Cloud ERP vendor NetSuite is embarking on a massive global sales push to give its parent company, Oracle, a dominant position in cloud.
“Larry (Ellison, chairman and billionaire founder of Oracle) believes that everything is going to the cloud. He believes it to his core,” says Jim McGeever, who heads up NetSuite within Oracle.
“This is a golden opportunity for Oracle. None of their competition are anywhere close to having the cloud apps they do. They think they can dominate the landscape over the next couple of years. They want to hire as many people as they can and go for a land grab in the enterprise.”
Oracle, which spent US$9.3 billion on the acquisition, has US$60 billion in cash to fulfil its dreams (that’s not a typo – sixty billion).
How will NetSuite change to conquer this once-in-a-lifetime opportunity? It will grow at a phenomenal rate; McGeever says they want to double the size of the sales team as quickly as possible and add many more partners. NetSuite will open field offices throughout Europe and Asia, add data centres in Australia, Japan AND??, and expand development teams.
McGeever wouldn’t say how much the company was spending but it must be scores of millions.
While NetSuite will maintain a level of independence within Oracle as a separate global business unit, it will need a sales-hungry mentality to achieve its enlarged targets. It will be interesting to see how much of Oracle’s culture and reputation as a highly aggressive sales machine will pass over to NetSuite.
The juciest targets will be converting on-premise ERPs to the cloud. Oracle dearly wants to steal market share from SAP, the leader in on-premise ERP. However, NetSuite sales reps will receive the same commission for taking out one of Oracle’s own on-premise ERPs. The mantra is “take everyone to the cloud, asap”.
McGeever says NetSuite will maintain its focus on the mid-market but inevitably it will start hunting elephants where the commissions are so much fatter. This was most obvious in the product announcements. The banner was the addition of SuitePeople, an HR management module that sits just below Oracle’s human capital management (HCM) products, and the plan to integrate Oracle’s cloud software into NetSuite.
Remarkably, given the frenzy in the cloud accounting market, there was not a single mention during the keynotes of AI or machine learning. I asked Oracle CEO Mark Hurd, Evan Goldberg, NetSuite’s EVP of development at NetSuite, and McGeever why they weren’t introducing AI into their financial module. Wouldn’t SMEs would be reluctant to move from AI-powered cloud accounting software to manually reconciling in a cloud ERP? I gave the example of Australian e-commerce company Kogan using Xero and an inventory app Unleashed to sell $170 million of goods a year.
Their responses were revealing.
Goldberg, sounding slightly exasperated, replied, “We’re not automating the financial functions. We’re automating entire business processes. When you’re adopting NetSuite you’re adopting more than a financial system. They experience the same thing (i.e. siloed databases) that caused me to build NetSuite in the first place.”
McGeever said that if cloud accounting software was a consideration then NetSuite was in the wrong competition. “Companies in the US don’t normally choose between NetSuite and QuickBooks Online. There are some unicorns like the one you mentioned but it is a different market.”
(Hurd didn’t understand the question and gave an answer about machine-to-machine applications in mission-critical systems. The guy runs a company with 40,000 employees and turns over $40 billion a year in revenue, so you’ve got to give him a break.)
The answer in short was that NetSuite had so much opportunity with the product that it has today that the AI revolution in small business accounting software is not relevant.
It’s true that, from Oracle and NetSuite’s perspective, competition from cloud accounting software does not matter. They are standing at the foot of an enormous mountain of larger, more profitable prospects.
And it will have its work cut out chasing all the companies using on-premise ERPs from Oracle and SAP. Many product announcements at this week’s SuiteWorld conference added new functions or expanded existing ones to make it more comparable to the heavily developed on-premise solutions.
It’s fair to say that NetSuite is the furthest developed of the cloud ERPs; it’s definitely the oldest and has the largest number of customers. Clearly then the cloud accounting apps will discover practical uses for AI in financial systems for a good while before it appears in ERP.
I would expect that once AI delivers auto-coding of transactions, invoices, bills and receipts it will make it a little harder for an SME to leave cloud accounting software for an ERP. How much harder? I guess that depends on how well AI works.
If it lives up to its potential, AI will eventually strip out many accounting functions. It would be a difficult proposition to upgrade to a larger system that depended on manual processing.
Hurd, McGeever and Goldberg are clearly thinking of all the opportunities in the upper mid-market and enterprise. The vendor’s attention will follow their leadership. NetSuite will always claim to want the small mid-market and SME but I’d expect that over the next couple of years the smaller fish are likely to be overlooked.
Disclosure: Sholto Macpherson travelled to SuiteWorld in Las Vegas, USA as a guest of NetSuite.