when they ship you a new one. Chances are you don’t own the DVR in your home. Your cable provider does. You simply pay for the cable service as a subscription.

More and more companies must invoice based a hybrid business model, invoicing for some combination of product, services or “as a service.”

“If you can sell it, we can bill it (and recognize it.)”

NetSuite’s SuiteBilling module not only supports all these different invoicing methods, but it can also combine them all on a single invoice. While this sounds simple, trust me, there are many solutions out there today that will struggle with supporting all these different billing methods at all, even without trying to combine them on a single order and then a single invoice. I applaud NetSuite for rejecting the option of trying to optimize for the intersection. Instead NetSuite chose to but have to optimize for each and make it easy to combine them.

And because many of these new ways of billing have a signed or at least implied contract, there won’t be too many companies that are not going to be impacted by the convergence of ACS 606 and IFRS 15 (Accounting Standards Update (ASU) 2014-9, Revenue from Contracts with Customers (Topic 606 and the International Accounting Standards Board (IASB) International Financial Reporting Standards (IFRS) 15, Revenue from Contracts with Customers.)

These converged standards for revenue recognition go into effect the beginning of 2018 for public entities, and in 2019 for privately held organizations, bringing very significant changes to financial statements and reporting for any company doing business under customer contracts. While revenue recognition, including expense and revenue amortization and allocation, has never been simple, with these changes, it is about to get harder – at least for a while.

Why? First of all, while you can prepare for the change, you can’t jump the gun. You can’t recognize revenue based on the new rules until those new rules go into effect in 2018. At that point public entities must report under the new guidance and private companies can, but they have an additional year before they are required to do so. So any public entity better be ready to flip the switch, so to speak. But flipping the switch doesn’t only mean recognizing revenue in a new way. For any contract with outstanding, unfulfilled obligations, you also have to go back and restate the revenue for prior periods under the new rules. And for some period of time, you will need to do dual reporting: old and new. In addition, when contracts change, this can potentially have an impact on revenue previously recognized, including reallocation and amortization of revenue and expenses.

NetSuite has been working on this for quite awhile, starting with the support for multiple sets of books, which is how it will accommodate the dual reporting. It is not too early to be planning for this change and using multiple sets of books, you can be looking at how the revenue will be recognized in the future. I have seen some of these before and after revenue reports and the changes are not particularly intuitive. Best to understand what is coming or your revenue predictions for 2018 are going to way out of whack.

Bonus Quotes

While those were my top 10 favorites coming out of SuiteWorld 2016, there were a couple more that you might find interesting:

“Luck should not be a business strategy”

No further explanation required. Real “luck” is a combination of careful planning and hard work.

“The Cloud is the last computing architecture, the last business architecture.”

Sorry Zach, I just can’t agree with this one. I am sure some will immediately think of the famous quote: “Everything that can be invented has been invented.” While some give credit to Charles H. Duell, the Commissioner of US patent office in 1899, others point to a more contemporary source, a book published in 1981 titled “The Book of Facts and Fallacies” by Chris Morgan and David Langford. Either way, whoever said it, was wrong. Maybe Zach is right, but personally whatever the last computing or business architecture will be, I’m pretty sure nobody has even thought of it yet.

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NetSuite In Transition

 From “Graduations” to Full-Scale Replacements

After years of supporting “graduations” from the likes of QuickBooks and desktop solutions, more and more larger, more well-established companies are turning to cloud native NetSuite for whole-scale replacement of entrenched Enterprise Resource Planning (ERP) solutions. This transition comes at an opportune time as the demand for scaleable solutions escalates and the acceptance of software as a service (SaaS) grows. NetSuite OneWorld’s cloud-based ERP, including support for global financial consolidation and embedded omnichannel commerce, along with its scaleable platform that supports customization and extensibility, makes it a viable contender as a replacement strategy for legacy solutions.

Cloud and SaaS, Not Just For the Little Guys

Many confuse the terms cloud and SaaS. In fact Mint Jutras has been guilty of using them interchangeably. But in fact they are not the same and this means not all “cloud” solutions should be viewed as equals.

  • Cloud refers to access to computing, software, storage of data over a network (generally the Internet.) You may have purchased a license for the software and installed it on your own computers or those owned and managed by another company, but your access is through the Internet and therefore through the “cloud,” whether private or public.
  • SaaS is exactly what is implied by the acronym. Software is delivered only as a service. It is not delivered on a CD or other media to be loaded on your own (or another’s) computer. It generally is paid for on a subscription basis and does not reside on your computers at all.

All SaaS is cloud computing, but not all cloud computing is SaaS. Traditional on-premise or hosted solutions might (or might not) be accessed via the cloud, although this is more likely to be a private cloud. NetSuite is a real multi-tenant SaaS solution, which puts it in a different class of applications than those that just deliver web-based access.

