Three-Pronged Strategy for Growth
Since being acquired by Oracle, NetSuite has continued to grow at a healthy 30%/year. They now have over 16,000 customers. Jason Maynard, Oracle NetSuite’s SVP of Global Field Operations, described their three priorities for growth: 1) International Markets, 2) Emerging Companies, 3) Industry Verticals.
Expanding the International Footprint
The acquisition of NetSuite by Oracle provided the resources and presence to help grow the Oracle NetSuite business internationallly. Prior to the acquisition, international sales represented about 20% of revenue. Since then, 20,000 international subsidiaries have gone live with NetSuite and 50% of new subsidiaries are international. NetSuite has put a lot of effort into localization for different countries, including translations, currencies, tax and regulatory compliance, and localizing business processes such as reconciliation and vendor exemptions. Their OneWorld product serves them well in this effort.
Serving High-Growth Companies
NetSuite has always been popular with startups for a variety of reasons. Being cloud-based requires no data center and far fewer IT resources than an on-premise approach. NetSuite has just about all of the functionality a company needs on one platform, with the ability to extend for areas not covered. They strive to acquire customers as early in the growth cycle as they can get them. VCs will often suggest to their portfolio companies that they should use NetSuite, rather than starting on QuickBooks, since they know the NetSuite platform can scale to take their companies to an IPO or large exit. Implementation of NetSuite has always been relatively rapid, since it is a cloud-based system. Now implementation has become even faster with SuiteSuccess — on average 42 days to go live. And their sales cycle is fast too, 35 days on average. NetSuite relentlessly pursues further reductions in implementation times, to accelerate time-to-value for the customer and time-to-revenue for NetSuite.
Focus on Industry Micro-verticals
NetSuite introduced their SuiteSuccess implementation approach in 2017 (for more see Agile ERP Implementation) initially focused on Wholesale Distribution. Since then, NetSuite has created many more micro-vertical-specific blueprints for rapid implementation, which contain industry-specific roles, reports, dashboards, process workflows, and so forth. These blueprints are based on the experience of their professional services team, knowledge gleaned from the statements-of-work (SOWs) from the most successful implementations, direct observations1 of how successful customers are actually using the system, and interviews with successful existing customers. NetSuite has SuiteSuccess blueprints for 20 different industries and micro-verticals:
- Apparel, Footwear and Accessories
- Campus Stores
- Financial Services
- Food and Beverage
- Health and Beauty
- Healthcare and Life Sciences
- IT Services
- Media and Publishing
- Professional Services
- Restaurants and Hospitality
- Software/Internet Companies
- Technology Services
- Transportation and Logistics
- Wholesale Distribution
Several of the above industries have multiple editions. In addition, NetSuite has horizontal solution-specific blueprints for:
- Starter — For small company needs, including finance/accounting, order-to-cash, procure-to-pay
- Commerce — Ecommerce-focused business needs
- OneWorld — For international growth
- Administrator — Supporting NetSuite administrators
- Accounting — Maximize use of NetSuite’s accounting features
The different versions are segmented not only by micro-verticals, but also by different stages of growth for customers. This enables both younger/smaller and mature/larger companies to use the methodology. With SuiteSuccess now being NetSuite’s primary go-to-market approach, they changed their professional services compensation from billable hours to ARR (Annual Recurring Revenue) and NPS (Net Promoter Score), both key indicators of sustained ongoing customer satisfaction and value realization.
OCI, Autonomous DB, OIC, PBCS, WMS Cloud — Revving up the Oracle Engines
While many of NetSuite’s clients start small, they often continue to grow rapidly. One of the reasons they choose NetSuite is its ability to scale up to serve much larger firms. In fact, NetSuite has a number of clients that are well over $1B in revenue.2 Features like OneWorld help support multi-national corporations. NetSuite is often used to run subsidiaries of larger F500 corporations as well.
Now NetSuite is starting to leverage some of Oracle’s technology to provide even more scalability and higher performance. In particular, they will be using OCI (Oracle Cloud Infrastructure) and Oracle Autonomous Database to help them scale even further. OCI is Oracle’s cloud-based IaaS and PaaS3 offering, competing with Amazon AWS and Microsoft Azure. It includes a variety of services: Compute, Networking, Storage, Database, Containers, FastConnect (private connectivity services), Edge Services, Security, Governance, Streaming, Resource Manager, and Monitoring. NetSuite will begin testing their first customers on OCI within a few weeks. They expect OCI to provide a substantial increase in scalability for the platform.
