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NetSuite moves upmarket with NetSuite Unlimited

After battling with Microsoft and SAP in the midmarket, the ERP vendor is aiming at their enterprise bread and butter

SAN FRANCISCO – On-demand enterprise resource planning (ERP) vendor NetSuite Inc. (NYSE: N) used its first user conference to announce it’s growing from its traditional mid-market roots with NetSuite Unlimited, its new offering aimed to take it into the enterprise market.

Having built its success in the hosted ERP business in the midmarket, NetSuite CEO Zach Nelson said the vendor has developed the functionality and scale with the product to take it up market, and with growing acceptance of cloud computing and the hosted model the time is right to enter the enterprise space.

“NetSuite Unlimited basically takes the stops off everything in the system,” said Nelson. It includes all the modules, unlimited storage, applications and subsidiaries, and unlimited users. Pricing is still based on a combination of functionality and users, starting at 500 users and scaling up for around $1 million annually.

“That’s a lot, but much cheaper than SAP traditionally is,” said Nelson.

While NetSuite has competed with Microsoft Corp. and SAP AG in the mid-market before, the competition will heat-up as they move into the traditional players’ enterprise bread and butter. The competition will include not just traditional on-premise solutions, but also hosted ERP solutions such as SAP’s Business ByDesign.

Nelson, however, said the demand for a cloud-based solution in the enterprise market is increasing and he doesn’t as yet see Business ByDesign as a competitor he needs to worry about.

“At the end of the day it’s going to be a battle on feature, function and price. When (SAP) gets out into the market and they get feature and functionality, we’ll compete with them. But we’re not seeing (Business ByDesign) much in the U.S.,” said Nelson. “SAP is a license business at the end of the day, and no other company has made that transition (to a subscription model) successfully. I have so little concern about them being successful.”

NetSuite does have cause for optimism said Jim Shepherd, research vice-president and distinguished analyst with Gartner, noting NetSuite has taken the time in the midmarket to build up the functionality and the reference base needed before it could think about selling to the enterprise. He sees a confluence of events: NetSuite being ready to move into the enterprise, and the enterprise ready to consider the cloud model.

He added it will be easier for a mid-market company like NetSuite to move up-market than it is for a company like SAP to move into the mid-market. SAP’s challenge has been convincing the market it’s not just for big business. Conversely, any success for NetSuite in the enterprise will help fuel further growth for it in the mid-market.

“Companies will look at it and say this large corporation clearly has the resources to do every evaluation imaginable, and if it works for them, I don’t need to worry,” said Shepherd. “If I already have reputation as a company that serves small business well, I can move up market without losing credibility. But moving the other direction is much more challenging.”

If NetSuite is going to get there, they’ll need the channel’s help. Nelson touted the growing revenue share of the company’s channel partners, which reached 40 per cent of NetSuite’s business in the first quarter of 2011, up from 32 per cent last year and 23 per cent the year before. The vendor is also signing large consultancies and integrators such as Accenture to help it capture the enterprise market.

There’s opportunity for NetSuite’s traditional VAR partners as well. Ottawa’s Enabled Success, a veteran NetSuite partner, said the move up-market gives partners like it the opportunity to close bigger deals with similar close-times.

“The price-point for NetSuite is easier for midmarket and enterprise customers than it is smaller firms. It will be a lot easier to compete price-wise as these organizations can better justify the cost,” said Enabled Success president Paul Doucet. “This will let us focus on larger sales, we can close fewer but larger sales, and those close cycles are about the same in our experience.”

Doucet added he’s not worried about butting heads with new larger NetSuite partners such as Accenture, who deal with larger organizations and couldn’t deliver to the mid-sized organizations that a local VAR can. NetSuite’s Nelson added he’s also not worried about channel conflict or diluting the opportunity for its traditional VAR partners as larger players come on board.

“We have 200 channel partners and 150 direct partners covering the world, so if we’re running into each other in the same deals something’s wrong,” said Nelson. “As we move up market the Accentures are expanding our footprint; we’re in deals we wouldn’t be without these guys. We’re building the last part of our sales house.”

Follow Jeff Jedras on Twitter: @JeffJedrasCDN.