For many years, many also made the assumption that SaaS was just for small companies. And yet for the past several years, Mint Jutras Enterprise Solution Studies have found a growing preference for SaaS across all sizes of companies. Below we present those results in two different ways.

Figure 1 shows the progression of preference over the past several years, in intervals of two 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.

Figure 1: Which Deployment Options Would You Consider?

NS Fig 1Source: Mint Jutras Enterprise Solution Studies

* Option added in 2015

We found 2013 to be a turning point, where we saw a very sharp drop-off in willingness to even consider a traditional on-premise solution, and in 2015 we saw almost a 20% increase in willingness to consider SaaS. Very early feedback from our 2016 Enterprise Solution Study indicates both trends are continuing.

But this doesn’t answer the question as to whether SaaS is just for small companies. To answer this question we need to examine the responses by size of company. Figure 2 defines size of company by annual revenue and we find nearly as much interest in SaaS in large enterprises as we do in small companies.

Figure 2: Percentage that Would Consider SaaS (by company size)

NS Figure 2Source: Mint Jutras 2015 Enterprise Solution Study

Note: annual revenues determine company size:

  • Small: Annual revenues under $25 million
  • Lower Mid: $25 to $250 million
  • Upper Mid: $250 million to $1 Billion
  • Large: Over $1 billion

Mint Jutras believes this is largely fueled by the way companies grow and expand today. Gone are the days when companies grew to be large, monolithic giants. While companies may be large and centrally owned and operated, they typically expand into multiple operating locations, oftentimes distributed across the globe. Indeed 80% of companies surveyed in our 2015 study operate in more than one location (Figure 3).

Figure 3: Number of Operating Locations (by company size)

NS Figure 3Source: Mint Jutras 2015 Enterprise Solution Study

Even where these operating locations are semi-autonomous subsidiaries, when it comes to software that runs the business, it is no longer common to leave those decisions to the individual business units. The vast majority (87%) has defined corporate standards for these applications. As the company grows, along with the number of operating locations, the potential for complexity grows faster. What better way of managing and enforcing these standards than through a centrally maintained SaaS solution like NetSuite OneWorld?

Case In Point: Dent Wizard International

Dent Wizard International has been the leader in the development of Paintless Dent Removal (PDR) technology since its establishment in 1983, and today is North America’s leading provider of SMART Repairs (Small to Medium Area Repair Techniques). In 2010, Dent Wizard was acquired by a private equity firm, and therefore needed to transition off its legacy IT environment, including an on-premise ERP and custom accounts receivables and payroll applications running on an IBM AS/400. With over 1,800 employees, 1,500 of which are service technicians in the field, Dent Wizard needed a solution with access to business data any time, from anywhere capabilities, so cloud was a “must.” But beyond that, Dent Wizard sought added scalability and the ability to automate labor-intensive processes. Dent Wizard was specifically looking for:

  • a broad range of functionality to run complex and mission-critical business processes across multiple subsidiaries on the same platform;
  • speed of implementation and time to value;
  • a platform that removes the burden of having to manage upgrades and servers and dealing with version lock issues;
  • real-time visibility into and control of its business across all business entities and subsidiaries through a single version of the truth;
  • the agility, scalability and flexibility to support business growth.

When it first selected NetSuite in 2012, the majority of its invoices were entered manually, which necessitated a massive amount of data entry. Since then, the company’s revenue has grown by more than 60% and it now processes more than 1.8 million invoices per year, and has increased electronic invoice processing by 30%.

Many of those invoices are filed directly by field service technicians using its Wizard Pro mobile invoicing application running on mobile devices. This eliminates the need for the lion’s share of that manual data entry. The mobile application was developed using the NetSuite platform and integrates directly with OneWorld. It gives technicians the ability to manage tools and equipment on site through NetSuite inventory management.

Value and scalability were key elements of the decision to go with NetSuite OneWorld. “NetSuite gives us a platform for growth and scalability, and from an IT infrastructure standpoint—we don’t have to manage servers,” said Tammy Conner, Dent Wizard Chief Information and Accounting Officer. “NetSuite has enabled us to run a very lean IT department, and that makes our organization much more efficient. Our people are happy with NetSuite and routinely evaluate how we can optimize the solution for our business.”

Now Is the Time

Now is certainly an opportune time for NetSuite itself to be graduating into this new realm. Only 36% of Mint Jutras survey respondents gave us a definitive “no” when asked if they would purchase an ERP system within the next two years. Of course some (20%) of the remaining 64% are still undecided and some of these purchases will be “graduation” from a solution like QuickBooks that might not qualify as a full-fledged ERP. But a follow-on question lends a bit more clarity around those switching out old solutions versus supporting new sites or perhaps even a first time purchase. While 38% will be replacements, another 43% will combine replacement with accommodation for a new site not previously supported by ERP (Figure 4). Needless to say, this is a huge opportunity for ERP solution providers.

Figure 4: First Time Purchase or a Replacement?

