Analyst Perspectives

The theme of this year’s Oracle NetSuite SuiteWorld was “Full Suite Ahead,” with content aimed at demonstrating to customers (and prospective buyers) the value of using more of what NetSuite has to offer. The business logic behind this concept goes beyond the obvious objective of upselling existing customers to increase the average annual recurring revenue. As is often the case with subscription businesses, customers fail to take advantage of what’s already included in their service. Ensuring that customers are achieving full value is essential to retaining them, and almost always a precondition to selling them more. For a cloud software vendor, this translates to having an effective customer success organization backed by a customer-centric product strategy and a product management organization that delivers on the strategy. All of this was on display at the event.

A major challenge facing the customer success of an organization is the customer: Our Office of Finance Benchmark Research reveals that one-half of finance and accounting departments are technology laggards. The research found that, while a majority are able to perform either core or basic functions (such as accounting and simple planning and reporting), just 25% routinely have advanced capabilities such as more complex analytics and reporting.

NetSuite sells mainly to midsize organizations, which Ventana Research defines as those with 100 to 999 workers. Executives, especially the chief financial officer, typically face the dual challenge of managing a higher degree of operational complexity than smaller organizations but lacking the resources that larger ones can bring to bear. The shift to the cloud for delivering software has been especially useful for midsize organizations because they no longer need an IT department to manage and maintain applications. They also don’t have to commit capital investments for the hardware necessary to run these applications, and can take advantage of additional services the vendor can provide that aren’t feasible in an on-premises deployment. Ventana Research asserts that by 2025, over 80% of ERP systems purchased by non-product companies will be deployed in the cloud to promote continuity, improve performance and lower costs.

Even so, other challenges remain, especially in the back office, where midsize organizations face a skills shortage. While 45% of larger organizations perform financial analysis very well, only 29% of midsize ones achieve that level. Our research found similar gaps in budgeting and fiscal control (40% versus 27%) and strategic and long-range planning (38% against 28%).

Vendors have made technology that can close that gap more accessible, but getting users to take advantage of these advances is the job of the customer success organization. There, achieving a higher level of engagement is difficult because, while some fraction of customers are sufficiently motivated, a significant portion aren’t. To encourage engagement, NetSuite offers an Advanced Customer Support service that monitors usage and performance and gives guidance on operations as well as providing configuration, testing and tuning assistance to improve performance, preparing customers for new releases and upgrades, helping customers use more of what they already pay for and extend their implementation to do more.

Examples of NetSuite’s customer-centric product strategy presented at the event focused on new or improved capabilities for eliminating friction in processing transactions and accounting, facilitating sales and their fulfillment as well as employee management. The most significant announcement for me was the configure, price and quote offering.

Earlier this year, Oracle NetSuite’s acquired Verenia’s configure, price and quote offering, which was highlighted at the event. CPQ has been around for decades, enabling salespeople to quickly put together a valid configuration of a product bundle (say, matching the right mattress to a particular bed shape and size), and then price it correctly. The quote becomes a sales order and generates a bill of materials used for downstream tasks, saving time and supporting data quality to substantially reduce process errors. CPQ software has grown in importance as businesses increasingly make products and services more configurable to attract a wider set of customers and eliminate friction and delays in the sales process. CPQ is especially useful in selling recurring revenue and subscription offerings, which can include a combination of ongoing services and one-time charges. This front-office software ensures the accurate pricing of these often-complex arrangements and helps automate revenue recognition accounting to ensure accuracy and increase back-office staff productivity.

A major challenge for midsize organizations is to scale up without adding administrative overhead, and back-office software makes this possible. One area the company focused on is its accounts payable automation and payments enhancements, including invoice processing, which matches purchase orders, receipts and vendor bills to eliminate overpayments and take best advantage of early payment discounts. NetSuite embeds banking services to better manage and control vendor payments, allowing users to scale end-to-end AP processes. It has also added automated, intercompany netting, which saves time, increases accuracy and substantially reduces a soul-deadening task for organizations with significant volumes of these types of transactions.

Oracle NetSuite also announced SuitePeople Workforce Management, which helps manage labor costs and reduces employment frictions by automating routine tasks such as scheduling, tracking employee hours worked and calculating wages. The software enables workers to view their schedules, clock in and out of shifts and submit shift change requests directly from their mobile device. It also provides staff scheduling recommendations that can produce more optimal outcomes for all involved.

There may have been reasons for staying away from cloud-based ERP systems a decade ago, but these have largely disappeared. For most organizations, advances in the functionality and configurability of all vendors’ cloud offerings make them similar enough to existing on-premises software, and customization capabilities can plug most or all of the remaining holes. Moreover, the total cost of ownership may be lower, security in the cloud is superior to what all but the largest organizations can afford and system performance is better, since vendors are constantly upgrading equipment and usually offer elastic computing resources. I recommend that organizations contemplating an ERP change should consider a cloud-based system as a default option and include Oracle NetSuite on the list of vendors to assess for this purpose. Regardless of the vendor selected, gaining value from the technology depends upon taking advantage of the full scope of the software’s capabilities.

Regards,

Robert Kugel