Morphing Message: NetSuite Touts Service As Software

That's the updated partner strategy mantra from NetSuite CEO Zach Nelson, who is encouraging vertical solution development centered on his company's eponymous hosted business software suite.

While SaaS evangelist Nelson has long preached the value of verticals, the company's new SuiteBundler technology, part of the latest edition of the SuiteFlex development platform, formally gives solution providers the tools to deliver their "service as software" more easily.

"You can embed your expertise into software and make it available over and over again," Nelson told press, analysts and partners at NetSuite's launch event Wednesday in San Francisco. NetSuite partners have already created at least a dozen vertical applications that create custom extensions and processes for its core business applications engine. "You're restricted only by what you know about the industry," he observed.

Nelson amplified the strategy Thursday during his company's partner conference, attended by approximately 200 people, noting that 50 percent of his company's resources now are focused on industry-specific editions and the enablement of vertical applications. NetSuite already offers industry-focused versions for wholesale distributors and services companies and is planning one for e-commerce companies, he said. The company already claims about 1,500 e-commerce companies as customers.

It is Nelson's contention that solution providers will find future success by becoming business process experts and further customizing NetSuite for microverticals, rather than simply focusing on the infrastructure benefits offered through the basic suite offering. For example, partner Epiphany has created a solution for audio/visual dealers seeking to automate their quote and configuration processes as well a separate offering for floor-cleaning services businesses.

Brenda Brinkley, president of Houston-based Epiphany, said both sets of customers operate according to complicated, highly unique processes that aren't addressed by existing software applications. After working with several AV integrators, her company decided to offer its custom code more broadly because there was a void in the market.

"The real challenge is really understanding the business," she said.

Similarly, zeroedin of Corona, Calif., has addressed the needs of specialty retailers and Toronto-based Kuspide has customized NetSuite for window and door distributors with its own repeatable offering.

"It's a solution we're selling, it just so happens that it's technology," said Robert Warwick, a principal with Kuspide.

It should be noted that NetSuite itself offers what is essentially a vertical edition of its services for other software companies, since it figures it knows how to run one, but Nelson reassured partners that the company isn't planning to focus on other verticals.

"I don't know that we'll go into verticals deeper than software," he said.

What partners can expect in the future, though, is for the company to build out what Nelson describes as a "mashboard" that allows solution providers to extend NetSuite's core functionality beyond the suite's traditional focus on ERP and CRM processes. One logical point of collaboration would be hosted e-mail, he said, but Nelson is cagey about deals that could be in the works.

The privately held NetSuite, which is planning an initial public offering in 2007, generated $25 million in new business in the first half of 2006, with $7 million in the month of June alone, Nelson told partners. The company is cash-flow positive and expects to be profitable by December, he added.

Partner revenue is growing at the same clip as the company's sales, he said. Still, NetSuite's channel is limited to relationships with about 150 solution providers. At the conference, NetSuite announced that one partner, Skyytek Worldwide of Miami, exceeded $1 million in new NetSuite license revenue through September.