NS Figure 4Source: 2015 Mint Jutras Enterprise Solution Study

We know the time is right for NetSuite, but is the time right for you? If you are in the “undecided” camp, it may be helpful to understand what spurs these replacements. We asked survey respondents to select the top three reasons that would prompt a replacement of a current solution. Figure 5 shows the five reasons with the most votes.

Figure 5: What Prompts Replacement? (select top 3)

NS Figure 5Source: Mint Jutras Enterprise Solution Studies

Interestingly enough these align quite well with what we find to be the appeal of SaaS (see sidebar). Quite often legacy solutions fail to meet the functional needs of their owners. Early solutions lack the depth and breadth of functionality available in newer solutions based on advanced technology, leading to customizations that further exacerbate the problem by building in barriers to upgrades and innovation.

Not only does a multi-tenant SaaS solution lend itself to more frequent updates (the vendor has only a single line of code to maintain), but also NetSuite’s platform makes extending the solution relatively easy. Dent Wizard’s Wizard Pro mobile invoicing application is the perfect example. This mobile process is quite unique to Dent Wizard and therefore not likely to be satisfied right out of the box. But in treating this as an extension to OneWorld the barriers traditionally built in with invasive code changes are removed. Even as NetSuite delivers innovation, this type of extension simply moves forward as well. Nothing breaks.

A SaaS solution also is a key enabler of growth. 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. The access any time, from anywhere nature of a cloud solution is conducive to supporting distributed users and bringing up remote sites rapidly and easily while conforming to and enforcing those corporate standards mentioned earlier.

Those saddled with outdated technology can rest assured they will never wind up in such a situation in the future. A good SaaS solution also addresses the cost of obsolescence.

And finally, sometimes you need to spend money to save money. An old, outdated solution can be costing you in terms of time, effort and real money to maintain it. The good news is that with a SaaS solution such as NetSuite’s you don’t need a capital investment.

Based on survey responses gathered in past Mint Jutras surveys, NetSuite customers place a lot of emphasis on costs. Back in 2013, in rating the appeal of SaaS, 50% of NetSuite customers selected lower total cost of ownership (TCO). Two years later when we asked what actual benefits had been realized, NetSuite seemed to have over-delivered on this promise with 61% indicating they had realized lower TCO.

Conclusion

Indeed, the time is right for NetSuite to be coming up market, targeting not only those seeking their first ever real ERP solution, but also those who are hindered by older solutions that lack the functionality and the technology to keep pace with growth and change. NetSuite’s solution has been developed over its long history as a cloud-native solution to address the needs of larger, global and distributed environments with financials and consolidation. Customers have proven the solution can handle massive transaction volumes while helping organizations like Dent Wizard run lean and efficiently.

Do your current solutions allow you to grow efficiently? If not, perhaps the time is right for you. If so, NetSuite is definitely worth a look.

 

 

 

 

 

 

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NetSuite Announces the End of the Beginning: Cloud is Here

At SuiteWorld 2015 NetSuite CEO Zach Nelson announced The End of the Beginning. “The question of whether cloud was going to happen is answered. Cloud is here.” Mint Jutras agrees. Attitudes towards cloud and Software as a Service (SaaS) have changed dramatically over the past few years, particularly with respect to software that runs your business. As recently as five to ten years ago, Enterprise Resource Planning (ERP) could easily have been called the last bastion of resistance to SaaS. “Cloud” had yet to become part of the business vernacular and “SaaS” was still a relatively new and poorly understood concept. While other complementary solutions were headed in that direction, entrusting the transactional system of record of your business to the cloud requires a higher level of trust than required for other applications, including those which are often referred to as “systems of engagement.”

But now – how times have changed! According to the latest Mint Jutras 2015 Enterprise Solution Study, the majority of businesses have some sort of cloud strategy and the shift to the cloud has definitely begun.

What’s Your Cloud Strategy?

To get a clear picture of how cloud strategies have developed and evolved, we turn to some specific questions in our study.

Figure 1: What Best Describes Your Cloud Strategy?

NS Fig 1Source: Mint Jutras 2015 Enterprise Solution Study

The first of these questions specifically asked about cloud strategies. This is the first year we have asked this question and the results were a little surprising – but only a little. The first surprise was that the majority (84%) has a cloud strategy, even if that strategy is to not go there (8%). In a way this is not particularly surprising given all the hype over cloud these days. This leaves the remaining 16% with no cloud strategy. But notice how we phrased this option: “We don’t have a cloud strategy. Cloud is just one of many factors we consider.” So it doesn’t mean these participants will not consider cloud.

We phrased it that way because for years we have been capturing priorities for selection criteria for ERP. Over the years we have always included some sort of reference to deployment option and it has consistently been ranked close to the bottom of the list of criteria. Since deployment option was not the overriding factor in selecting these solutions, you might also conclude that cloud was not driving strategy. And yet only 16% don’t have a cloud strategy.

