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Head to Head: NetSuite and Salesforce.com
The companies release customization platforms for on-demand, a move that reduces IT risk, yet could spell trouble for midmarket CRM providers.
For the rest of the January 2007 issue of CRM magazine please click here
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Looking to dispel the long-held notion that on-demand applications aren't customizable, Salesforce.com and NetSuite both unveiled their first customization and development platforms in October 2006. The vendors have, in the process, placed themselves at the forefront of the next big development in on-demand CRM. At this past year's DreamForce conference Salesforce.com announced Apex, the company's on-demand programming language and platform that enables third parties to write and run code on the Salesforce.com multitenant, shared architecture. Developers can build applications and software components of any type (not just applications associated with CRM) with Apex, and have Salesforce.com store and run them for a fee. "It gives them total control over the entire system," says Chairman and CEO Marc Benioff. Just two weeks later NetSuite released SuiteFlex, its own customization and development platform that enables the creation of third-party applications on top of NetSuite. "We're adding the final layer in terms of programming extensions to tailor the entire interface to a vertical industry or the business processes," says Mini Peiris, vice president of product management. Although the two customization and development platforms look and sound familiar, Rob Bois, research director at AMR Research, says each company's reasons for launching the products vary. "Salesforce is clearly targeting the enterprise segment by tackling the customization problem that has always been associated with SaaS solutions. SuiteFlex is more about customization tweaks, allowing companies to customize their NetSuite products for the verticals they operate in." NetSuite's Peiris agrees. "The core functionality is already included in the NetSuite platform," she says, referring to the company's CRM/ERP/e-commerce suite solution. "Who wants to take on the complexity of adding that functionality? We're focusing on allowing customers to verticalize their NetSuite products via third-party vendor apps." NetSuite's built-in ERP functionality, combined with its new customization and development platform, "puts them on the same playing field as Salesforce," says Denis Pombriant, managing principal of Beagle Research. "They're going toe to toe with Salesforce," although he doesn't see NetSuite being "as aggressive with third-party vendors." This, according to Pombriant, could be because Salesforce's AppExchange had a nine month head start--it was released in January 2006.
Regardless of the similarities and differences, both announcements are a clear indication of the next big trend in on-demand, and diminish another "knock against SaaS," Pombriant says. "This style of delivering business applications is the wave of the future. This is more than just a technology, this is a different business model that will carry us through the 21st century." The ability for companies to now write, publish, and take code from other third-party on-demand vendors and run it on Salesforce.com or NetSuite servers allows them to focus on driving value from their software investments. "It greatly reduces the risk involved in purchasing these solutions," says Bruce Richardson, chief research officer at AMR Research. "It makes upgrades and customization that much easier, and enables the IT department and CIO to focus on innovation and business process." The announcements should also set off warning bells for the rapidly diminishing legacy midmarket CRM providers. For years these vendors have served the midmarket by offering solutions that weren't as expensive as enterprise CRM solutions, but are more customizable than on-demand. "Their argument has always been that you can't customize on-demand. Well, now you can," Bois says. "That would make me nervous."
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