Running on top of OCI, Oracle Autonomous Database provides automated patching, upgrades, and database tuning. Automated tuning will improve performance and free up NetSuite engineers to work on implementing application functionality. Evan Goldberg, founder of NetSuite, said they have written about 9,000 indexes since the founding of the company 20 years ago, and their engineers have spent time tuning them all. Oracle’s Autonomous Database was able to tune 6,000 of those indexes in just 24 hours and improve the system’s performance significantly. The system uses machine learning, so it will continually improve performance beyond these initial gains.
NetSuite will be using Oracle Integration Cloud (OIC) as their standard integration tool. It provides cloud/SaaS and on-premise integration adapters and service orchestration, process automation, visual application design, analytics, and scalable streaming data services.
NetSuite is also implementing NetSuite Planning and Budgeting, based on Oracle’s PBCS (Planning, Budgeting, and Cloud Services). NetSuite Planning and Budgeting will provide planning horsepower to NetSuite users. One of NetSuite’s customers, LogMeIn, said their planning system used to take four days to run the full company planning cycle. Now with NetSuite Planning and Budgeting, it takes 30 minutes, allowing them to do more what-if analysis, reducing risks and improving planning outcomes. Any NetSuite user will be able to pull NetSuite data into NetSuite Planning and Budgeting, to do what-if analysis, financial modeling, forecasting, trends, and other kinds of planning and analysis. NetSuite will be providing a SuiteSuccess implementation of NetSuite Planning and Budgeting as well, starting with inventory and financial blueprints.
In addition, Oracle WMS Cloud4 has been integrated into NetSuite, providing a solution for those who are running higher volume, automated warehouses, with support for conveyors, pick-to-light, carousels, carton sorters, ASRS, robotics, integrated scales, etc. The platform has been designed for resilience (99.5% uptime guarantee) and low latency.
AI/ML, Adding Intelligence to NetSuite’s Supply Chain Control Tower
Last year NetSuite launched their Supply Chain SnapShot that provides a time-phased picture of inventory across the supply chain, highlighting demand-supply mismatches. This view can include any locations where inventory is being maintained within NetSuite, including any suppliers and 3PL locations whose inventory information is input into NetSuite. This provides tools to see when there is an impending mismatch between supply and demand (due to demand exceeding or falling short of the forecast, delays in manufacturing and/or logistics, and so forth).5
In the fall of this year they are planning on releasing the first phase of their full Supply Chain Control Tower and this is one of the first areas where NetSuite is applying Machine Learning (ML). They will be using it to predict late shipments and provide suggested remediation actions. They are also applying ML to look at project-related risks. They said this will include nine mitigation strategies, various actions the user could take based on the nature of the risk.
A key factor in how fast and effectively a machine learning engine can get smarter and learn more is the quality and quantity of data it has available to learn from. NetSuite has an enormous amount of high quality current and historical data with which to train their ML engine. They have 16,000 customers and data across many different functions (purchasing, manufacturing, logistics, planning, ecommerce, finance, quality control, etc.). This will be a substantial asset for them in machine learning, compared with other players.
Allocation and Commitment, Manufacturing Planning
NetSuite has also been investing heavily in development of their Allocation and Commitment engine. This will allow complex rules for prioritizing and allocating work orders, sales orders, and transfer orders, thereby enabling more sophisticated available-to-promise and eventually capable-to-promise algorithms and optimization of limited supply. NetSuite is finally making strides into manufacturing planning (MRP) and advanced planning and scheduling (constraint-based APS), which will be appreciated by those NetSuite customers that do their own manufacturing inhouse.
Managing Outsourced Manufacturing
NetSuite has built-in support for managing outsourced manufacturing, to support their core market of emerging fast-growing companies that often outsource much or all of their manufacturing. An outsourced process step — like sending a machined part out to be heat treated or chrome plated — can be added to the BOM (bill-of-material) structure. Outsourced locations and non-inventory service items can be defined in NetSuite. The outsourced step can be defined as a work step in the customer’s own operations, accounting for the actual lead time it will take to get it done. If more granular visibility into the status of work-in-progress is required, a portal can be set up for the outsourced manufacturer to record milestones and progress.
NetSuite’s quality module can be used to manage inbound inspection of purchased and co-manufactured parts, materials, and assemblies. The QA technician sees the queue of items to be inspected. Once an item is inspected, the technician can change the inventory status on the batch from hold to released, then the inventory immediately shows up as allocatable.
Brainyard and Benchmarking
Last year, NetSuite launched Grow Wire as a place to learn about successful entrepreneurs and strategies for high-growth companies. At this year’s SuiteWorld, they announced the Brainyard, which provides performance analysis, advice, and industry-specific KPIs and benchmarking, based on actual data from NetSuite’s 16,000 customers. It shows quantitative and qualitative metrics. Anyone can view the benchmarks. NetSuite customers can automatically see exactly where they fall within the benchmarks. This same data will be made available in context, within NetSuite apps, for companies to set improvement goals and track progress.