So, in a way, survey participants are sending us mixed signals. But at the same time, we saw the availability of “cloud options” rise significantly in importance this year. It moved up from the very bottom of the list of criteria to the middle of the pack.

But, based on the strategies shown in Figure 1, we might conclude that cloud deployments will not dominate immediately. We actually confirmed this conclusion by capturing the percentage of all business software that is currently deployed as SaaS, along with projections over the next two, five and ten years and beyond (Figure 2).

Figure 2: Percentage of Business Software Deployed as SaaS

NS Fig 2Source: Mint Jutras 2015 Enterprise Solution Study

This steady progression is to be expected largely because of the number of existing on-premise (non-cloud) solutions that are currently installed. These will not be ripped out and replaced overnight, particularly when it comes to ERP. Implementing a solution that runs your business is not a small undertaking and most will not abandon their current solutions without a very good reason and an expected return on investment. So in that respect, it is not surprising that the most likely strategy is to leave existing systems in place but surround them with cloud-based solutions. This option leads to a hybrid environment, which delivers some of the benefits of SaaS, but will lead companies down a more circuitous route in their cloud journeys. In these cases, hybrid solutions might simply be viewed as temporary options and not necessarily the desired final destination. It will be interesting to see if interest in these hybrid solutions continues to grow or decline over time. A lot will depend on whether the hybrid solutions deliver the desired (end) results or just whet the appetite for more SaaS.

However, one in five (20%) will seek to replace existing on-premise solutions with cloud-based alternatives and another 8% are taking specific action now to do just that. If we add these two percentages together we see those taking the plunge and replacing systems with complete cloud solutions (slightly) outnumbers those that prefer a more evolutionary, hybrid approach (28% versus 25%). These are the companies most likely to be evaluating NetSuite as a replacement solution, as well as companies just starting out on their ERP journeys.

Those with a defined strategy of moving to the cloud clearly see the potential benefits. These benefits may be cost savings, more innovation, better support of remote workforces and distributed environments, or simply enabling growth.

But Remember, Not All Cloud is SaaS

However, if you recall our previous definitions, while all SaaS is cloud, not all cloud is SaaS. So we asked specifically “Which is most important to you in terms of placing any solution in the cloud?” While 12% admit to not really understanding (Don’t Know), the preference is for SaaS (Figure 3).

Figure 3: Which is most important to you in terms of cloud?

NS Fig 3Source: Mint Jutras 2015 Enterprise Solution Study

SaaS is the top choice, but as long as the solution is web-enabled, even a hosted or on-premise solution might be able to be accessed anytime, from anywhere. However, Mint Jutras would contend that without a SaaS solution, you would leave some of the potential benefits on the table. And as you can see, there is still a significant percentage that prefers a private cloud. This might be because a private cloud is considered more secure (it may or may not be), or because of current or anticipated customization. If the overriding desire is to simply move to the cloud (only), it might be easier to lift and shift existing solutions to a private cloud. Yet in doing so, you relinquish the opportunity to re-implement and remove limitations that might have been imposed by older, less functional and less technology-enabled solutions. And with the current configurability of a good SaaS solution, you would likely be able to eliminate a lot of your invasive customizations and therefore simplify your IT life, particularly as business needs change over time.

As the World Turns

And what business today is not undergoing change? Only those that are stagnating and losing any competitive advantage they might have ever had. In fact today we are living in times of unprecedented change and growth opportunity. New consumer middle classes have sprung up in countries that were hardly industrialized a short decade ago, creating opportunity even for small to medium-sized enterprises (SMEs). Innovation, advanced technology and the Internet have combined to create new business models that were never even considered a decade ago.

Those companies providing these consumer goods and even those offering industrial products that support the manufacturing and distribution of these consumer products see the most opportunity, but are also most subject to new and ever evolving business models. This is a market that NetSuite is very well suited for given its strength in eCommerce and its support for digital transformation.

NetSuite was born in the cloud long before cloud and SaaS came into the limelight. While NetSuite could not have foreseen all the new opportunities and new business models that have been created over the past few years, it did have foresight enough to build a system that could accommodate change. As Zach Nelson likes to say, “We built change into the system. We can’t predict the next business model or where it might go, but we can make the solution adaptable, regardless of the direction.”

Disruption in an Omni-channel Environment

As a result, NetSuite views “disruption” as a good thing. In prospecting, it seeks out these disruptive business models and sees its support of “omni-channels” as a key factor in supporting growth and therefore featured it prominently in its SuiteWorld message..

Omni-channel, alternatively referred to as “multi-channel,” refers to the ability to use different channels simultaneously. Consumers might purchase online, but pick up, or return merchandise at a physical store. Retailers may use retail stores as distribution hubs. As consumers make online purchases, it may be advantageous to ship from a store location where the item may be overstocked, thereby drawing down surplus inventory. Or the choice of ship from location may be made to minimize cost and lead-time. This is definitely an issue for retailers today. But more and more manufacturers and distributors find themselves also selling direct now, so it is just a matter of time before they need to deal with omni-channel supply chain issues as well.

