April 14, 2009

NetSuite Expands Programs To Target Large Corporations

With aspirations of moving beyond their achieved small- to mid-sized business market, NetSuite Inc. has expanded programs to target large corporations, Reuters accounted. 

A person who understands this strategy well and wishes to remain anonymous until the products are publicized, indicated NetSuite wishes to sell the software to divisions of large corporations currently utilizing software from SAP AG and Oracle Corp. 

Until now, the company has always concentrated on products for small- to medium-sized companies (SMBs).  However, Netsuite is anxious to capitalize on the enterprise market as corporations make up the bulk of sales of business application software, an estimated $89 billion a year according to researcher Gartner.

The new programs coined, "SuiteCloud Connect," permit corporate divisions to operate their businesses on a high-end version of NetSuite's web-based software, then simply add up financial data into their parent companies' SAP and Oracle systems, the anonymous person said. 

The New York Stock Exchange reported an increase in NetSuite shares of 2.54 percent to close at $12.10. 

SAP and Oracle, which the majority of the world's largest corporations utilize, sell traditional software for companies to buy and run in their own facilities. 

Nucleus Research analyst, Rebecca Wettemann, who had received no briefing by NetSuite about the product line, suggests that this standard method can be more costly than buying a subscription of NetSuite's hosted, Web-based software. 

Analysts anticipate that NetSuite's new product will be viewed software-as-a-service making it well liked by corporate technology managers as an inexpensive alternative to installing an SAP or Oracle system. 

"It is clearly making it easier for customers that might need to do something, but are unable to do something given the capital constraints," said Wedbush Morgan Securities analyst Michael Nemeroff, who also had not been briefed on the new product. 

These days, corporations have a larger quantity of money to spend on technology than the typical NetSuite customer base, he added.

"If you are going after deals, it makes sense going after customers that have cash, as opposed to SMBs that are cash strapped these days," Nemeroff said.

Analysts predict NetSuite will make its first profitable year in its 11 year establishment in the 2009 year. Reuters estimates the company's revenue will increase 15 percent to $176 million.  By comparison, SAP is anticipated to post revenue of $15.8 billion and Oracle to report full-year revenue of $23 billion. 

NetSuite will soon announce the connection software compatible with SAP, the source indicated, but the product that coincides with Oracle will be exposed at a later date.  NetSuite may opt to downplay its intentions to take business away from Oracle due to the Ellison association.

Ellison and his family own approximately 61 percent of NetSuite, but his authority over operations is limited.  Ellison put 52 percent stake in NetSuite that he directly owns in a "lockbox" company.  This means it prohibits his voting power, and thereby reduces apprehensions that his relationship with Oracle could generate a conflict of interest. 

SAP and Oracle programs already have built in application program interfaces, or APIs, compatible for NetSuite to utilize with its new product, SuiteCloud Connect. 

NetSuite customers have previously been able to develop their own integration software for the purpose of rolling up financial data into the parent company's computer systems due to these open APIs. 

SuiteCloud Connect, however, proposes a standardized set of tools created to save businesses the time and cost of doing that customization personally.

The programming was partially supported on customization work created to help integrate Asahi Kasei Corp's SAP programs with subsidiary Spandex America's NetSuite software. 

The source indicated that the Oracle connectors were in part based on the knowledge obtained from Iron Mountain Inc.'s execution of NetSuite at its Iron Mountain Digital division.


On the Net: