NetSuite

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!

Best Independent ERP Blog

Best Independent ERP Blog

 

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NetSuite Takes Omni-Channel Commerce to the Great Outdoors

What do camping gear, nutrition bars, portable ultraviolet water purification systems and surfboards have in common?

  1. All are consumer products, consumed by outdoor enthusiasts
  2. All are sold by national retailers like REI, Bass Pro Shops and Eastern Mountain sports
  3. All are also sold online
  4. All are manufactured by companies that once ran QuickBooks but today use NetSuite to manage their businesses

These companies were among 33 exhibitors at the Outdoor Retailer Summer Market 2013 show in Salt Lake City, Utah that run NetSuite cloud-based solutions. NetSuite of course capitalized on this event to highlight its recent wins in the outdoor industry. Featured prominently in NetSuite’s press release was the concept of omni-channel commerce. Omni-channel is all the rage amongst retailers, but if you don’t follow retail closely, you might be asking, “what’s that?” In short, omni-channel retailing “is a seamless approach to the consumer experience through all available shopping channels.” And what are these different channels? Stores you visit in person, catalogues you get in the mail, 800 numbers you call after seeing an advertisement on television, websites you visit from your computer or your mobile device.

Have you ever bought something online and wanted to expedite delivery by picking it up at a nearby store? Or maybe when it arrived it didn’t fit and you wanted to save the shipping cost and just bring it back to the store? How about when you go to the store to make a purchase and the item is out of stock? Maybe you’d like it shipped directly to you from a regional warehouse or directly from the manufacturer. As a consumer, these all sound like logical alternatives and perhaps you get annoyed when you can’t “mix and match” your channels. If you can’t, then it is probably because manufacturing, distribution and each of those retail outlets are all running separate systems that don’t (or can’t) “talk” to each other.

So if you think omni-channel commerce is just a retail issue, think again. It also impacts wholesale distribution and even manufacturing. While many struggle with this even today, others have made the leap to fully integrated solutions that support the omni-channel experience.

NEMO Equipment, for example, is a designer of innovative tents, sleeping bags and pads and other camping gear. Its products are sold both online through its own custom-built web storefront, as well as through about 300 retailers including REI and Eastern Mountain Sports in North America, and internationally in Europe and Asia. Up until recently (January 2013) it was trying to piece all this together with QuickBooks, but today uses NetSuite for financials, inventory and order management, CRM and PCI-compliant credit-card processing. Consolidated inventory management allows NEMO to also compartmentalize inventory, virtually segmenting direct-to-consumer, B2B and US military sales channels while cutting pick, pack and ship time in half.

Liberty Bottleworks is another example. The company prides itself in making the only metal bottle on the market that is entirely made in America. Therefore it can’t rely on off-shoring or other low-cost country means of reducing costs. It relies instead on operational efficiencies to create a strong bottom line. It uses NetSuite financials, manufacturing, inventory, order management, CRM and eCommerce, with a direct-to-consumer website powered by NetSuite SuiteCommerce to manage its business end-to-end while also expanding its retail network to about 1,400 including REI, Whole Foods and L.L. Bean. But its omni-channel commerce has a bit of a unique twist.

In addition to its B2C online sale of standard metal bottles and its distribution through regular retail outlets, Liberty Bottleworks also offers custom bottles. Want your logo and company name on a bottle? No problem. Liberty Bottleworks can do that for you. In fact it does just that for corporate customers like Coca-Cola, the Seattle Seahawks and even NetSuite itself. While the company expected this to be about 10% of sales, this part of the business has recently exploded, which has added a level of complexity that would be unmanageable without an integrated solution to support it. NetSuite supports Liberty Bottleworks in managing up to one million components (who would have thought?), including recycled materials.

These are just a couple examples of companies manufacturing consumer products that face a level of complexity added to a business that once might have been relatively simple. As consumers expect and demand more choice, merchants, distributors and manufacturers require an added level of seamless integration that is impossible to achieve with spreadsheets and desktop-bound solutions.  In order to manage the relationships between consumers, retailers, distributors and manufacturers, you need seamless integration of financials, ERP, CRM and eCommerce. Yes, it’s a tall order, but consumers demand it. And with the right solutions, the opportunity for companies like Liberty Bottleworks and NEMO Equipment is as big as the great outdoors.