Combining all these options requires flexibility, a level of expertise and feature functionality not typically included in your traditional ERP software suite. NetSuite has differentiated itself by doing all of the above. But more importantly, this requires an unprecedented degree of flexibility and adaptability, well suited for the cloud.

Much of this adaptability comes simply from being a multi-tenant SaaS solution. On the one hand, solution providers that maintain a multi-tenant SaaS solution have a distinct advantage to those offering traditional on-premise or even single-tenant SaaS solutions. But while they must only maintain a single line of code, it must be more configurable and flexible than a traditional solution, or it winds up appealing only to a small sector of companies.

The NetSuite ERP provides many options for configuration without invasive code changes. But it also goes one step further, offering a software development platform that allows partners and customers to add in new features without impacting the single line of code that NetSuite manages for its subscribers. The code developed using this platform can and does survive updates that are made on a quarterly basis.

Shopping for a New Solution?

In order to take full advantage of next generation solutions, enabled by advanced technologies, you may choose to replace your current solutions. The question we have been asking for years now is this: “If you were to select a solution today, which deployment options would you consider?” In the early days of this question, those that would consider SaaS were definitely in the minority and almost everyone would, of course, consider on-premise solutions. That landscape has shifted dramatically. Figure 4 shows the most recent few years.

Figure 4: Deployment Options that would be Considered TodayNS Fig 4

Source: Mint Jutras Enterprise Solution Studies

* Option added in 2015

SaaS is currently the option most likely to be considered (participants are allowed to select as many options as they want). For the past few years “SaaS” and “hosted and managed by your solution vendor” have run neck and neck. In the past, one of the reasons has been because the difference between these two options was often blurry and survey respondents didn’t necessarily understand the difference. This was substantiated by observing that a significant percentage of participants that were running solutions that are SaaS-only (including NetSuite) chose this hosted option instead of, rather than in addition to SaaS.

But we’re now starting to see evidence of a better understanding of the difference between these options. Not only are more participants actually running SaaS solutions, but also the preference for SaaS is starting to pull away from hosted solutions.

Conclusion and Recommendations

Mint Jutras would agree with Zach Nelson. Data from our 2015 Enterprise Solution Study signals that the end of the beginning is indeed here. Early pioneers, and NetSuite in particular, have been providing cloud-based SaaS solutions for more than a decade. NetSuite customers, pioneers in their own right, have led the way and are living testimony to the benefits. The shift to the cloud has begun in earnest.

Most companies today have defined a cloud strategy. If you have not, either because of lack of understanding or lack of attention, take a step back and develop one. Educate yourself on cloud and SaaS, along with the potential benefits; satisfy any lingering concerns you might have and investigate your options.

Not everyone will take the same approach. If you are currently running your business on legacy solutions that limit your connectivity and interoperability, adding some peripheral and complementary cloud solutions might selectively help you connect to trading partners and customers, but ultimately you will need to replace that old software or run the risk of being at a significant competitive disadvantage. Replacing it with a cloud-based ERP, deployed in a secure SaaS model might just be the giant step you need to move into today’s digital world and accelerate your own competitive advantage. If you’re looking for a SaaS ERP solution with some longevity in the market, you would do well to add NetSuite to your short list of vendors.

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Elysian Field Software will Broaden Epiphany’s Reach

Robust Field Service and HR/HCM Cloud Solutions

The launch of any new company is exciting, but even more so when it is launching from a foundation that is already stable, well-built and primed for growth. Epiphany, an early pioneer in Software as a Service (SaaS), founded in 2002, is a well-established NetSuite value added reseller that offers both NetSuite’s Enterprise Resource Planning (ERP) solution as well as its own comprehensive solutions for field service and human resource/human capital management (HR/HCM). At the December JRocket Marketing Winter 2014 Analyst Roadshow, Epiphany announced plans to launch a new company, Elysian Field Software.

This announcement represents far more than just a name change and rebranding effort. Epiphany will become a division of the newly formed enterprise, Elysian Field Software. While Epiphany will continue to serve the NetSuite community with an integrated suite approach, a brand new sister division, Elysian Field Services wil serve a broader market. Taking a “best-of-breed” approach it will offer comprehensive, affordable, cloud-based solutions to those running other ERP solutions, but suffering from gaps so often found in field service and HR/HCM functionality.

Epiphany: A Great Starting Point

Epiphany’s business will not change; it will continue to resell NetSuite’s ERP and serve the broader NetSuite community with tightly integrated, “best-of-breed” extensions. With 114 NetSuite deployments to date, Epiphany is one of the larger channel partners of NetSuite. The two companies have evolved over the years, as have their products. Looking at the NetSuite product through the eyes of their customers, Epiphany found some gaps in terms of field services and HCM. Using the NetSuite development platform Epiphany filled those gaps, and not just in a superficial way.

