Ten Questions With NetSuite CEO Zach Nelson

By DAVID SIMS, TMCnet CRM Alert Columnist

Hi Zach, thanks for taking the time to talk to us. So, what’s it like to work for Larry Ellison?

It’s a pleasure to speak with you, David. Larry has a wealth of knowledge about what works and what doesn't in the software applications business, and he's not shy about sharing that knowledge. The fact that in 1998 he co-founded NetSuite with Evan Goldberg (our current CTO and Chairman) says a lot about what he thinks about the opportunity we have to consolidate the midmarket around our business application in much the same way the at Oracle and SAP have consolidated the enterprise application market around their respective applications.

What was the opportunity you saw at the founding of NetSuite? What wasn’t being done in the hosted space that you were confident you could do?

There were really two big ideas that the company was founded upon and our name – NetSuite –embodies those two ideas. We deliver a suite of business applications over the internet. We felt that the way SMB companies tried to run their business – attempting to tie together an accounting application from one vendor to a sales application from another vendor to an ecommerce application from another vendor – was broken and would never work. It takes large enterprises millions and millions of dollars to achieve integration (with equally poor results I might add) and it’s no easier to tie QuickBooks to Act! than it is to tie SAP to Siebel. We also felt the way software was traditionally sold by vendors, in effect shipping customers a disc and daring them to install it, was also going to be replaced by a service like Amazon.com where you just log-in and use the application.

Today, nearly eight years later, we have delivered on that vision. NetSuite’s “one system” approach of combining ERP, CRM and Ecommerce functionality to run a company’s core business processes has created a new class of business application. And our customers now run their business, and NetSuite runs their software.

Siebel’s Bruce Cleveland said here a while ago that hosted is simply a delivery method that the actual CRM has to stand on its own. Is there in your mind any real difference between building hosted or installed CRM?

A customer’s first decision when looking at application is not usually “how is it delivered” but rather” does it solve my business problem.” In the early days of hosted business applications, they didn’t solve many problems as they were just beginning to be developed. But today, an application like NetSuite can meet the business needs of very large sophisticated companies, so more and more the answer to “does this solve my business problem” is a resounding yes. Once you get that “yes”, then the distribution of the software as a service over the internet will heavily tilt the playing field in the direction of a web-native application over a traditional on premise solution because the web-native offering costs the customer nothing to manage, upgrade or maintain. In terms of building a hosted solution, there are many differences than building traditional customer-managed software. And the difference can be summed up in one concept: if the vendor writing the software has to manage it themselves, they will write a lot better software. In the case of NetSuite, we have to guarantee that the application is available, that customizations will migrate with each release and that the application will perform well. In the case of stone-age software, the vendor hands the customer a box of 200 discs and wishes them good luck. So for those software vendors who think it is trivial to deliver software as a service, I wish them a lot of luck. It's not something you wake up one morning and know how to do.

Let’s hear about the new product you’re announcing – what does it add to the discussion?

We’re really excited about Release 10.6 of NetSuite. We’re rolling out hundreds really great customer-requested features that we’ve been working hard to include in V10.6. NetSuite 10.6 allows includes a major break-through in browser based user interfaces that allow users to perform complex business functions that dynamically change data without requiring the entire browser page to be regenerated. NetSuite now integrates simply with widely-used applications like Microsoft Office and Google Maps.

We’ve also updated our dashboard features to include: Trend Graph Average Comparisons; Saved Search Email Alerts and Graphical KPI Meters that convert any key performance indicator (KPI) into a visually distinguishing gauge. Microsoft Outlook-specific integration complements NetSuite’s previously available, patent-pending “no click” email integration. Now incoming and outgoing Microsoft Outlook email messages can be directly attached to NetSuite records throughout the customer lifecycle including Contacts, Customers, Opportunities, and Cases. The list goes on.

You were quoted recently as saying that you, salesforce.com and RightNow are all established in the on-demand space. What would an upstart have to do to elbow into the market? Where is there still room for competitive difference?

Developing a successful web-native solution takes time, money and great software developers. NetSuite and the others you mention have been at this for 7 years. It will take an upstart today at least that long to get to where we are. And of course, we won’t be sleeping during those 7 years, will just be even farther ahead. So I really believe NetSuite’s place as the most widely-used on-demand integrated application suite is unassailable.

You really want to be retired by 2012? And do what?

I don’t think I will ever retire. This is the best job in the world.

You say right now the on-demand market’s big enough to support you, salesforce.com and RightNow. At what point will that change, once Siebel’s out of the way?

There are about 7 million small businesses in the United States. No one company has a strong grip on this market but someone will eventually emerge as a leader, though I think NetSuite has the longest “legs” of any company in the on-demand space and offers the most robust solution. Again, you have to remember that it takes a tremendous amount of skill and experience to develop software via a hosted model. It’s not easy. NetSuite has a 7 year head start on anyone else looking to get into the on-demand space. We’re confident that even if other competitors do pop up in the fray that their lag time is going to cost them dearly. And NetSuite will be there.

Salesforce.com is talking about expanding beyond CRM, basically becoming a rival to Windows. Any Multiforce-style vistas of grandeur for NetSuite?

We have a similar capability in NetSuite 10.6 called NetSuite Customer Centers. Customer Centers allow you build new applications on top of NetSuite’s infrastructure, which enables those applications to leverage the NetSuite user interface as well as our data center hosting and security model.

I think it is much more likely that a product like NetSuite would become the platform for such application development than salesforce.com for a simple reason: the core data stored in NetSuite is your key business data – what a customer bought, how they paid for it, when it was shipped to them, etc. Salesforce.com’s core application stores data that is pretty useless when running a business, data like who are the prospects and contacts for a sales lead. It is much more likely that meaningful business applications will be written on the core business data than based on a bunch of suspect sales contact data.

What’s the best music to play while at work?

I can’t work and listen to music at the same time…

Now that SAP and Microsoft are both threatening to jump into on-demand CRM, which one do you think has a more realistic shot of success?

They will be too late to the party when they jump in. We have a 7 year head start in building the functionality and the systems to deliver software as a service. I don’t care how much money or how many developers they throw at the problem, it will take them 7 years to get to where we are today. But I hope they do announce on demand products in the CRM and ERP space. It will be the ultimate validation of what we are doing, and will force customer to look at our solutions as well as theirs. And when they do, it will be clear that NetSuite’s are light years ahead.

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David Sims is contributing editor for TMCnet.

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