Oracle’s Approach to Its NetSuite Acquisition
Whenever a business is acquired by a much larger company, there is always the question of whether the emphasis will be on integration or autonomy. Each situation is unique, but it is becoming more common for large acquirers to take a ‘hands off ’ or ‘don’t fix what ain’t broken’ approach when they’ve acquired a fast-growing and successful company. Other times, they believe ‘we can make this even better’ and start making many changes and/or more rapidly absorbing and integrating the new acquisition.
Last year’s $9.3B acquisition of NetSuite by Oracle marked the biggest event for NetSuite since it was founded. What we heard at SuiteWorld from Mark Hurd, Oracle’s CEO, was an attempt to get the best of both integration and autonomy, but leaning towards autonomy. He said, “We set it up almost like an incubator. We want to provide all the benefits of Oracle’s scale with none of the encumbrances. Scale is good for investment, but bad if it slows things down. We have 140K employees. Some of the best things they can do with regards to NetSuite is — nothing.” Later, at our executive briefing session, Mark added “If NetSuite needs to leverage our [Oracle’s] resources, we will make those resources available, but we won’t tell NetSuite how to do things.”
When a change of this magnitude happens, customers want to be reassured that it is going to work out, and understand what it means for them. It is not surprising then that a good portion of SuiteWorld this year was dedicated to answering those questions. In fact, Jim McGeever, EVP of the Oracle NetSuite Global Business Unit (GBU), opened up the conference with two taglines: “What’s Changed” and “Next Starts Now.” He said that, as a Global Business Unit of Oracle, NetSuite is self-contained — all service, support, and development remains contained inside the business unit. Jim said, “For most of our customers, there will be almost no change.” Initial signs are that customers and prospects see this acquisition as a good change. Mark Hurd said that NetSuite has increased its growth rate since the closing of the acquisition.
Investing in NetSuite, Expanding the Global Footprint
Mark and Jim both said that Oracle will invest in NetSuite, initially by leveraging Oracle’s global footprint1 to expand NetSuite’s geographic presence; first in Benelux, the Nordic countries, Mexico, South America, Germany, Japan, and Southeast Asia; then ‘phase two’ expansions into China, India, Brazil, France, and the UAE. NetSuite currently has five data centers, three in the U.S. and two in Europe. They have approved budget to immediately add six more in Chicago, Frankfurt, Japan, China, Singapore, and Australia. Leveraging Oracle’s global R&D centers, NetSuite is also expanding the number of development centers, including new R&D offices in Argentina, India, China, and Japan.
Mark also said that they will “broaden the suite with Oracle’s SaaS solutions, including budgeting, planning, HCM, and others.” He did not go into what level of integration was intended between these and NetSuite. He talked about increased R&D investments and acceleration of the verticalization with SuiteSuccess (more on that below).
Jim announced the launch of NetSuite’s integrated core HR application called SuitePeople, with general availability on June 1, 2017. He said that, as with other NetSuite applications, SuitePeople has a role-based UI, tightly integrated with the financial core that provides the flexibility to modify and customize the platform with SuiteScript and the other tools that are standard on NetSuite’s multi-tenant architecture. They already have some beta customers that have been live on it for many months.
Expansion and Sweet Success of SuiteSuccess
Last year, we wrote a two-part article on Agile ERP, the rapid, incremental implementation of ERP using industry-specific ‘blueprints’ with workflows and configurations culled from years of implementation experience within that specific industry. When this is combined with consultative discussions very early on, and prototyping and validation throughout the sales cycle, it can be used to get the system up and running much faster, with a ‘go-live’ that actually works as expected, and people using the system. Our inspiration for that article series was, of course, SuiteSuccess, which was introduced at last year’s SuiteWorld.
When we wrote Agile ERP last summer, wholesale distribution was the only industry available through the SuiteSuccess program. Since then, they’ve been adding industries at an impressive pace, having built out eight industries, with 12 sub-verticals. Each of these is comprised of thousands of pre-configured system settings, KPIs, dashboards, roles, transaction forms, customer and vendor records, and workflows, all based on leading practices drawn from NetSuite’s professional services experience who have tens of thousands of hours implementing systems in these industries. As well, NetSuite learns from process knowledge embedded in the SOWs2 of their most successful implementations; observations of how successful customers are using the system; and interviews with their most successful customers.
NetSuite said that for the 300 customers that have implemented via the SuiteSuccess program, there were a total of only four change orders, a testament that they are not only implementing rapidly, but they have figured out the right configurations and implementations that make it so successful. SuiteSuccess implementations are 60% faster and cost 18% less than those not using the methodology. We were told that 90% of SuiteSuccess implementations are immediately referenceable.
A less immediately obvious benefit is performance. The average page load time for those who have implemented via SuiteSuccess is 66% faster than those who haven’t. Why is that? Consider 100 ‘regular’ NetSuite customers (i.e. not using SuiteSuccess). Each of them implements their own configuration and NetSuite personnel will spend a certain number of hours optimizing each one. Now consider 100 SuiteSuccess customers. They all have virtually the exact same configuration, so NetSuite engineers can afford to spend all their time optimizing that one standard configuration, rather than one customer at a time.