These extensions to NetSuite have grown into very comprehensive suites for field service and for human capital management that rival the most robust packages in comparable markets today. Typically these types of robust solutions are outside the budgets of small to medium size businesses, but Epiphany has been making these solutions affordable to even small customers since the early NetSuite days when most customers were just graduating from QuickBooks. Of course the average NetSuite customer has grown substantially over time, but Epiphany still serves the lower end of the spectrum (as well as larger companies) with products that could rival many of those sold into much larger enterprises.

About a year ago NetSuite acquired TribeHR, which brings a unique approach to the recruiting process and is integrated with NetSuite ERP in that it adds and provisions the employee upon hire. However, there is no natively built full HR/HCM solution. That’s what Epiphany brings to the table.

Human Resources/Human Capital Management Modules
These modules are currently sold as Epiphany products. While they will be re-branded under the Elysian Field Software label, they will also continue to be sold by Epiphany, along with NetSuite ERP.

  • Applicant Tracking: this is a comprehensive module that supports the entire process from Job description and requisitioning of positions, through screening and applicant processing, selection, employee record creation and on-boarding checklists.
  • Human Capital Management: supports “one click” hire process for setting up new employees, change management, separation, EEO data capture and organization charting.
  • Benefits: includes paid time off (PTO) management, Family and Medical Leave Act (FMLA) tracking, health insurance management and COBRA event management.
  • PTO: “Leave” management includes overview calendaring for all staff with group/subsidiary/location selections, including customizable color-coding, supervisor views, graphical portlets and dashboards.
  • Performance Management: Goals determination and tracking can include cascading goals, supervisor/employee synergies, Lominger Competencies assignment and performance review rating calculation methodology.
  • Compensation Management: Salary ranges, job grade assignments, employee change tracking and compensation conformance.
  • Manager Self Service: includes employee data, PTO requests, review/update employee qualifications, job description/requirement definition, open applicant management, selection of applicants and property distribution management.
  • Employee Self Service: for qualifications, certifications, skills, licenses, leave and PTO requests, performance review participation and goal management.
  • Third-Party Integration: Integration to career sites, compensation planning, organizational modeling, payroll, resume parsing, etc.
  • Customized Report/Search Templates: Pre-screening, scoring, posting success rates, time to fill analysis, cost per hire analysis and more.

 

Customers can choose to use TribeHR along with Epiphany’s modules, or rely exclusively on Epiphany for HR/HCM functionality.

Business Expertise to Get the Job Done: Mantra Teams

However human resources and HCM projects, particularly in smaller companies, are challenged in a rather unique way, beyond the typical budgetary constraints. Seldom can small companies afford to hire a seasoned veteran with experience in implementing comprehensive HCM solutions, leaving the implementation in the hands of younger workers with little experience in driving an implementation to completion. And of course when staffed with younger workers, companies may experience a higher degree of turnover in the position. And even if a small company can afford and attract a seasoned veteran, this HR leader must wear many hats and is often consumed by overseeing compliance requirements and handling the occasional personnel crisis, causing the implementation to stall.

After spending 12 years deploying enterprise cloud solutions at other firms, Epiphany CEO Brenda Brinkley observed many incomplete or functionally deficient solutions, as well as inadequate resources to take full advantage of more robust solutions, even when available. To address this she came up with a concept of what she calls “Mantra Teams.” Rather than leaving the implementation to full-time employees, these teams will be available on demand, on a contract basis.

The Elysian Field Mantra Teams will be largely full time consultants and/or retired HR/HCM professionals who are experts in the field, but available for as long or short an engagement as required. These experts will be:

  • Screened and vetted by Elysian Field Software for their expertise and understanding of HR/HCM best practices
  • Trained on how to use the software
  • Affordable because they will be contracted directly by the customer with no middle man mark up
  • Motivated by the customer’s priorities but able to advise on how best to leverage the solution quickly and efficiently

In other words, this is a team of experts that customers can bring in simply to get the job done expeditiously.

Addressing the Complexities of Field Service

While HR/HCM modules are a big part of Epiphany’s business, remember it also provides a comprehensive suite of field services management modules as well. NetSuite’s early successes centered on professional services businesses, then moved into distribution and light manufacturing. It has been very successful in attracting manufacturers of consumer products, but has more recently targeted manufacturing of more industrial products. With this move, repair and maintenance of manufactured products becomes more complex. And again, Epiphany filled a functional gap with a robust, integrated suite of Field Service Management Modules.

Field Services Management Modules
These modules are currently sold as Epiphany products. While they will be re-branded under the Elysian Field Software label, they will also continue to be sold by Epiphany, along with NetSuite ERP.