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Oracle, NetSuite, And Deloitte Partner To Deliver Integrated HCM And ERP Cloud Services

Last week NetSuite, in conjunction with Oracle and Deloitte, announced a partnership to deliver integrated human capital management (HCM) and enterprise resource planning (ERP) cloud services for the mid-market. Each of the three companies will throw something into the pot: NetSuite brings ERP, Oracle contributes HCM and of course both will be delivered via the cloud as software as a service (SaaS).  Deloitte plans to work with the two companies to develop a practice with “highly skilled practitioners specializing in tools and implementation services to help customers adopt the soon to be integrated SaaS technologies faster and more seamlessly.” The “soon to be” qualifier implies a future deliverable, so Oracle and NetSuite will also have to work together on this integration.

The partnership between Oracle and NetSuite is not new, but until now was pretty much limited to the technology stack. However, as far back as June 26, 2001, Oracle announced its “small business suite”, which was in fact NetSuite. But applications from NetSuite and Oracle never came together in any kind of substantive way. After all, in some ways NetSuite’s solution competes against Oracle’s Business Suite, as well as the ERP solutions acquired along with JD Edwards.

But NetSuite never really built out HCM functionality, choosing instead to partner. In fact, it already has several HCM partners, but they tend to have different solutions for different parts of the world. One of the biggest challenges for HCM solutions has always been the different regulations around the world, both in terms of payroll and other compliance requirements. Laws in the United States are very different from those in Europe, and even from one country in Europe to the next – and on and on around the world. Most HCM solutions start out as country-specific and never make it into the big leagues to compete on an international basis. But Oracle’s HCM solution can.

There are also quite a few different sub-segments within HCM ranging from the traditional human resource information system (HRIS) to talent management (including recruiting) to benefits and compensation, etc. It is more common to find individual point solutions for each segment than to find a full, comprehensive suite covering all of them. Hence the market is quite fragmented. Oracle is one of the few solutions that has the breadth of functionality and also serves a global market. It not only acquired expertise early in the game from its acquisition of Peoplesoft, but also more recently acquired Taleo for talent management.

The Taleo product, which is also SaaS only (like NetSuite) fits right in. But because this is a “cloud only” solution, global HR will have to come from Oracle Fusion, not the Oracle Business Suite. Fusion is still a work in progress.

The nature of the relationship between NetSuite and Oracle could best be categorized as a “referral” agreement. Oracle doesn’t sell NetSuite products and NetSuite doesn’t sell Oracle products. However Oracle has a dedicated HCM team, which will engage with the NetSuite sales team to jointly sell into NetSuite customers. This makes sense because a NetSuite ERP customer is more likely to buy Oracle HCM. That’s not to say an existing Taleo customer might not be interested in NetSuite, but I am sure the Oracle sales team would prefer to sell them an Oracle ERP. An Oracle HR customer running Oracle Business Suite or JD Edwards is less likely to buy NetSuite. Even if they were willing to consider this, the Oracle sales team isn’t going to bring the NetSuite team in for a possible replacement.

While referral arrangements are quite easy to create, there is one inherent weakness. They are also easy to walk away from. As mentioned above, right now Oracle Fusion is a work in progress. When it is a complete ERP, will Oracle still be as interested in partnering with NetSuite? Probably. NetSuite has an installed based of over 14,000 customers, so it is quite a large field of opportunity.

But what about the role of Deloitte? According to Jim Moffatt, CEO of Deloitte Consulting LLP, “Mid-sized companies are looking for solutions that allow them to be nimble and respond quickly to market opportunities. This newly integrated solution will help these organizations deliver better service at a lower cost, ultimately giving them an edge in the war for talent and a true competitive edge.”

I agree that mid-size companies are primed and ready for low-cost solutions. HCM functions have historically been under-served by enterprise applications and therefore there is a great deal of pent-up demand, particularly in the mid-market. I’m just not sure mid-size companies are ready to pay the price of a consulting firm like Deloitte. I suspect many mid-size companies will prefer the “do it yourself” approach, whether they are capable or not. Those that recognize their own weaknesses might turn to consultants, but the mind-set of a mid-size company expects a consultant to get in quickly and out just as quickly. Consultants such as Deloitte tend to like long engagements. We’ll have to wait and see how many times they get invited to the party and how long they stay.

