In what we saw as an awesome display of moving the bar higher, Evan Goldberg, NetSuite’s CTO, demonstrated in his Keynote Thursday that NetSuite continues to deliver industrial-strength innovations and solutions using tools that are increasingly easy to use, intuitive and particularly well suited to fast-growing Mid-Market companies with global aspirations.
Picking up from a summary paragraph from a 2009 blog post I wrote on NetSuite in a previous life:
“After looking at this demo it will be a little clearer why IMHO this is what the future looks like – all applications will have built in BI and reporting capabilities much stronger than has previously (been available) – without third party BI and lots of integration services – a big differentiator for SaaS vendors that provide this type of visibility as a standard component of their value proposition.”
- Collaborative Innovation Blog post, April 4, 2009
Among others, there are two things that seem like very good strategic moves for NetSuite: Fishing where the Fish Are, and being in a unique position to leverage the new Enterprise Applications Platform for companies that are ready to expand into global markets.
Fishing where the Fish Are
NetSuite positioned itself from the beginning as an Enterprise Software company, starting with ERP and then building other complex, traditionally on-premises software applications into the platform as successive SaaS waves hit the market and customer acceptance increased; Customer Relationship Management, Supply Chain Integration, Customer Service, Professional Services Automation – all tightly coupled with Billing and Fulfillment for a truly integrated workflow that almost covers the gamut of the Traditional Multi-user Systems requirements (Integrated Front and Back Office). Now adding deeper focus to e-Commerce, Global Financial Reconciliation and Industry Vertical implementations, NetSuite can enable Mid-Market firms to be truly competitive in a global market; leveraging speed and agility to outperform larger slower companies.
We have seen a very steady increase in the willingness (and need) for SMBs to embrace Cloud Computing and SaaS Models that move them out of the annual cycles and cost-center mentality that used to define IS Departments. A good indicator of this is how eager the SMB Channel is to offer a wide range of products and services and here we have seen amazing growth; even from last year to now surveys show the laggards are rapidly jumping on board, as seen in this table:
Of the 615 US-based SMB Channel partners interviewed, 86% were now offering or planning to offer Cloud-Based Services, those Not Planning to Offer Cloud dropping from 38% to 14% of the channels. This data represents aggregate results for VARs, SIs, MSPs, SPs and ISVs. In addition to Cloud Services fast growing areas for the SMB Channel include Mobility Solutions, Managed Services and a wide variety of applications in all three of these categories.
SMBs are Hungry for Enterprise-Level Capabilities
Based on early success in SaaS and basic Cloud Services such as Email, Storage, Back Up and Recovery, and CRM/SFA, Small and Medium Businesses have seen the light at the end of the tunnel. Security, availability and usability objections have been overcome and the cost to implement with lower complexity and higher focus on the core business have resulted a very compelling value proposition in widespread adoption worldwide.
To survive in an increasingly globalized and optimized business environment, SMBs need to be growing faster than the market and their competitors, reflected by their Priorities: #1 Increasing Revenue (56%), #3 – Increasing Productivity (34%), #4 – Penetrating New Markets and Customers (32%), and #6 – Speed to Market / Keeping Pace with Competition (28%). On the other hand, rapid growth without an increase in efficiency is unsustainable, so the rest of the priorities revolve around scaling the business efficiently; including #2 – Reducing OPEX (45%), #7 – Collaborating Efficiently (29%), and Reducing Cost of IT (27%).
Because Cloud Computing has been able to deliver these benefits much more effectively than the previous generation of Client/Server architecture did, SMB customers report between 75-80% satisfaction levels of “Satisfied” or “Very Satisfied” with their Cloud-based implementations.
All of this bodes well for NetSuite as the market matures and moves further into the cloud looking for Enterprise-Level capabilities. And timing is also very good as we can see from the additional results of the 2013 SMB Channel Partner Survey:
For Channel Partners Offering or Planning to Offer Cloud Services (85%), the left column shows the top 12 applications cited by Partners based on currently offered Cloud Applications, the middle column represents Cloud Applications that Partners plan to offer this year, while as the title suggests, the “No Plans” column shows the share who say they have no plans to offer the Application. It is pretty clear that the areas of focus and strength for NetSuite are lining up with the opportunity, or put in another way, the Mid-Market needs are maturing to a level that can benefit from NetSuite’s focus. And while there are many companies in the market who can provide these as point solutions, there are very few who can provide them in a unified suite of applications, with an integrated group of cross-department KPIs that can be used to get at a single version of the truth.