  • Work Order Management: technician/equipment assignments, time/expense/part tracking, rapid billing and mobile management
  • Rentals Management: pricing rates, equipment repair, pick-up/return, route delivery management, time utilization of rental assets, financial utilization of rental assets, fleet age and apportionment, inventory management
  • Depot Repair: Parts/returns/repair, advanced replacement, warranty visibility, repair orders with equipment tracking and inventory availability
  • Job Costing: job profitability, work in progress, cost and profitability reporting
  • Contract & Warranty Management: auto-create and renew contracts, manage service contracts, co-terminate multiple contracts, revenue and profitability tracking, manufacturer and custom warranty tracking, convert warranty to contract, bill warranty overages
  • Scheduling & Dispatch: dispatch center, drag and drop technician scheduling, non-sequential work order scheduling, team scheduling, PTO, schedule by skill and availability
  • Technician Skill Management: skills, licenses, education & certifications, qualifications, tied to HR
  • Mobile Tech: offline and online, calendar view, daily & weekly expenses, signature capabilities, attachments, complete view of configuration, tasks, contracts, notes, photos, time, expenses, etc.

 

Field service solution implementations also have the potential of suffering from lack of fully functional solutions and also lack of attention. Not only has Epiphany made a robust solution to a complex problem quite affordable, but it also wants to address what might be a “commitment issue.” While a good field service department is likely to have deep and broad expertise, the very nature of the job means the customer is always the first priority. This makes a software implementation even more challenging. As a result, Elysian Field also intends to add Mantra Teams for Field Service deployments.

And these teams of seasoned experts will also pave the way for introducing more leading edge technologies into the field. Elysian Field intends to aggressively pursue “machine to machine” capabilities, supporting the concept of the “internet of things (IoT)” and new technologies such as 3D printing and mobile wearable devices. While these types of technologies might seem like “pie in the sky” overkill for some industries, they are particularly relevant for field service. Think what a portable 3D printer could do to supply repair parts in the field. Think about the value of providing diagnostics or schematics built right into safety glasses, leaving the technicians’ hands free to trouble shoot and repair. Think about the possibilities of remote diagnostics by tapping into machine data.

Beyond NetSuite

While all these existing products and new plans are potentially exciting for NetSuite customers, Elysian Field Software would like to bring these exciting capabilities to a broader audience – hence the new sister division to Epiphany. This could spell a huge opportunity for the newly formed umbrella company. While the HR/HCM modules could be a good fit for virtually any NetSuite customer, today the Field Service Management modules are a better fit for NetSuite’s target manufacturing customer, rather than its current installed base. Making these modules ERP-agnostic represents a huge opportunity for Elysian Field Software.

However, it also represents a technical and development investment. Currently Epiphany’s solutions are built with the NetSuite development platform. It is very likely that Elysian Field Software will need to re-architect these solutions on a different platform to best meet its goals. Will this be Salesforce’s Force.com platform? Will it remain on NetSuite’s? Will it use another, different platform? Right now, Elysian Field Services is evaluating all different possibilities and has not ruled any out.

But given the effort involved, is it worth it? Is there sufficient market, beyond the NetSuite base to merit such an investment? Mint Jutras believes it is, provided Elysian Field Services chooses wisely and brings the new product to market fairly rapidly. New technology and rapid application development tools will be key, as the market will not patiently wait. The vast majority of companies have a strong preference for an integrated end-to-end solution. However, for every company that has an overriding preference for a tightly integrated solution from a single company, two will not sacrifice functionality for ease of integration or dealing with a single vendor (Figure 1). The best of both worlds obviously will be robust functionality that is easily and seamless integrated.

Figure 1: Preferences for a Suite?

Elysian fig 1Source: Mint Jutras 2014 ERP Solution Study

Both field service and HR/HCM functions have historically been underserved in smaller companies. The Mint Jutras solution study found only a 42% adoption rate of any kind of after market service functionality installed in manufacturing companies, and where installed, it was twice as likely to be a separate application that was loosely integrated or not integrated at all (28%) versus embedded or tightly integrated (14%).

HR capabilities were more pervasive at 66%, but this adoption rate did not distinguish between a robust suite and marginal HR capabilities, but still those not well integrated by a wide margin.

2015: A Year of Transition

As talent management, both in house and in the field continues to grow in importance, if Elysian Field Services can fill those gaps, and also provide seamless integration, not just to NetSuite’s ERP, but to other players in the small to midsize market, it should be a winning combination. Watch for some important milestones in 2015, including an official launch of Elysian Field Software in the second quarter, followed by the choice of a new independent platform.

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What’s New in the Annual Mint Jutras ERP Survey

I am excited to be preparing to launch my annual 2014 ERP survey. This will be my 8th and I’ve learned a lot through the years about how to ask the questions and how to best analyze the results. Since founding Mint Jutras in 2011 I have gradually shifted the timing of the survey, so that now (and in the future) it will be launched early in January, and I will use and reference the data throughout the year. As most of you know, I collect a massive amount of data. I try to be consistent with many of the questions from one survey to the next in order to make legitimate year over year comparisons, watching prior trends and spotting new ones. But each year I remove some questions that didn’t produce much insight (that’s how I learn) or that really don’t change much in one year. I do that to make room for something new.