The KPIs are classified into Foundational, Competitive, Best-in-Class, and Transformative, which are the first, second, third, and fourth quadrants of performance (25% of companies in each category) respectively. NetSuite is in a unique position, having access to very detailed performance data across a wide variety of companies. It is easy to imagine increasingly sophisticated and integrated uses of these KPIs and benchmarking data.
Omni-Business Model — aka Crossover Businesses and Multi-Faceted Business Models
In Evan Goldberg’s keynote address, he talked about the increasing prevalence of ‘Omni-Business Models,’ where a single business sells a mix of products, services, subscriptions, products-as-a-service, and potentially other types of business models — all within that single business. This is similar to what we have written about in Crossover Businesses, combining Manufacturing, Distribution, and Retail all in one business. We have another report coming out soon on The Rise of Multifaceted Businesses: How Manufacturers and Distributors Are Diversifying Their Business Models to Gain a Competitive Advantage which talks directly about the points Evan brought up. NetSuite is well-suited to support this kind of diversity, as their single platform supports manufacturing, distribution, retail, and service businesses, with various business models. They have especially strong support for subscription businesses and for managing a unified billing and revenue recognition process across all of these different types of business and financial models.
NetSuite’s ability to support omni-business models is a result of what they have started calling ‘Suiteness.’ On one level, this is having a single unified system across all functions in a company from finance to supply chain, service and support, ecommerce, engineering, sourcing and procurement, merchandizing, and so forth — all on one system — a single system that supports manufacturing, wholesale, retail, and service business models. Once you get all of this functionality on one system, ‘magic happens.’ It eliminates a tremendous amount of integration effort. Data is always in synch (single version of the truth across the enterprise). Delays and latency inherent in waiting for inter-application batch processes to execute are eliminated.
Now NetSuite is taking Suiteness to another level. They are starting to include cross-application functionality — functionality that is only possible because everything is all in one system. They showed a couple of examples. One was in HR performance management. Normally the performance review process is an annual affair, based on a manager’s assessment of the performance of the employee, potentially with some objective metrics that had been collected over the year. What NetSuite showed was the ability to give each employee a set of live, continually tracked KPI metrics, showing them where they stacked up against the goals and other employees. These are live and continually updated, based on actual execution data from NetSuite. This way, the employee does not have to wait until the end of the year to see how they are doing. They get continual feedback and no more end-of-the-year surprises.
Another example of Suiteness that they demonstrated was in ecommerce B2B merchandizing, the ability to prioritize the most profitable products when presenting options to retailer customers. With all of the data in one system, NetSuite can start to solve problems in ways that people have not thought of before and that other systems are not capable of doing (without a lot of heavy-lifting integration effort). The NetSuite teams have started doing cross-team brainstorming to come up with more ideas. I thought this was one of the more powerful ideas I heard at the conference and expect to hear more innovations on this front in the future.
Going Strong, Growing Strong
My overall impression — NetSuite is healthy, going strong, and growing rapidly. They are investing a lot in innovation and seem to really understand where they fit in the world, what is the source of their competitive differentiation, and how to get maximized advantage out of that differentiation. I expect to see more exciting things coming out of NetSuite in the coming year and beyond.
1 NetSuite is able see precisely how their system is being used, due to their single-instance, multi-tenant architecture. — Return to article text above
2 This leads to questions about overlaps between Oracle and NetSuite’s target prospects. Oracle’s CEO, Mark Hurd was at the keynote address and our analyst Q&A session. Some of the questions were around how they resolve sales conflicts between the upper end of NetSuite and lower end of Oracle’s markets. Mark and other Oracle NetSuite executives said these rarely happen, because of differences in industry focus, but when they do, they have a mechanism to ensure all the salespeople are treated fairly and it has worked well so far. — Return to article text above
3 IaaS = Infrastructure as a Service; PaaS = Platform as a Service — Return to article text above
4 Oracle WMS Cloud was formerly LogFire, which Oracle acquired in September 2016. For more on LogFire’s approach to low latency and high availability, see WMS Cloud Solutions Take More than a Cloud. To read about their support for DC-to-store logistics, see Extending the Reach of the DC — Return to article text above
5 Many other control towers come from companies that are more network-oriented and logistics-centric than NetSuite and thereby tend to focus more on the logistics part of the equation. Since NetSuite has richer data on inventory, supply plans, and forecasts, it uses those as the core of its control tower. — Return to article text above
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