All told though, this seems like a smart move for NetSuite. Its footprint expands without a huge development effort. Processes and functions managed by HCM solutions are quite easily integrated into ERP since they are not too deeply embedded in transactional activity. That is, unless time and attendance transactions are collected through workforce management in HCM. Even in this case, the integration is quite clean and simple. The HCM solutions market has been heating up, and this means the NetSuite team, in conjunction with its Oracle counterpart can provide a more complete and competitive solution.

Oracle also benefits from that wide open market of NetSuite customers, which get a more complete, integrated solution. As to Deloitte… we’ll see.

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NetSuite and Autodesk Partner for Complete End-to-End Product Life Cycle Management

Earlier this week NetSuite announced its latest strategic partnership with Autodesk to provide seamless integration between its ERP solution for manufacturing and Autodesk PLM 360. As NetSuite dives deeper into manufacturing, it is a logical move since the link between design engineering and manufacturing is a necessary one, although often a contentious one.

While MRP and its successor ERP have been regarded as necessary tools for manufacturing for decades, the truth is, early MRP and ERP solutions didn’t support the needs of the engineers very well. That set the stage for engineers to go off and do their own thing, often and very successfully avoiding any connection to other applications. If there was a connection, it was arm’s length. Engineers sent paper drawings and electronic bills of material (BOMs) over to manufacturing where they tended to take on a life of their own.

That might work well enough from a pure product design point of view. Yet in reality there is much more to a product life cycle than just design and manufacture… as well there should be. For example:

  • Do you co-develop with customers or partners?
  • Does marketing coordinate and collaborate with engineering on new product introductions?
  • What about the list of suppliers of raw materials and/or components?
  • What about the cost and impact of engineering change orders?
  • Do changes made in manufacturing ever make their way back to the engineering design?
  • Do you service and repair your products?
  • Does customer feedback influence product innovation and design?
  • How about feedback from service technicians or sales?

Of course it will take some discipline on the part of the NetSuite/Autodesk customers, but tight integration between ERP and PLM will remove many of the reasons engineers have struck out on their own to purchase and implement solutions. With this integration, product concept, design and engineering data are developed in Autodesk. Once released, bills of material (BOMs) are fed to ERP.  Engineering can also suggest vendors from which to source component parts. But these need to be approved by purchasing within the ERP and confirmed back to PLM with a handshake.

Engineering change orders (ECOs) can also be managed with the same level of automation and control and gives the engineers added visibility to the impact on cost and profitability as well as capacity.

But probably more important in terms of change control is the bi-directional aspect of the integration. How often does manufacturing feel the need to tweak a design for manufacturing? Do those “tweaks” ever get communicated back to engineering?  If not, the next change order from the engineers could be a nightmare. Integration ensures that changes are properly documented, propagated and managed in both PLM and downstream manufacturing.

The bi-directional integration can also have an impact on both quality and innovation. Without that closed loop from manufacturing back to engineering, there is an increased the risk the engineers can operate from an ivory tower. Quality issues are hidden without feedback from manufacturing operations and including suppliers in this feedback loop makes it that much more effective.

But NetSuite is also proposing the seamless integration will enable a cycle of innovation. In many industries, most notably in (but not limited to) consumer electronics, the expected life spans of products are shrinking. It’s not enough just to close the loop between manufacturing and engineering. It is equally important to capture feedback from customers and partners to understand customer acceptance. NetSuite is positioned to capture that feedback from CRM, service and PSA modules.

This is strictly a marketing agreement. NetSuite and Autodesk do not sell each other’s products. They will however work together on a deal. Expect them to work cooperatively and collaboratively.

And of course, it wouldn’t be an announcement from NetSuite without a reference to cloud. This partnership is unique in that both solutions were born in the cloud, designed specifically to be multi-tenant solutions deployed as Software as a Service (SaaS). So while it might be stretching it to say this was a marriage made in heaven, at least it is up there in the clouds.

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