It will be interesting to continue to watch trends, particularly around:

  • Buying cycles: Last year the percentage planning to purchase a new ERP within the next three years more than doubled from 24% to 47%, with another 15% undecided.
  • Deployment preferences: In the 18 months between the 2011 and 2013 surveys, the percentage of companies that would consider a traditional on-premise deployment dropped from 56% to 27%. Preference for both SaaS and hosted models increased.
  • ERP is reaching more users: On average 50% of employees actually use ERP today, including more executives. All executives have access to and regularly use ERP in 47% of companies, a far cry from just a few short years ago. We suspect the growing use of mobile devices has been and will continue to be a game-changer here.
  • Results measured since deploying ERP rose considerably with improvement percentages rising from the 5-7% range to double digits. These are improvements like cost reductions and improvements in on-time delivery, customer retention and inventory accuracy. “World Class” ERP implementations produced results in the 20-24% range. Was this an aberration last year or is new technology fostering better results?

What’s New This Year?

But what I am even more excited about is our new approach to capturing information about how the full spectrum of business applications, with ERP at the core, are implemented. Back when I started benchmarking ERP in 2006, I set out to quantify its usage. My first five annual surveys were done while I was at the Aberdeen Group where I came up with a formula for determining the percentage of ERP that was actually used. When I founded Mint Jutras I used what I had learned in those five years and modified that formula in order to get what I felt was a much more accurate result. But after eight years of this type of measurement, not only has this become old news, it is also harder to get an accurate read.

As I have been saying for several years now, the footprint of ERP has grown to the extent that it is becoming more and more difficult to determine where ERP ends and other applications begin. That is not only the case when covering, writing and talking about ERP, particularly as integration capabilities have improved, but for users as well. In prior blog posts this year I have discussed the relative advantages and disadvantages of “tightly integrated” versus “loosely coupled” applications. But this distinction is not intuitively obvious to the typical ERP user that takes our survey, particularly since typically less than 40% of respondents are in IT. Most are business users and may not have intimate knowledge of the purchase or the architecture of the product itself. They simply use ERP to run their businesses. And of course, that is primarily what we benchmark.

Modules versus Extensions: No longer the right question

In prior surveys I distinguished between ERP “modules” and “extensions” to ERP – those separate applications that might surround and complement it. I asked which modules were implemented (fully or partially) and then asked (separately) which additional applications were implemented. But as the footprint of ERP has grown, the overlap between these two lists also grew. While having both for any particular function might happen occasionally (e.g. a manufacturer might use supply chain planning functions of their ERP and also complement that with a separate “best of breed” solution), it would be the exception and not the norm. And yet, the number of instances where survey responses indicated they had both a module and an extension for the same function began to grow, casting a shadow of doubt on the validity of the responses. That told me it was getting too hard for the survey participants to answer the questions.

So this year I am changing it up with a different purpose in mind. This year, we will

  • Determine current state of implementations with a single list of functions, including traditional core functions of ERP (e.g. general ledger, accounts payable, accounts receivable, inventory control, order management, purchasing, etc.) and more advanced or “edge” functions (e.g. warehouse management, cash flow planning, BI and analytics, employee expense reporting, supplier collaboration, etc.) that might be a module or a separate application. The survey respondent will indicate whether it is (perceived as) part of ERP or not and, if separate, the level of integration.
  • Ask “what if?” Maybe this current state came about because of limited functionality and technology at the time of purchase. If the respondent were making the same decisions today, how would they go about it?
  • Ask “What next?” Given the state of their current implementation, what are most likely next steps? Add new components? Trade it all in for newer technology? Replace certain embedded functions? Eliminate separate applications now that ERP does more?
  • Have them choose up to five areas they are most likely to invest in next.

While this will tell us a lot, we’ll also drill a little deeper into plans for two areas, which happen to be among the hottest categories on the market today:

  • Human Capital Management (is it a fluke the big ERP vendors are buying these applications?)
  • Business Intelligence and Analytics (Is it time to take these tools out of the hands of IT and put them in the hands of the business user?)

We have also added a couple “Mobility” questions, along with one that will determine just how “usable” ERP data is.

If you are an ERP user, look for a link to the survey in the beginning of the year. We welcome your response.

If you are an ERP solution provider and think

  • The data we collect will be useful to you in making product roadmap or go-to-market decisions
  • Mint Jutras might be able to develop some good educational content for you with our distinctive “call to action”
  • You might like to benchmark your customers against our World Class

Please shoot me a message or contact Lisa Lincoln (lisa@mintjutras.com)

Lisa and I both wish everyone health and prosperity in the coming year!

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