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December 11, 2009

The New Release Ditches its SAP R/3 System in Favor of NetSuite

By Patrick Barnard, Senior Web Editor, TMCnet


The New Release, which owns and operates thousands of DVD rental kiosks throughout the U.S. under the Moviecube and Blockbuster Express brands, recently decided to ditch its high maintenance, hardware-centric, on-premises SAP (News - Alert) R/3 system in favor of NetSuite’s more elegant cloud-based solutions.

SAP recently announced that maintenance for its R/3 V4.6 solution will end as of March 2010 -- and that maintenance for SAP R/3 4.7 will be extended, but at a higher cost. These changes will affect approximately 70 percent of SAP users who now face the difficult decision of whether to pay increased costs for maintenance, or upgrade to SAP ERP 6.0.

In response to this, CRM solutions provider NetSuite (News - Alert) announced an incentive program, the “NetSuite Crossroads Initiative,” as part of its ongoing effort to lure more SAP customers over to its NetSuite OneWorld cloud-based offering. The new program targets SAP customers facing “end-of-life scenarios” with their SAP R/3 software.

What’s more, in April NetSuite announced a new version of NetSuite OneWorld for SAP, enabling SAP customers to use NetSuite 'at the divisional level,' while retaining their current on-premises systems at the corporate level. Through the integration of the two platforms, made possible through NetSuite’s “SuiteCloud Connect for SAP,” large SAP legacy accounts can use NetSuite's on-demand application to manage business operations and roll up division-level transaction and summary data.

It now appears that both initiatives are paying off, as The New Release joins a growing throng of SAP customers who have adopted NetSuite’s cloud-based CRM solutions – some of them washing their hands clean of SAP completely.

Software-as-a-service or “cloud”-based business software is seeing rapid adoption in the enterprise space, as companies continue to recognize the many advantages it has over on-premises systems. Not only are today’s cloud-based business software systems fast and easy to deploy, they are also more affordable in that they don’t require any up-front capital investment in new servers, network architecture or software licenses.

With the SaaS (News - Alert) or cloud-based model of software delivery, which is analogous to using a utility, companies pay for the software on a subscription basis, which means the cost of the system can be represented as a single recurring line item in monthly budget reports. This is contrast to on-premises systems, which require significant up-front investment in hardware, as well as ongoing maintenance costs, including software upgrades, installing new releases and patches. Because the software vendor assumes responsibility for application performance, including all maintenance, repairs and equipment replacement, as well as integration with other systems, the cloud-based model significantly reduces the strain on company IT departments.

Furthermore, because the organization doesn’t have to “power up” all the related on-premises hardware, companies can reduce their carbon footprint by outsourcing these systems to third party cloud-based providers.

So significant is the trend toward cloud-based software that Gartner (News - Alert) recently put “cloud computing” as number one on its top 10 strategic technologies and trends for 2010.

More recently, Gartner released a report estimating that global software-as-a-service revenue will reach $7.5 billion this year, a 17.7 percent increase from 2008 revenue of $6.4 billion. The report, “Market Trends: Software as a Service, Worldwide, 2008-2013, Update,” predicts the SaaS market will show consistent growth through 2013 when worldwide SaaS revenue will total more than $14 billion for the enterprise application markets.

'The adoption of SaaS continues to grow and evolve within the enterprise application markets,” said Sharon Mertz, research director at Gartner, in a release. “The composition of the worldwide SaaS landscape is evolving as vendors continue to extend regionally, increase penetration within existing accounts and ‘greenfield’ opportunities, and offer more-vertical-specific solutions as part of their service portfolio or through partners.”

The report finds that the CRM solutions market had the second largest amount of SaaS revenue across market segments, generating $2.3 billion in 2009, up from $1.9 billion in 2008.

“SaaS has continued to represent a key driver of growth in the CRM market for the past four years, climbing from less than $500 million in 2005 and over 8 percent of the CRM market to over 20 percent of the market in 2008, with nearly $1.9 billion in revenue,” the report states. “Gartner expects growth to continue, with SaaS representing almost 24 percent of the CRM market’s total software revenue in 2009.”
 
'SaaS adoption has moved beyond the ‘Tipping Point,” said Ray Wang, partner with analyst firm Altimeter Group, in a press release from NetSuite. “Enterprise customers are moving to the on-demand ‘cloud’ model for a variety of applications as concerns about its shortcomings decline. Additionally, the confluence of recessionary forces, stalled innovation from many on-premise software vendors, and success of early SaaS pioneers has pushed software-as-a-service into the mainstream as alternatives to the legacy ERP solution providers.”

The New Release recently sought to expand its share of the DVD rental market but, according to the release, was constrained by the limitations of its SAP R/3 system. With help from NetSuite partner Scope Group, Inc., the company was able to migrate over to NetSuite in about 100 days. NetSuite estimates that the company will save approximately $325,000 a year in annual recurring ERP spend as a result.

'NetSuite has greatly reduced our stress level, helped us streamline our basic processes, and organize around our aggressive growth strategy,' said Tracy Terrell, CTO of The New Release. 'We can make better, faster decisions about capital allocation, new kiosk deployment, perform monthly close more quickly, and customize the system ourselves in a matter of minutes.'

NetSuite made news on TMCnet yesterday when it announced that Activision (News - Alert) Publishing Inc., maker of the multi-million copy selling videogame Guitar Hero, has improved e-commerce operations for its Guitar Hero Web site using NetSuite’s cloud-based e-commerce solution.
 
According to a press release, the company has been using NetSuite to power its Guitar Hero Web site for about a year to account for online revenues and cost of goods sold, provide customer support, and perform deep analytics into customer activities and keyword campaign success.
 
By migrating to a cloud-based solution, Guitar Hero has reduced support time by one-third during the busy holiday season. Although the release doesn’t mention which solutions it used previously – whether hosted or on-premises – it does mention that it was “multi-vendor,” therefore chances are Guitar Hero has also reduced its carbon footprint through the outsourcing of applications and infrastructure to a cloud-based software provider.

 



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