With more than 7,500 paying customers and a new product suite, NetSuite is making its way out from under Oracle's shadow and is poised to take full advantage of the next wave of software delivered as a service. Which, according to founder Evan Goldberg, is coming.
Ten minutes on the phone. That's all it took one day in 1998 for NetSuite
(formerly NetLedger) founder Evan Goldberg and Oracle founder Larry Ellison
to come up with the concept for the birth of NetLedger, an online, on-demand
application service provider (ASP) delivering accounting software to small
At the time, neither could have foreseen the disastrous downfall of the
dot-coms and associated demise of the ASP industry that came along with it.
It was, after all, 1998, and all things IT were hot.
As the slowdown in IT spending really took hold and ASP and dot-coms began
to disappear in droves, NetLedger, which was backed by Ellison both
financially and as a member of the board, made a deal with Oracle to supply
the software that would become the Oracle Small Business Suite (OSBS). But
there was a problem.
While the online solution sold well, NetLedger was being slowly but surely
subsumed by Oracle. Indeed, for a time, NetLedger's only product was the
OSBS and it needed to retain the Oracle name to attract skeptical buyers,
which it did. Thousands of them.
Today, however, NetSuite has a new name and product line that has nothing to
do with Oracle.
NetSuite's "NetSuite" is an integrated CRM/ERP application, still delivered
online but now heralded as an "on-demand" application. Even though it still
sells the OSBS for Oracle and Ellison is still the majority stockholder,
most of NetSuite's clients are buying NetSuite, not OSBS. And the company no
longer looks to its larger partner for marketing and branding muscle.
"Certainly from a messaging perspective we were very, very integrated into
(Oracle's) messaging about the (OSBS) suite," said Goldberg, who used to
work as a vice president for Ellison at Oracle. "The thing that's changed,
from a positioning perspective, is when we first did the deal with Oracle
really everything was focused on the (OSBS) suite. Our entire product line
was OSBS for all intents and purposes. But now OSBS is really a relatively
small part of the low-end of our product line."
Goldberg said much of the success of NetSuite actually belongs to Zach
Nelson, the company's CEO and also a former Oracle VP who came onboard in
2002 and immediately, along with Ellison, began rebuilding the company's
And now that IT budgets are loosening, Goldberg sees a bright future for
what was once known as the ASP industry. But, today, while the whole idea of
hosted software delivered remotely is the vision of Ellison and many others,
it will be the specialty ISVs that take fullest advantage of the "on-demand"
model, predicts Goldberg.
"It's more difficult for an (ISV) with a legacy of client/server delivery to
move to this approach," said Goldberg. "The desktop-delivered applications
will be limited to the ones that need the horsepower and graphical
capabilities of a Windows desktop application. So things like CAD, it will
be a long time before those types of applications are Web-delivered. But a
typical application that has a standard interface of forms. Those
applications are really going to be rapidly moving to the Web-based
The next step for the company is to become consistently cash-flow positive.
Right now, some months are and some months aren't. But, if Goldberg and
Ellison are right and software ultimately becomes a deliverable instead of a
package buy, it could be sooner rather than later. But there is a long road
between here and there. Even Goldberg admits legacy apps have a funny way of
"Definitely, it's a line-of-business sale," said Goldberg. "But we see the
CIOs and the heads of IT being on our side and being advocates for us within
the company. If I would say what the biggest barrier we see in companies is,
generally they have an entrenched application already for doing their