From the Top
- Executive to Executive -
Recently, RealMarket had the opportunity to spend time with Zach Nelson, CEO of NetSuite. In this interview, Zach shares his unabashed views about why most CRM solutions have missed the mark and are of limited value to business. In his opinion, most systems cannot do the one thing that is most important for the sales rep - transacting the order. Read on to find out what other bold claims Zach Nelson makes.
Zach Nelson,
CEO, NetSuite
RealMarket: You talk with CEOs from leading companies. What do they see as the number one issue or opportunity facing CRM today?
Nelson I do speak to quite a few CEOs. In fact, at NetSuite I am probably the number demonstrator of our system. I’m shocked when I talk to CEOs about how much they know about their software infrastructure and they are not saying good things. They say their company is broken because software is not talking to each other. CEOs of all industries and all sizes say that software doesn’t work and they can’t afford to make them talk together. It is very frustrating for them.
RealMarket: How did this come about?
Nelson In the past, companies would buy software when they had a particular pain. For example, if they had an inventory management problem, they bought inventory management software. If they had a sales force automation problem, they bought sales force automation software. Now the real pain is managing the transfer of information between all the different software systems.
| Web services and integration efforts will never work. The smartest guys in the world can’t solve the problem of how to integrate salesforce.com with products built decades ago in Fargo, North Dakota. We’ve been going down this integration road two or three generations and have yet to kick the problem. |
RealMarket: What about APIs, web services and other integration technologies to make systems work together?
Nelson Web services and integration efforts will never work. The smartest guys in the world can’t solve the problem of how to integrate salesforce.com with products built decades ago in Fargo, North Dakota. We’ve been going down this integration road two or three generations and have yet to kick the problem. People continually ask, “Can you make Siebel work with SAP?” The answer is always, “yes we have APIs.” In reality, there are lots of custom software to write and it all breaks when there is a new release. The other CRM solutions available today are nothing more than prospect management systems or pipeline management systems. In that world, you have to leave the system and go to another system to actually process an order. How ridiculous is that?
| The other CRM solutions available today are nothing more than prospect management systems or pipeline management systems. In that world, you have to leave the system and go to another system to actually process an order. How ridiculous is that? |
RealMarket: If you believe integration is futile, what can companies do to get their systems to work together?
Nelson Very simply, companies need one single system. Information is what runs most companies today. If you are a CEO today, then you are most likely the CEO of a software company because software is core to running the business. That perspective is the only way to manage a company and that is why we at NetSuite offer a single system perspective.
RealMarket: Briefly explain your philosophy in light of the business issue you just described.
Nelson NetSuite was founded to address the pain of running a business created by data here, data there, data everywhere. We solve that problem with a central repository of data. If you have multiple customer records - sales, accounting, shipping, etc. - you are never able to get the 360-degree view of the customer. Simply, one customer record is enough. More than one is too much. That becomes truer as web site allows the customer to do things to the customer record.
RealMarket: In a crowded market, how does your company differentiate itself?
Nelson What makes us different is that we actually have customer information in our system. The other CRM solutions available today are nothing more than prospect management systems or pipeline management systems. In that world, you have to leave the system and go to another system to actually process an order. How ridiculous is that? Sales reps are ultimately measured on sales performance not just how they management their pipeline or forecast. We create a customer management system in which you can place orders, ship, and invoice. These are things you cannot do in systems like salesforce.com. Other CRM systems are not really customer systems because they really don’t manage the customer. What is the definition of a customer? In our world, it is an order. Those other systems are really forecast systems. When something in the forecast is sold, the order is processed in a different system. Funny, isn’t it that there is no customer data in those other CRM systems.
| Microsoft has their own CRM solution but isn’t it interesting that the largest software company in the world can’t make their front office and back office systems work together. If they can’t do it why would any regular sized company be able to? |
RealMarket: So is your solution really an order management system?
Nelson I had that revelation a few months ago. Order management is complex. There is so much to think about like taxes, shipping, discounting, configuration, etc. Order management is one of the hardest applications to write because it is so involved. That is where we started. We have the definition of the customer. Now the rest of the sales process is trivial. You can’t go the other way and write forecasting first. So, our system is a CRM system with order management at the center.
RealMarket: More than once, you have mentioned salesforce.com. Are they your number one competitor?
