Zach Nelson, NetSUITE

One of the hottest segments in the industry today is SMB applications delivered by ASPs including Leading contenders Salesforce.com, Siebel and NetSuite. NetSuite partners with Oracle to offer an application suite for small business. In an interview with Editor In Chief Michael Vizard, NetSuite CEO Zach Nelson tells why the company has A channel-friendly approach, and previews plans for 2004.

CRN: In the past year, what have you done to make the business model associated with being an ASP more attractive to companies in the channel?

Nelson: We have this new account-cloning technology. What this allows [ASPs] to do is basically configure our system, customize our system for one customer, and then before they distribute to that customer, clone it and sell it to as many companies in that vertical market as they want. Basically, we're putting them into the software business, so they're going to amortize their cost over many sales and still charge the same amount. It is something we just announced. We only charge [the ASP] $300 per cloned account.

CRN: What's the biggest challenge for VARs working with an ASP?

Nelson: Because the customer's data is with us and not literally with the reseller, we have to essentially take the paper with the customer. Some resellers like it and some don't. The good side of this for the reseller is we carry the receivables; the bad side is they have to wait until we get paid for them to get paid. I think over time with larger resellers we'll probably let them carry the receivables and let them take the paper and pay us after they get paid. But right now, because we own the customer's data, the customer tends to want to have some sort of relationship with us in addition to the local partner.

CRN: There's a lot of evangelical marketing on behalf of the ASP model. Do you believe that all software will eventually be delivered using this model?

Nelson: I have a skewed view, of course, but my firm belief is a lot of the software will be delivered this way in the future. It's not going to be 100 percent, but I think it's going to grow very rapidly. You look at us growing at 30 percent. Some other successful ASPs are growing at comparable rates while Great Plains and all those other guys are shrinking. Clearly, this is gaining market share compared to the old way of delivering software.

CRN: When you compete against Salesforce.com or Siebel, what do you emphasize?

Nelson: Siebel is $70 per user, per month, but we're $75 per user, per month. And Salesforce.com is $125. We'll be the first ASP to actually guarantee service levels or your money back. Our differentiator is that we have the integrated front office and back office in a single solution. Our statement is there's only one thing you can't do in Salesforce.com or Upshot.com, which are the sales applications. What you really want to do is cross-sell and upsell. If the customer is looking to do any kind of integration with the back office or the Web, we're by far the better solution.

We probably have 40 Salesforce.com conversions in fairly big deals. They tend to be companies that have a more complex sales process. They have to ship product; we have the shipping integrated. They have to calculate tax. They have an international business; they have an order management need. So we've got about 40 customers that have switched over to us from them, but we've had [only] one switch from us to them.

CRN: In 2004, what do you think will be the big driver for new sales?

Nelson: All that code out there is dying. It's not e-commerce-ready, it's not supply-chain ready; it's dead code. I don't think many vendors have anything to offer them that gets customers to the next generation of where they want to go. I think we have a huge opportunity to take the ERP upgrade cycle that they will miss.