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Summary

Oracle's Modern Business Experience conference in London in February 2017 provided an opportunity for an update on the NetSuite business following Oracle's acquisition in November 2016. Former NetSuite CEO Zach Nelson explained that NetSuite's driving vision was to develop SaaS-based solutions to run an entire SME on a single platform. NetSuite was most successful in North America. The concept of a unified platform has increased in importance in recent years in tandem with customers' increasing expectations for a seamless omnichannel experience.

The different tax laws in regions and countries outside the US have led to a fragmented market with no dominant vendor. Oracle's successful acquisition of NetSuite will provide much-needed impetus in markets outside the US as well as additional resources to make the offering more attractive to businesses and end users.

Oracle will increase momentum for NetSuite sales beyond the home market

While NetSuite enjoyed considerable success in North America, only around a quarter of its revenues came from other regions around the world. With NetSuite's existing international capabilities and more in the works, there is significant opportunity for growth in Europe. Oracle's plan is to improve and expand sales coverage for NetSuite with a distinct SME sales force. That should increase NetSuite's reach, and we can expect Oracle's marketing clout to bring increased momentum in key countries, regions, and industries.

Oracle's other Cloud applications, including the ERP Cloud and CX Cloud, have also attracted interest and sales from the SME space. Oracle's own transformation to simplify both its operations and its contract terms has enabled it to reduce its costs to serve customers. The growing appetite for a more integrated suite of applications is particularly strong with midmarket companies that want to create a more responsive environment for customers. With such a broad portfolio and multiple product lines, presenting the right offer and avoiding conflicts can be a challenge. Oracle will need to take care in developing effective engagement rules.

Ultimately, it will be the customers who will decide which platform suits them best. We might also see hybrid environments where many companies opt for NetSuite but also wish to take advantage of Oracle data-as-a-service offerings to enrich customer data for marketing purposes, Oracle CPQ for pricing and configuration of complex multi-option products, or Oracle Field Service. NetSuite investments can be complemented by Oracle Cloud investments as the need from a business perspective arises, but for many customers, the NetSuite offering will suffice.

Distinct offerings in the Oracle Cloud, such as Oracle Marketing Cloud, present opportunities to extend NetSuite investments. In such cases, sales teams across the multiple product lines will need to be in constant alignment for every customer and prospect to assess the right offering and growth path.

Expect to see improvements in UI and analytics

In the Ovum Decision Matrix: Selecting a Customer Relationship Management Solution, 2016–17, NetSuite was positioned as a challenger, with Oracle CX Suite as the leader. NetSuite understandably had invested heavily in SuiteCommerce to create a commerce platform suitable for B2B and B2C business models or companies operating both. This was at the expense of aggressive investment in the user experience, but more importantly, in predictive analytics, which is critical to omnichannel customer engagement success. Those two areas are Oracle strengths, and we can expect improvements in the UI, especially if the Alta UI team gets involved. Although no announcements have been made to that effect, we anticipate some of the advanced analytics to be provided. That will come in the near term via Oracle Analytics Cloud and longer term through the adoption of Oracle Adaptive Intelligent Apps, once specific use cases have been developed to take advantage of the NetSuite platform and address midmarket needs, which are likely to be less complex than those of much larger enterprises.

The opportunity for expansion of NetSuite's SME footprint beyond US shores is certainly there, and we expect Oracle to shake up the mid- and lower end of the market and build momentum for NetSuite growth outside the US. Expect to see signs of this in 2017.

Appendix

Further reading

''Oracle agrees to acquire NetSuite – a positive move for midmarket customers,'' IT0020-000222 (July 2016)

"Oracle plans to get more out of NetSuite," IT0018-001515 (December 2016)

Ovum Decision Matrix: Selecting a Customer Relationship Management Solution, 2016–17, IT0020-000184 (March 2016)

Author

Jeremy Cox, Principal Analyst Customer Engagement Practice, Ovum.

jeremy.cox@ovum.com

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