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NetSuite searches for next generation of cloud VARs

NetSuite talks channel growth, new Microsoft partnership and “next generation of cloud VARs”

People in meeting using the cloud

Cloud software vendor NetSuite (NYSE: N) has opened up about its channel expansion plans, as well as its investment in a number of additions to its partner programme.

NetSuite’s partner base comprises Solution Providers (VARs) and SuiteCloud Developer Network partners (ISVs). Between them indirect sales currently make up 37 percent of NetSuite’s business – and the firm says it wants to grow this figure further.

The Silicon Valley firm has been one of the most vocal advocates of a ‘pure cloud’ model, long arguing that resellers can’t afford to exclude cloud-based software from their portfolios.

Speaking at NetSuite’s annual customer and partner event, SuiteWorld, CEO Zach Nelson was confident the channel will evolve in line with the growth of the cloud: “You’re not going to make money on upgrading Great Plains anymore,” he said. There’s no money, it’s gone.”

The firm’s COO, Jim McGeever, agrees: “As Zach talked about, there’s no doubt the cloud has won. There will never be another on-premise ERP system written. So the question’s not why you’re in the cloud business, it’s how quick can you get there.”

Old rivalries

NetSuite has historically targeted channel partners selling on-premise products from the likes of SAP, Sage and Microsoft Dynamics GP, with a view to persuading them to build new practices based on NetSuite’s cloud business management suite.

NetSuite hit the deadlines last year when it ran a high-profile campaign in the UK, directed at Sage.

Nelson now, however, appears to have put the skirmish behind him: “Lots of things change in a year and we’ve moved on to solving a much more complex set of problems ‘than let’s run financials on Sage’,” he tells Channel Pro. “It’s beneath us given the functionality we’re bringing in – Sage isn’t an omnichannel retailer; there’s no comparison really.”

This sanguine attitude may have something to do with the recent announcement that NetSuite’s cloud ERP suite is to be integrated with Microsoft’s Office and Azure platforms. The news came as a surprise to some, considering NetSuite’s historical rivalry with Dynamics and Great Plains.

“It does make for strange bedfellows, what’s happening in the cloud. We have to work with a variety of new partners,” says Nelson.

So could it be a case that you can capture more Microsoft partners with honey rather than vinegar? Yes, says NetSuite’s VP of channel sales, Craig West. He tells Channel Pro: “We’ve seen some of the Dynamics community saying ‘maybe there’s some more synergy here because of the Microsoft relationship, perhaps it’s not so adversarial.’”

West says NetSuite has already fielded “tons of approaches” from Microsoft partners. “Integrating NetSuite into Office365 for improved calendar, productivity, email, has a lot of people excited.”

Nevertheless, the battle to take market share from Sage – who remains dominant in the Financial Management System (FMS) market – clearly remains a focus for the company in the UK.

According to Mark Woodhams, MD of NetSuite in EMEA, 40 to 50 percent of NetSuite’s direct revenues come from Sage conversions, although he concedes, “We’re not seeing as much of them as we used to, partly because we were going is slightly upmarket, more complex, more complicated.”

However the firm still “catches a lot of people on Sage 50, who’d like to move up.”

(The good news for NetSuite is that globally, its market share growth rate of 46.6 percent was more than six times the rates of its closest competitor within the top 10, according to Gartner.)

The argument NetSuite leads with is that customers are increasingly demanding cloud-based solutions, and Sage has yet to deliver. As such, many software providers are turning to the likes of NetSuite to fulfil that demand.

It points to partners like East Kilbride-based Eureka Solutions, which has been a Sage supplier and developer for fifteen years. It took on NetSuite in October 2012, and started selling it in earnest last year. This year it was awarded NetSuite’s fastest growing partner in EMEA, based on sales, overtaking sales of Sage.

Says Aileen Primrose, general manager at Eureka: “We had to no idea it would do that so quickly. This year we’re hoping to even it up a bit more, but it will all be customer-led, and what they want.”