Nelson Interesting our primary competitor is the combination of salesforce.com and Great Plains. But it is impossible to make those two code bases work together. Yes, Microsoft has their own CRM solution but isn’t it interesting that the largest software company in the world can’t make their front office and back office systems work together. If they can’t do it why would any regular sized company be able to? We have taken more business from SAP and Peoplesoft in the mid-market. salesforce.com’s primary business is to replace Siebel. But salesforce.com’s success as an ASP helps us. We both believe in software as a service. The “pay as you go” versus “bet the farm” mentality is really catching on in business today. We both have shown this is a more efficient way to buy software. It is clear that software will be delivered this way. Two reasons. First is risk. Managed software is more likely to work than licensed software that is shipped via disk. I, as a customer, know that the product will really work because it has to be written better. Two, younger people involved with these decisions grew up on the web. They get it and are comfortable with the model. They expect applications to look and behave like web applications.
RealMarket: If salesforce.com replaces Siebel, who does NetSuite replace?
Nelson We aren’t going to replace SAP at large companies like GM. But we will replace salesforce.com. When a company with salesforce.com has a need to integrate and they really start to feel the pain of integration issues, they call us. The next system that will drive this pain is when customers don’t want to deal with reps and they want to interact via the web site. They want to see their history and their transactions. They want support via self-service instead of talking to a customer service rep. To provide a seamless customer experience, a company must tie the web site to information systems. You can’t take the old code and make it work like that. By definition it makes the target different.
| The scales get way tipped towards the ASP delivery model . . . Everyone knows by experience there are big gotchas with licensed software in terms of implementation, customization, maintenance and big revisions. |
RealMarket: Today, more than ever, ROI justification is paramount. Everyone talks ROI. What’s your take on the real benefits?
Nelson People talk about ROI in a number of ways. Software is seen as a way to reduce cost by automating business processes. Order management is a good one because it streamlines how data moves between departments and systems. The scales get way tipped towards the ASP delivery model. Upfront we look substantially cheaper because there is no huge initial check to write. When you look at NetSuite, you know what the costs will be for the first three years. There are no surprise costs moving from version x to version y. Everyone knows by experience there are big gotchas with licensed software in terms of implementation, customization, maintenance and big revisions.
RealMarket: But the ASP model has not been universally accepted. Why?
Nelson Initially, ASPs had lots of expectations but not a lot of functionality. Now we have the functionality. We are moving towards functional equality with applications from Peoplesoft and SAP. First and foremost, does the application do what I need it to do? Then how it is delivered. If you match functionality then we crush them on a costs basis. A year ago we competed against a couple deals a month with Peoplesoft and SAP at the low end of the enterprise space. They already have tons of functionality so they are not adding much but they can’t address the low cost delivery model. Because I’m on one code base - we can add features and functions more quickly. They have customers on Linux, Oracle, various desktops, various servers, etc. and there are big platform issues that complicate and slow the delivery process. We don’t have that. It took us 5 years to get where we are today. It took them 15 years. They can’t compete - they are stuck in the role of the dinosaurs.
RealMarket: What is the average size implementation? What is the range and what percent are implementation services?
Nelson From my company’s perspective, customers are expecting monthly charges of $49 - $99 per user per month. That’s a far cry from writing a million dollar check on day one. Customization of our system is ridiculously low. It is so inexpensive people think there is a zero missing. Yes, every one of our customers customizes, or more accurately, they configure the system to meet their specific needs. But all those changes move forward without re-testing. In fact, we use NetSuite to run our entire company and we make many changes to the system to meet our specific needs. But it is easy. In fact, our CFO is the administrator. The bottom line is that mere mortals can customize this.
RealMarket: Looking to the future, what is the biggest change you see on the CRM and contact center horizon?
Nelson To me, the fact that there is no customer data in the CRM systems is the elephant in the room. Can you believe that most systems have no customer history capabilities? Everything you want to do starts with the customer - costs per lead, cost per conversion, etc. You need order information to do this. Most businesses are not going to input forecast data into the customer database. It is ridiculous that sales reps can’t use sales automation to actually sell. How do you do cross-sell and up sell if you don’t know what they bought? How do you provide service without the customer history? Running sales, support, heck, running a company is all based on the order.
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