Andy Lloyd, VP of Commerce Products, talked about the ongoing evolution of SuiteCommerce. Since its earliest days, NetSuite has had ecommerce functionality integrated with its core ERP. Since then, they’ve added inventory and price visibility, POS4 functionality (via Retail Anywhere acquisition), order management, and commerce marketing (via the Bronto acquisition).
We heard about one SuiteCommerce implementation from Lyn Lewis, CEO of Journelle. Journelle is a luxury lingerie retailer and wholesaler, with four stores of their own; a wholesale business supplying 1,500 stores; and a strong online presence. Previously they did merchandising manually. To ensure availability, they often stocked more inventory than they needed, which wasn’t very efficient. With NetSuite, they now have the visibility to set up automated replenishment alerts, letting them keep stocks at the desired level to meet consumer needs. This resulted in a simultaneous reduction of both inventory and stockouts.
Blue Microphones’ Global Footprint
NetSuite’s Industry Marketing Lead for Manufacturing and Distribution Marissa Kinsley, had a good discussion on stage with Bart Thielen, CFO/COO Blue Microphones. Founded in 1995, Blue Microphones started manufacturing and selling studio grade microphones priced in the $1,000 to $6,000 range. Ten years ago, they started making consumer grade mics for things like blogging and Skyping. Headquartered in California, Blue Microphones distributes and sells globally. Bart said as of a couple of years ago, they still had a lot of manual processes with the 3PL5 they were using in Amsterdam. They implemented a portal in NetSuite which their 3PL uses to pull orders, fulfill, and post and track invoices. It worked so well, they implemented the same system in Hong Kong about a year and a half ago and now are having their U.S. based 3PL move onto the same system. Soon they will be connecting those 3PLs via EDI allowing NetSuite to get notified whenever freight is picked up.
Blue Microphones also sells direct to consumer via their ecommerce site. They set up a product registration page on their site to help them understand how people are using the product, whether for music content, blogging, podcasting, conference calls and so forth. Later this year, they are adopting Bronto for automating their marketing campaigns. At that point, they will have all data consolidated into one system. Bart said that was their vision from the start two years ago, when they implemented NetSuite. Before that, they had pockets of data all over the place. Blue Microphones expects to double or triple in the next five years and selected NetSuite because it is the system that could grow with them.
RST Managing Multiple Channels
We also heard from RST Brands, a designer and manufacturer of luxury outdoor furniture and flow walls. RST provides a good example of the need for unified visibility across channels. They sell through major retailers, including Costco, Home Depot, and Lowes. They also sell online through Amazon, as well as direct to consumer through their own website. They connect to their retail channel partners via EDI. RST’s average order size is $1,300. Larger orders, up to $10,000 or more, are not uncommon. Because of this, they also provide financing options. They have three mid-sized warehouses of about 100K S.F. each (in Los Angeles, Toronto, and Atlanta).
When RST Brands first started as a dot com company back in 2004, they had their own home grown systems. In 2013, they were one of the first customers to implement SuiteCommerce Advanced (SCA). They started using Bronto about a year and a half ago. This helps them respond to abandoned carts on their own site. Matt Grimm, director of ecommerce at RST Brands, said they have a 60 percent open rate for their marketing campaigns, more than twice the industry average.
When an order ships from RST, their customer is automatically notified. The email tells the customer exactly what to expect: the nature of the white glove service they will receive; requesting them to report any damages; and (for example) point out that cushions are found under the frames (one of the most common calls from customers; ‘where’s my cushions?’). The combination of all these functions in one platform — ecommerce, inventory management, WMS Lite, marketing campaign management, core financials, and more — enable RST to see what inventory they have, more reliably promise, set customer expectations, and deliver personalized customerexperiences across multiple channels.
The Future of NetSuite Within Oracle
As they say, “Predictions are hard to make, especially about the future.” Having said that, the early signs are positive. It appears that Oracle understands and doesn’t want to destroy the magic that made NetSuite into what it is today. Innovations such as SuiteSuccess are increasingly important in users’ selection of an ERP system. Solution buyers care less about checklists of functionality and more about speed and agility of implementation, and the ability to scale as they grow. Features like unified billing and revenue recognition6 — enabling new business models selling products, services, and subscriptions all together — are a real differentiator for NetSuite, especially for young growing companies built on these new business models. If Oracle keeps its ‘hands-off ’ promise, this acquisition could turn out to be good for NetSuite, its customers, and Oracle.
1 Oracle is in about 120 countries, so they have global resources (field offices, shared services, etc.) that can be leveraged by NetSuite. — Return to article text above
2 SOW = Statement-of-work — Return to article text above
3 B2C = Business to Consumer, i.e. selling direct to individual end customers. — Return to article text above
4 POS = point of sale — Return to article text above
5 3PL = Third Party Logistics provider — Return to article text above
6 We didn’t cover unified billing and revenue recognition, but I feel it is one of NetSuite’s more important assets. For more, see our writeup from last year here. — Return to article text above
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