Customers are demanding cloud, says Primrose, and Eureka has to be able to provide it.

Rebecca Eden, CIO at UK NetSuite partner, CloudTamers, agrees. The firm has almost entirely moved to offering NetSuite over Sage, as “it’s one database and one system, and everything is compatible.”

She explains: “Sage’s policy has always been to buy products in and brand them as Sage, which is what Microsoft and others have done. People think ‘I’ll have a Sage system’ but you’re actually getting different products that aren’t necessarily compatible.”

Eden says CloudTamers has retained its relationship with Sage “partly because we have a few customers still using it, and because NetSuite hasn’t got on-platform payroll for the UK.”

However she says Sage has “fumbled moving to the cloud, but they will probably get there. They’ve done some cloud washing – so instead of delivering a true, built-for-the-cloud system they have taken an old client server system and are hosting it and going ‘oh we’ve got cloud.’ Certainly they’ve done that with Sage 50 and some bits of it don’t work properly because it was designed for client server.”

Nevertheless, Sage remains a huge name and has established products in the UK market. But without a ‘true’ cloud offering it faces increased competition from the likes of NetSuite, and at the lower end, companies such as Xero.

Programme updates

The vendor used SuiteWorld to launch a number of new channel initiatives, including a mutual referral programme that match makes Solution Providers with SDN partners. 70 percent of NetSuite implementations have an ISV aspect of some kind, so the firm is to publish a directory of ISV solutions created by its SDN partners. This will make it easier for Solution Providers to find customisations to meet the needs of their customers.

It also unveiled the Vertical Velocity Programme which helps partners create and market specific solutions around different industries. “There are tons of micro-verticals where the generic NetSuite footprint doesn’t meet enough customer requirements, so partners can take the NetSuite platform and tailor that last mile to help us win customers we otherwise can’t win,” explains West.

NetSuite will work with partners to build an end-to-end vertical strategy, including website design, sales and marketing collateral, reference customers and provide them with leads generated in those spaces.

Also piloting this quarter is the sharing of NetSuite’s lead nurture programme with partners.

“Currently when partners register a lead with NetSuite, we will not market to that lead. “[The partner] controls the marketing experience – direct marketing campaigns, calling them...” says West. “We now have this pretty big database of leads we’re not marketing to, and we’ve got this successful nurture engine we use with our other leads. Why in the world would we not want our partners’ leads to be nurtured under the NetSuite engine? So a partner can opt-in where their leads can receive co-branded campaigns with the call to action back to them.

“If folks don’t like it they don’t have to, and it’s on a lead-by-lead basis so they can opt out,” he adds.

As to how NetSuite’s channel itself is evolving, the last couple of years have seen the firm align itself with a number of global systems integrators, such as Deloitte, Cap Gemini and Accenture – organisations it says understand the challenge of rolling out complex business systems to the likes of American Express, HP, Billabong and Qlik.

Nonetheless, West is keen to emphasise that the vendor has “always taken strategic bets on small partners that align with our vision.”

Regardless of the size of the partner though, NetSuite isn’t looking to partner with just anybody. “There’s an investment footprint. We’re not looking to be the home for all the lifestyle VARs being forced out of other communities,” says West. “We want to be known for aspirational partners that want to go something.”


The next step for VARs and ISVs? Getting on board with NetSuite’s ‘omnichannel’ e-commerce roadmap.

“Omni is...something we need to get enablement completely together on. It’s going to be a big challenge – these partners are used to dealing with finance problems, and CRM problems, not omnichannel problems,” admits West.

Nelson also says it’s something he says the firm is working on: “Omnichannel commerce is a brand new class of partner – if you think about the commerce channel it was largely website designers.”

Regardless of its omnichannel aspirations, COO McGeever claims to have seen already “an enormous transition of those who went beyond the lifestyle solution provider, VAR business, to those moving over to a cloud business.

“We’re also seeing, even more importantly, the creation of the next generation of cloud VARs.”

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