Many experts predict that hosted software solutions will continue to grow. Software-as-a-service is another term for these hosted solutions. Examples of larger ones are NetSuite.com, Salesforce.com, and Google Apps. NetSuite’s solution includes an ecommerce component. We recently asked NetSuite’s CEO, Zach Nelson, about the rise of hosted solutions and why, exactly, an ecommerce merchant should consider them.
Practical Ecommerce: NetSuite is a hosted solution, software as a service. Why should merchants make monthly payments for their ecommerce platform when they could purchase license software outright and own it?
Zach Nelson: There are a number of reasons. First of all, starting with a solution like NetSuite is quite a bit less expensive. With the traditional software model, you pay a lot of money upfront to own that software, and with NetSuite, it’s more pay-as-you-go. So, instead of paying all on day one, you pay monthly. There’s much less cash up front for the solution, number one.
Number two is what you mentioned about NetSuite hosting the site. The beauty of that model for small ecommerce providers, even large ecommerce providers, is that NetSuite provides a Fortune 100 data center at essentially $999 a month. So, they’re getting an infrastructure that far outweighs anything they could build or own.
PeC: We’ve heard folks using licensed carts or platforms say hosted solutions such as NetSuite can’t be customized. You can’t customize metadata tags for SEO purposes. You can’t customize the look and feel of a cart. Is that true?
Nelson: You know, that may have been true five years ago, but these solutions, especially NetSuite, we’ve advanced so much in the last five years. Every one of those statements is untrue. You can have your site look like anything you want it to look like. You can build it in Flash. You can build it in Dreamweaver. You can do anything you want to your site from a customization standpoint and similarly from a cart perspective. Our search engine optimization is generally better in most cases than many of the traditional carts. So, we can do standard SEO information like meta tags, page tags, and descriptive URLs.
Beyond the shopping cart, the other important piece of this is that NetSuite provides the entire infrastructure to run the ecommerce business. There are two pieces to running an ecommerce site. One is getting customers to your site and giving them a good shopping experience, but then the second is how do you fulfill against the promise of your website; how do you make sure that your inventory levels are accurate, that your pricing is accurate, and that you respond to those customers in a timely fashion. That’s all the other things NetSuite provides, the accounting infrastructure, the warehousing infrastructure, and it’s all seamlessly tied to your website so you could effectively deliver an Amazon.com-like experience and a completely customizable site.
PeC: Tell us about the origins of NetSuite. I believe it was a single conversation that launched both NetSuite and Salesforce.com. Could you tell us about that?
Nelson: That’s interesting. Our founder, Evan Goldberg, was an entrepreneur, like many of your readers, and he came from Oracle. He created a company, but that company ultimately went out of business, as many start-ups do. As he was talking at the time to Larry Ellison, the founder of Oracle, he talked about what he wanted to do next. He started to complain about how hard it was to run a business with one accounting system here, a shopping cart there on another system, your sale system yet another system, trying to tie all that information together to get a coherent picture of your business and to run the business efficiently and Larry said, “Well, I have an idea. Why don’t you build the system that solves that problem?” and that was the birth of NetSuite. The idea was to build an application that you could run your entire business on. Also involved in those conversations was the founder of Salesforce.com, Marc Benioff, who decided to go off and build just a piece of that idea, the Salesforce automation piece; both of those conversations sprung forth with Larry and Evan and Marc way back in 1998, and so you get to where we are today, and both companies have executed on their visions I think very well.
PeC: What will ecommerce look like five years from now?
Nelson: I don’t mean to sound promotional, but I think it will look a lot like NetSuite, this notion of being able to deliver an Amazon.com-like experience to the customer, not in the sense of the user interface but in the sense of the real-time interaction with the customer and to enable smaller businesses to look as large as Amazon, to provide all the functionality, to deliver real-time inventory data to your website, to deliver real-time in effect financial data, transactional data to your customers, to deliver very personalized sites on a customer by customer basis. These things become very simple to do quite frankly when you use a system like NetSuite because it is hard to deliver that experience when you use multiple systems, a shopping cart here, QuickBooks for accounting, and something else for email campaigns. When you start to fragment your data, the customer’s experience on the website also becomes fragmented.
The other thing that I would point out, too, I think that’s important in the future is it won’t just be computers transacting with your ecommerce environment. It will be all sorts of computing devices. The iPhone is a great example of that. When I go to Japan, people are buying like crazy on their phones. They don’t do that yet in the U.S. They don’t pay for their transactions that way, but that is coming.
PeC: Does NetSuite have a mobile version currently? You mentioned the iPhone.
Nelson: We have an iPhone version, but quite frankly, it’s the same as our regular version you use on your PC because it’s device-independent. All you do is open a browser and use the application.
PeC: You don’t feel it’s necessary to render images or render text differently on a smaller screen than it would be, say, on a laptop?
Nelson: I think you will see us and others doing that. You do have to consider the form factor, and we’re doing it now; if you know anything about our user interface, the internal user interface to the vendor is a dashboard. So, we’re beginning to break up that dashboard so that it fits the phone’s form factor much more effectively.
PeC: What does NetSuite cost?
Nelson: It has variable costs depending on your transaction volume, but basically, for the entry-level ecommerce solution, it’s about $999 a month to buy the core functionality; it’s $149 per user per month for each one that accesses the accounting functionality or the sales functionality.
PeC: Well, $999 a month is a sizeable number on the face of it for many small businesses. Could you talk just for a minute about the other side of that equation, the efficiency a small business will gain by paying $999 to a solution like NetSuite?
Nelson: There are two parts to the equation. One is the cost savings. Again, when people look at NetSuite, they have to look at it as more than a shopping cart because it’s a business management system. It enables you to run your website and manage ecommerce transactions, but more importantly, it’s your accounting system, it’s your CRM system, it’s your support system, all in a single application.
So, when you look at that $999 a month, you have to look at add up the cost of all those systems you’re using to run your business, not just your shopping cart but add up what it costs for the hardware to run your QuickBooks or your Great Plains system, your sale system, your marketing system and you will see that cost a lot more just in terms of licensing costs than the cost of NetSuite. When you add the cost to manage all those applications, the IT infrastructure, and the time wasted managing those things, that’s the second piece.
PeC: Anything else on your mind?
Nelson: The great thing about the promise of the Internet was it could make a small merchant look as big as Amazon.com, but why does Amazon.com look as big as it does? It’s because it’s a seamless interaction with Amazon on the website. It’s seamless pricing, it’s seamless inventory, and it’s seamless shipping. So, to deliver on the promise of looking as big as Amazon.com while being five people, you need a system as powerful as Amazon.com in terms of the back-end. That’s really what we built with NetSuite.