In terms of product coverage and timing, we feel the rapid adoption in the Mid-Market towards Cloud Infrastructure, successes in overcoming basic Security, Functionality and Availability concerns and the need for Mid-Market customers to grow rapidly and efficiently, all support NetSuite’s strategy and roadmap as presented at the conference, providing a lot of runway for the next few years.
Leveraging A New Enterprise Applications Platform
The second major point is that by building their platform from the very early days of the Internet as a transaction platform NetSuite has been able to been able to take advantage of both technology and market advances. In 1997, the critical weakness of the Internet was that while it was very good for moving brochureware around the world quickly, more mature applications that required a lot of integrity and accuracy – such as OLTP in Financial Reconciliation and Supply Chain Integration – were not reliable enough; the Databases, Middleware and Network Management needed to improve and there was a serious shortage in programmers who could do this kind of heavy lifting.
Fast forward five years and the dotcom bust had made commercial broadband access ubiquitous and the tools and skills had (almost) caught up to the hype. CRM, the Killer App was being brought online to the SMB community through SalesForce.com and the benefits of a SaaS model were becoming very clear, albeit with some remaining hiccups and most enterprises waiting on the sidelines for critical applications.
NetSuite started with one of the most difficult challenges back in 1998; ERP Applications with all the Enterprise-level OLTP and Database Management challenges that came with them. By doing this, the ability to grow an integrated set of applications using a single foundation, has paid off in terms of functional leadership. Others in the market, most notably SAP for Back Office and Oracle for Front Office, have taken an “Acquire and Integrate” approach, which is complicated and time consuming in comparison. The fact that NetSuite has survived and thrived in this environment is testament to vision, determination and execution.
Without getting too abstract, we see long term patterns in the software market that seem to ring true over time – the first is to win a narrow space, shore up the position, look left and right and take the adjacent space that is most lucrative and easy to assimilate (by hook or crook). Repeat. The second is that network effects rise in proportion to the number of users: Market Share is King. The third is to focus on the Scalable model and ensure to develop an ecosystem of partners who can add value profitably. Finally, at a very abstract level, the history of IT has been a steady, long march to Data Integration for Process Automation and Optimization. Whether you call Big Data, Distributed Database Management, Supply Chain Integration, Enterprise Performance Management or Google Search, it boils down to integrating disparate data and making it useful for decision making, with a relentless concentration on efficiency. As seen in the Business Intelligence segment, those who started with an Internet-based implementation approach rather than one of everything to every mapping, have ended up with an easier road to implementation; consider Siebel vs. SFDC, SAP vs. NetSuite, BoA Merchant Banking vs. PayPal, or Cognos vs. Domo. New, better tools and focus on specific data integration points rather than mapping every possible permutation of interaction between systems has resulted in faster time to value, less complexity for the channel and much less risk for customers. Breakthroughs such as scalability with Multi-Tenant Architecture have also resulted from solving the problem from a clean slate.
In our 2012 SMB 2020 Technology Report, we described our perspective of the IT Environment of the future, Client, Server and Network. This graphic shows a functional view of the Multi-user System, traditionally called the “Server” within a Client/Server Architecture. This view has CRM as the Hub component, surrounded by an increasingly integrated suite of Applications areas that eventually cover the complete information requirements of the Front and Back Office to run the business using a highly customized group of integrated KPIs. This type of integrated Nirvana has been an objective for a long time; however, it seems to be closer, clearer and much less complicated than it used to be when looking at the NetSuite Roadmap, i.e., we are not counting the dozens of modules that need to be installed, configured and integrated (and who is responsible to manage it). NetSuite’s rapid increase in large customers and decision by the traditional big Systems Integrators to jump on board seem to indicate that timing is good and the functionality is there.
Channel Implications
As the functionality and capabilities of the platform have changed with Cloud Computing, so have the dynamics of the Channel, especially in the Small and Medium Business space. Access to capabilities that were previously far out of the reach of SMBs has fueled the adoption of increasingly complex applications. Ironically, the benefits of the SaaS architecture have compressed and digitized the sales process, allowing companies to sell directly through an online channel, with demand generation, research, pre-sales, sales demonstrations, etc., conducted through inbound sales organizations rather than relying on channel partners to push products and services to the market. The proliferation of horizontal SaaS applications, such as email, webinars, Storage and Back Up has spawned a generation of self-configured apps that have made the customers question the need for third party involvement. It has also shorted the decision cycle substantially; many times cutting the channel out completely and giving rise to a “trusted advisor” role, especially in the lower Mid-Market.
