Interview: NetSuite CEO regarding the gain of Hosted Software

Many experts prediction that hosted software solutions will continue to grow. Software-as-a-service is merely another expression for these hosted solutions, and examples of larger ones are NetSuite.com, Salesforce.com and Google Apps. NetSuite’s solution includes an ecommerce component, and we have lately asked NetSuite’s CEO, Zach Nelson, concerning the growth of hosted solutions, and why, exactly, an ecommerce merchant ought to think about them.

PeC: NetSuite is a hosted solution, software as a service. Why should merchants make monthly payments for their ecommerce platform when they could purchase license applications outright and get it?

Nelson: There are a variety of reasons. To begin with, it’s truly quite a little less costly to start with a solution like NetSuite. Along with the traditional software model, you pay a whole lot of cash all upfront to get this applications and with NetSuite, it’s more pay as you go. So, as opposed to paying all on day one, you pay monthly. There is not as much money up front for the solution, number one. Number two, is what you mentioned about NetSuite hosting the site. The beauty of the model for small ecommerce providers, even major ecommerce providers, is the fact that NetSuite is providing a Fortune 100 data center at essentially $999 a month. So, they’re getting an infrastructure that far outweighs anything that they could build themselves or possess themselves.

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PeC: We’ve heard people using license carts or allow platforms say hosted solutions like NetSuite cannot be customized so much. You can’t customize metadata, tags for SEO purposes. You can’t customize the appearance and feel of a cart. Is that true?

Nelson: You know, that might have been true five decades ago, but these solutions, especially NetSuite, we’ve improved so much in the last five decades. Every one of these statements is untrue. You can have your site look like anything you want it to look like. You can build it in Flash. You can build it in Dreamweaver. You can do anything you need to your site from a customization standpoint and similarly from a cart perspective. I think our search engine optimization is frankly better in most cases than a lot of the normal carts. So, we’ve got the capacity to perform routine search engine optimization information like meta tags and page tags and descriptive URLs.

Another important bit of this, past the shopping cart, is that NetSuite provides the entire infrastructure to actually run the ecommerce company. There are two pieces to conducting an ecommerce site. One is getting customers to your site and giving them a fantastic shopping experience, but the second is how do you meet contrary to the guarantee of your website, how can you be certain your inventory levels are accurate, your pricing is accurate, and that you respond to those customers in a timely fashion. That’s all of the other things NetSuite provides, the accounting infrastructure, the warehousing infrastructure and it’s all seamlessly tied into a website so you could effectively deliver an Amazon.com-like expertise in addition to having a completely customizable site.

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PeC: Inform us about the origins of NetSuite. I believe it was one conversation that began both NetSuite and Salesforce.com. Would you tell us about that?

Nelson: That is interesting. Our founder, Evan Goldberg, was an entrepreneur, like the majority of your readers, and he came from Oracle. He created a company, but that company finally went out of business, as many start-ups do. As he was talking at the chance to Larry Ellison, the founder of Oracle, he talked about what he wanted to do next and he started to complain about how hard it was to run a business using one accounting system here, a shopping cart on another system, your selling system still another system, trying to tie all that information together to get a coherent image of your organization and to run the business economically and Larry said,”Well, I have a notion. Why don’t you build the system that solves that problem?” And that was really the arrival of NetSuite. The idea was to make an application that you could run your whole business on. Also involved in these talks was that the founder of Salesforce.com, Marc Benioff, who opted to go off and assemble just a bit of this thought, the Salesforce automation slit, Both of those conversations actually appeared forth with Larry and Evan and Marc way back in 1998 which means you get to where we are now and both firms have implemented on their fantasies I think very well.

PeC: what will ecommerce look like five years from now?

Nelson: Well, I don’t mean to appear promotional but I think it will look a lot like NetSuite, this notion of having the ability to deliver an Amazon.com-like experience to the customer, not in the sense of the user interface but in the sense of the real-time interaction with the customer and to enable smaller businesses to look as large as Amazon, to supply all the functionality, to deliver real-time inventory data to your website, to provide real time in effect financial data, transactional data to your customers, to provide very personalized sites on a customer by customer basis. All these are the things that become very easy to accomplish quite frankly as soon as you use a system like NetSuite since what makes it hard to deliver that experience is when you use many systems, a shopping cart, QuickBooks for accounting, something else for email campaigns. When you start to fragment your information, the wisdom of the customer on the website also becomes fragmented.

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The other thing I’d point, too, I feel that’s important in the long term is that it won’t just be computers transacting with your ecommerce environment. It is going to be all sorts of computing devices. The iPhone is a outstanding example of that. When I go to Japan, people are buying like crazy on their mobile phone. They don’t do this yet from the U.S.. They do not cover their transactions in this way, but that is coming.

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PeC: Can NetSuite have a mobile version today? You mentioned the iPhone?

Nelson: We have got an iPhone version, but quite frankly, it’s just like our usual version that you use on your PC as it is really apparatus independent. All you do is open a browser and use the application.

PeC: you don’t feel it’s essential to leave pictures or leave text differently on a smaller screen than it would be, say, on a laptop?

Nelson: I think you will see us and others doing that. You need to take into account the form factor and we’re doing now, if you know anything about our user interface, the internal user interface to the vendor is a dashboard. So, we’re beginning to break up that dashboard so that it matches the form factor of the phone much more efficiently.

PeC: What does NetSuite cost?

Nelson: It is variable cost based upon your transaction volume, but basically for the entry level ecommerce solution, it’s roughly $999 a month to buy the core functionality it’s $149 per user per month for each one that accesses the accounting functionality or the earnings performance.

PeC: Well, $999 a month is a sizeable sum on the surface of it for many smaller companies. Could you talk just for a minute about the other side of this equation, the efficiency that a small business will gain by paying $999 to a solution like NetSuite?

Nelson: Well, there are two elements to the equation. One is the cost savings. Again, when people look at NetSuite, they have to look at it as more than a shopping cart because it’s really a business management system. It allows you to run your website and it permits you to manage ecommerce transactions, but more importantly, it’s your accounting system, it’s that your CRM system, it is your support system, all in one application. Thus, when you consider that $999 per month, you must appear at add up the cost of these systems you’re using to run your organization, not your shopping cart but add up what it cost the hardware to run your QuickBooks or your Great Plains system, your sale system, your marketing system and you will see that cost much more just about licensing costs compared to the cost of NetSuite. When you add on top of that the cost to deal with these applications, the IT infrastructure and the time wasted managing those things, that’s the next piece.

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PeC: Anything else on your mind about NetSuite or ecommerce Generally?

Nelson: Well, the fantastic thing about the promise of this Internet was it could make a small merchant look as big as Amazon.com, but does Amazon.com appear as big as it does? It’s because it’s a seamless interaction with Amazon when you go to the website. It’s smooth pricing, it’s seamless inventory, and it’s smooth delivery. Thus, to deliver on the promise of appearing as big as Amazon.com while being five people, you demand a system as powerful as Amazon.com in regard to the backend and I feel that’s exactly what we built with NetSuite.

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