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Thứ Ba, 28 tháng 4, 2015

NetSuite CEO: Race Against Oracle And SAP For Omni-Channel Fueled $200 ... - Forbes

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NetSuite CEO Zach Nelson is buying companies to try to win omni-channel commerce software. (Credit: David Paul Morris/Bloomberg via Getty Images)

As Wall St. closely watched Thursday’s quarterly earnings for some of the biggest companies in tech–, Google and Microsoft–it was easy to miss NetSuite quietly beating its own earnings estimates again and announcing it had splurged $200 million on a startup that’s a relative unknown. So what’s NetSuite thinking?

Speaking from that acquired company Bronto Software’s home state of North Carolina, where he’d given an all staff meeting, NetSuite CEO Zach Nelson says that he’s fine with his company not being the shiny newcomer that sets the market and business analysts buzzing. “We got all that when we went public years ago,” Nelson says with a chuckle. “And we like under-the-radar companies for a whole bunch of reasons.”

NetSuite might not get the headlines of Amazon or Google, but it’s a $7 billion (market cap) business in its own right with big ambitions. Public since late 2007, NetSuite’s one of the old new guard of cloud companies and continues to go up against two of the biggest in Oracle and SAP. It’s grown revenue by more than 30% (a threshold Marc Benioff and fast-growing are also proud to tout) for eight quarters in a row, and improved cash from operations in the last quarter by nearly 47%. The company’s improved its adjusted earnings and beat consensus estimates for non-GAAP earnings by $0.06 per share.

But NetSuite’s still much smaller than the companies it’s been gunning after for years–while its $164.8 million in quarterly revenue was a hair ahead of the cloud revenue at SAP this quarter, that represents just 3% of SAP’s overall business today. So with the market still fairly young for cloud enterprise resource planning (ERP), the core software of NetSuite’s business, the company’s been on a shopping spree to add new pieces.

Bronto Software will be the biggest of six acquisitions NetSuite’s carried out in recent months when it closes likely later this quarter for $200 million in cash and stock. A thirteen-year-old bootstrapped company, Bronto plays in the marketing space like Marketo and’s ExactTarget division. And like NetSuite, Bronto had specialized to compete against bigger competitors, focusing specifically on ecommerce and customer targeting for online retail.

“The bigger companies had lots of cash and venture capital money, to build broad marketing platforms,” Nelson says. “Bronto said, we have to do one thing really, really well.”

With more than $40 million in revenue impact for next year, Bronto had built its business especially among customers of Magento and Demandware commerce platforms. NetSuite plans to bring some of Bronto’s functionality into its main ERP product but marketer-specific tools like email systems will remain separate.

With some NetSuite stock watchers look at a possible decline in deferred, or future revenue, as a point of concern for NetSuite’s growth, the string of acquisitions represents a broader strategy by Nelson that he says the company’s been pursuing for four years.

NetSuite’s top priority for growth is to move its business software into an omni-channel solution for commerce that helps retailers both with physical stores and their online marketplaces at once. “Everyone is trying to essentially deliver an Apple-like experience,” Nelson says. “Where the store recognizes you and you have the same experience online and in a physical store.”

That strategy has led NetSuite to make smaller acquisitions to have its own point-of-sale solution as well as a website design shop in Oklahoma City called Element Fusion. “This is the architecture of the future for big retailers like the Williams-Sonoma of the world,” Nelson claims.

NetSuite believes it has a simpler and easier-to-use solution than the big individual pieces a company can get from Oracle and SAP. And while others like Square are looking to help with marketing for small to medium-sized brick-and-mortar businesses, Nelson doesn’t see that cohort handling large retailers with major online operations anytime soon.

Now NetSuite has to prove to customers it can integrate Bronto in a way that doesn’t make business more complicated for its users. Nelson says the company is “religious” about careful integration and sharing NetSuite knowledge back with anyone it buys.

To reach the next level of size and impact, however, will take NetSuite some time, even if the Bronto acquisition goes smoothly. Blame that on the complicated nature of switching services and incoming customers over ERP, Nelson says. “Unless you are sick, you don’t replace your heart. But this is the core business system once you are in there. So we are just at the beginning of a 20-year journey.”


Follow Alex on ForbesTwitter and Facebook for more coverage of startups, enterprise software and venture capital.

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