Our research has shown that generally the more complex a solution, the more likely it is to have a partner involved in the implementation. Because NetSuite offers relatively complex solutions, it will have to play on both sides of the fence here – avoiding conflict with large partners for direct sales and providing profitable opportunities to the SMB channel partners, this was one area we felt might be a yellow flag in the distance.
Mobility is coming on Strong
With the installed base of Tablets and Smartphones exceeding that of PCs this year and annual sales of the former expected to number in the hundreds of millions higher by 2018, we see a fundamental shift in the way customers access and manipulate data. “Fundamental” meaning the difference between double-entry ledger accounting in physical books to a software application or the move from IBM Selectric Typewriter to PC-based Word Processing applications; nothing will ever be the same, and it is inevitable. There has already been a steady stream of casualties in the wake of Smartphone sales – single function GPS devices, midrange Digital Cameras and landline phone sets have all peaked in global consumption in the wake of accelerating handset sales. Just as the Internet itself essentially changed all business where value could be digitized (Financial Services, Travel, Shopping, and Advertising), so will ALL industries change as the primary mode of information consumption to the Internet is by mobile device.
This is the area that saw the greatest change in our 2013 SMB Channel Survey, from 56% of partners who said they were not planning to offer Mobility solutions in 2012, the number dropped to 8% this year, representing a doubling of Mobility Solution partners in the market as they implement the plans.
We did not hear that much about mobility from NetSuite during the conference, but given their strength in operational visibility through dashboards across departments, we think focus on this area could help both channels and end users.
Techaisle Analyst Insights
Across geographies (US, Germany, Australia and India) and across different years, small businesses are showing remarkable uniformity and consistency in their response to which value statement best describes their business. We first asked small businesses in 2010 (for India in 2012) to tell us which one of the following statements best described their business success:
- Business success depends upon a strong relationship with the customer & being responsive to their demands
- Business success depends upon implementing highly efficient & optimized processes to deliver products/ services at the lowest possible cost
- Business success depends upon implementing cost effective IT solutions to improve productivity, efficiency and profitability
- Business success depends upon ability to consistently innovate and bring cutting edge products to market
We did expect customer relationship to be garnering highest number of responses. What we did not expect was the rapid rise in efficient process implementation with the size of business. We certainly did not expect the same sentiment to be represented across four different countries – US, Germany, Australia and India.
In 2014 we repeated the question to a completely different random sample of small businesses and we got similar responses across all countries.
The data clearly shows that for very small businesses, business success is dependent upon customer delight whereas for 50-99 employee size businesses, process efficiency and optimization also become important. The data consistency exhibits that irrespective of size or maturity of country, small businesses have similar mindsets in what defines their business success. With this foundation in place small businesses systematically build their business but the rate at which they are able to truly scale and achieve their value statements becomes dependent upon the absorption of IT. In fact, the role of IT has increased by an average of 38 percent between the two years of comparison. In today’s market, IT is generally delivered in the form of systems that improve sales process efficiency and visibility, collaboration, project management, analytics and social marketing systems that capitalize on connectedness within an economy that increasingly relies on person-to-person, cloud-enabled communications.
There is tremendous future interest within SMBs in cloud-based marketing systems, sales systems, and solutions supporting business operations. Availability of cloud-based business solutions will drive tremendous growth in automation across seven functions:
1/ Marketing solutions
2/ Sales systems
3/ Customer service solutions
4/ IT Operations solutions
5/ Solutions supporting business operations
6/ Solutions supporting financial operations
7/ Solutions supporting HR/talent management
And when we further consider that each solution area can (and often does) incorporate multiple applications, and that some cloud applications are outside of these seven areas, we will see that both the scope and depth of cloud workloads will increase to support small business value-statements.
Techaisle’s unique SMB research to understand the current state and implications of distributed IT influence and authority shows that today, the DMU (Decision Making Unit) is much bigger, much more diverse, much more difficult to inform, and can be much slower to take action. Business decision makers (BDMs) are an intrinsic force within DMUs in most SMB organizations, and are the primary decision makers in some high-growth areas. These BDMs have different objectives for technology, different perspectives on adoption drivers and impediments, and tend to be influenced by different information sources. The resulting diffusion in responsibility/authority and information channels has created an environment where buyers and sellers struggle to develop the cohesion needed to promote or embrace new IT/business capabilities within existing IT and business process structures.
