NetSuite Goes It Alone

After a three-year run NetSuite's marketing agreement with Oracle has come to an end. As of the end of this month the Oracle Small Business Suite on-demand service provided by NetSuite will be rebranded NetSuite Small Business Suite, ending Oracle's direct involvement with the company. Oracle Chairman and CEO Larry Ellison will, however, retain his 50 percent stake in NetSuite. Oracle Small Business Suite was NetSuite's entry-level product, focused primarily on NetSuite's accounting functionality. According to NetSuite CEO Zach Nelson, the functionality in the rebranded product will be identical. A small price cut is also reportedly part of the change. NetSuite currently offers four service packages: NetSuite Small Business, NetSuite, NetCRM, and NetERP. The NetCRM and NetERP packages focus on specific front- or back-office capabilities for companies not yet ready to commit to the complete range of functionality. It remains to be seen how Oracle will fill this newly created gap in its SMB portfolio. Oracle's On Demand unit is focused on bringing solutions to market that are Web-based and easier to deploy, but Sheryl Kingstone, Yankee Group CRM program manager, says that the two approaches are miles apart: "Oracle On Demand is still basically the same code base as the [on-premise] Oracle application, and that's not necessarily what the NetSuites of the world have been delivering--an application created for the mid-market." Although NetSuite says that Oracle-branded customers only account for 5 percent of revenues, a number of those customers had upgraded to NetSuite-branded services because Oracle Small Business Suite was not modular. According to Nelson, the new NetSuite Small Business Suite will allow smaller incremental upgrades, rather than requiring a step up to one of the more expensive services. NetSuite must prove in the meanwhile that it can swim without the big-name branding of Oracle. "Does this hurt NetSuite? I think NetSuite in the beginning needed Oracle for some foundation and validation that they weren't going to go away," Kingstone says. According to Nelson, NetSuite has no plans to partner with another organization to rebrand the Small Business suite or any other service package. And Oracle, for its part, will face new scrutiny about its interest in business below the enterprise level. "The question now is, has Oracle changed their mind, and is Oracle going to dedicate money into this space?" Kingstone says.
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