The study shows that both ITDMs and BDMs play important roles in the (formal and shadow) acquisition of IT products and services. However, Techaisle’s research has found that the distinctions between these roles are not evenly applicable across all types of IT-enabled solutions: in some areas, the business will look to IT for leadership, and in others, it will take direction from BDMs.
Figure below illustrates the extent to which ITDMs and BDMs are seen as solution leaders within small and medium businesses, and across nine major solution areas. The solutions have been assigned to three groups: those on the left (virtualization, managed services and IaaS) are labeled “IT led,” and represent areas where IT is generally seen as leading corporate initiatives; they are focused on the core infrastructure used by IT to deliver corporate services to users. The ones at the right (collaboration, social media and analytics) are labelled “BDM led,” and are solutions in which BDMs provide most corporate leadership, and IT is cast very much in a supporting role. The solutions in the middle – Big Data, SaaS and mobility – have been labelled “IT/BDM collaborative.” These are solutions that respond to BDM needs, but where IT is important to supporting delivery capacity.
The positioning of these solutions is important to IT vendor sales and marketing strategies. Solutions in the “IT led” category need to have strong IT-focused positioning, with detailed information on product attributes; this material should be supported with a second layer of collateral containing information on the business case for the solutions, and aimed at BDMs.
Solutions in the “BDM led” category require very different positioning: here, vendors need to make a strong case for the business benefits and relevance of the solution and orient these messages towards BDMs, supporting this campaign with accompanying technical information designed to provide clear deployment and integration guidance to ITDMs.
The “IT/BDM collaborative” category is the trickiest to address. It requires deep information on business benefits and the process steps required to capture those benefits targeted at BDMs, and deep information on how to assemble, deploy, integrate and support/optimize these solutions targeted at ITDMs – and an understanding of how to position and convey the messages to each audience.
During the survey, Techaisle explored one other solution issue that is important to understanding the different perspectives of ITDMs and BDMs. Each respondent was asked to categorize the nine solution areas as having one of two primary impacts: driving growth or containing costs/”increasing the bottom line.”
The comparison of small and mid-sized ITDM and BDM perspectives provides an instructive view of the differences between the two communities. Looking first at the small business results the survey finds that in six of eight areas (IaaS and SaaS combined into a single “cloud” category), BDMs are more likely to view a solution as contributing to growth, and ITDMs are more likely to view a solution as helping to control costs; this may reflect a fundamental difference in how each group approaches its business objectives. In the mid-market findings study reveals that the perceptions of value of ITDMs and BDMs are very closely aligned in mobility, virtualization, Big Data and managed services. ITDMs are more likely to believe that cloud will drive growth than their BDM peers, while BDMs are much stronger believers in the growth contributions of the three IT-led solution areas (collaboration, social media and business intelligence/analytics).
About the Study: 360 on SMB & Mid-Market IT Decision Making Authority - BDM vs. ITDM
The study covers:
- Stakeholders and their roles in end-to-end IT solution adoption
- ITDM vs. BDM : Balance of Authority (Needs, Budget, Purchasing)
- ITDM & BDM: Locus of Leadership in driving different types of IT Solution Adoption
- ITDM & BDM: Leadership roles in securing Cloud, Mobility
- ITDM vs. BDM: Success Attributes and Benefits of Cloud & Mobility Solutions
- SMB & Mid-Market Businesses: Shadow IT Spending
- Business Impact of BDM vs. ITDM perspectives and expectations with respect to IT Solutions
- ITDM vs. BDM: Differences in Business Issues, IT Challenges, IT Priorities
Techaisle’s SMB & Midmarket Collaboration adoption research found that apart from traditional collaboration solutions of file sharing and communication, SMBs need SaaS business applications to have collaborative properties. 34 percent of SMBs and 44 percent of midmarket businesses say that SaaS applications should have built-in collaboration properties out-of-the-box. They say that the success of a cloud business application is its ability to provide /support collaboration, including email and/or hosted telephony.
Techaisle survey data shows that there is a strong connection between SaaS applications and collaboration. In some ways, these connections are intuitive: SaaS is a resource that can be accessed simultaneously by multiple individuals located anyplace where there is a network connection and cloud is inherently supportive of collaboration, and many applications are either explicitly focused on collaborative activities (ranging from SharePoint to CRM) or embed these capabilities (as with productivity applications like Office 365 or Google Apps).
Techaisle’s SMB research found quantitative support for these perceptions. When SMB respondents were asked, “what are the key attributes of a successful cloud solution?” As would be expected, security, scalability, and data management (including disaster recovery) were prominent in these responses. However, the most common answer was “the ability to support mobility,” which speaks to the requirement to enable mobile collaboration. And the fifth-most common response was “the ability to provide or support collaboration.” As the figure below shows, this is an important issue across size categories: it was cited as an important cloud success attribute by nearly half of near-enterprise (500-999 employees) firms, and also by companies with just 10-19 employees.
Further analysis of current and planned SaaS workloads underscores the importance of collaborative capabilities within SaaS applications. Techaisle asked small business and midmarket respondents who are currently using or planning to use cloud to identify the top SaaS workloads in use today, and those that are in current adoption plans. The results, that collaboration plays a role in most SaaS applications:
Workloads explicitly focused on collaboration
- Hosted VoIP (used today by 52 percent of midmarket businesses, with 35 percent planning adoption)
- Content publishing (used today by 53 percent of midmarket businesses; 56 percent of SaaS using small businesses are planning deployment)
- CRM (in use or planned by 93 percent of midmarket businesses and 71 percent of SaaS using small businesses)
Workloads where collaboration is a key differentiator, attribute or outcome
- Office suites (both Google Apps and Office 365 emphasize intrinsic collaboration capabilities. Office suites are the most commonly used SaaS application type within small business, and the third most commonly used application type within midmarket business)
- Project management (most commonly used SaaS application type within midmarket business, and the third most commonly used SaaS application type within small business)
- Business Intelligence (53 percent of midmarket businesses and 44 percent of small business are planning adoption)
Workloads where better collaboration or reporting within/across departments/functions and/or with external stakeholders is a key outcome
- Accounting/financial management and ERP (accounting/financial management is the second most widely used SaaS application type within small businesses)
- HR management (deployed by more than half of midmarket business SaaS users)
- Marketing automation (highest rate of planned adoption within midmarket business SaaS users)
These findings underscore trends that are apparent in the SMB SaaS and collaboration markets: that increasingly collaboration is important to SMBs (as a means of boosting productivity), and that cloud-based systems – including file sharing systems, and extending to SaaS applications as well – are expected to provide support for many forms of collaborative activities.
Deployment scope further impacts SMB buyer requirements
As Techaisle observes the evolution of collaborative solution capabilities within SaaS, it is important to also consider the scope across which these applications and solutions are expected to operate. Solutions that connect workers within a group or department benefit from a common understanding of context and source applications; those that connect users across groups/departments exist within a single company, and can focus on supporting IT-approved devices with reference to IT-defined security policies. Solutions that extend beyond the organization’s own staff may well offer more business impact than internal-only systems by speeding communications to customers, prospects and/or suppliers – but they come with increased issues in terms of support for seamless connectivity across multiple platforms, and potentially, may raise security concerts as well.
In the research, Techaisle asked respondents to specify the scope of their collaboration solutions. The results help clarify the strong demand for collaboration within microbusinesses, and provide insight into why businesses view collaboration as an essential solution investment area. More than 40 percent of microbusinesses, and 39 percent of all SMBs, extend their collaboration infrastructure to support for customers. Midmarket businesses are more likely to focus on internal collaboration, but they join smaller peers in having a roughly 20 percent incidence of supporting supply chain relationships (suppliers/vendors) through their collaboration systems.
Looking at the above chart, one sees that there is the potential for missed connections within the emerging panoply of collaboration-enabling systems. Social media, mobility, BI and cloud all have important collaboration extensions. But how can businesses ensure that these technologies will connect internally once they are in place? Techaisle believes that collaboration is evolving in response to this market condition. IT vendors have traditionally tried to position collaboration solutions as a platform on which businesses can create new capabilities and integrated processes. However, data shows that businesses are instead acquiring collaborative capacities as part of other applications: social media, mobility, cloud and BI all provide discrete and important – but potentially disconnected – collaboration capabilities. Moving forward, Techaisle expects that collaborative technology solutions will increasingly be positioned as a framework that integrates and extends the value of these discrete system capabilities, rather than as a “first step” platform.
Related Blogs:
SMB and Midmarket File Sharing & Collaboration Adoption to Grow by 52 percent
SMB Content Management & Collaboration Solutions Adoption: Seven Key Trends
Report details:
360 on SMB & Midmarket File Sharing & Collaboration Solutions Adoption Trends
