NetSuite: a localization and SAP play update

by Dennis Howlett on October 8, 2009

Following my ‘be nice to NetSuite’ post complete with CEO Zach Nelson video, Frank Scavo was concerned that the company has yet to nail the localization issue (among other things.) Given the company is taking a tilt at SAP in its own back yard, that’s kinda important. Craig Sullivan is NetSuite’s resident expert on this topic. He called me up and said that NetSuite is fully localized for the following countries: USA, Canada, UK, Australia and Japan. The company defines ‘fully localized’ as follows:

Pre-configured out of the box to include:

  • Statutory compliance with reporting requirements for profit and loss account, balance sheet etc
  • Included tax engine for different types of sales tax, VAT, GST etc
  • Credit card processing/gateways for popular services
  • Local shipping/carrier integration

Mr Sullivan went on to talk about what he calls ‘gray’ area localization. We focused on Germany where he says the company has received certification that is broadly the equivalent of Sarbanes-Oxley compliance but that NetSuite has yet to complete localization as it defines the topic. He said that should be done ’sometime in 2010.’ He noted that when completed, Austria, Switzerland and the Czech Republic localizations will be straightforward since they generally follow the German code albeit with minor modifications. contrary to what I thought, France and Spain are not receiving the same attention at this time.

NetSuite was particularly anxious to mention the service operates in 80 countries and that to date, its customers have been able to modify the software for local requirements. That’s something of a kludge but if it gets customers working happily then who am I to argue? Localization is a slow and painful process. Nevertheless, NetSuite will need to pick up the pace if it is to regarded as wholly credible in other territories.

Frank’s other major concern is the lack of standard costing in the NetSuite solution. If the company is to make a serious impact in the manufacturing space then this will be an essential component. Mr Sullivan said that at least one customer has scripted a solution but that NetSuite has not yet engineered its own solution. I wonder whether those types of customization will proliferate and become unmanageable in the context of the NetSuite portfolio. That is something SAP found when it inventoried the number of add-on business process components that had been developed over the years. It discovered thousands going back in time, many of which were built for a one off purpose that had since become redundant.

My concern is that NetSuite under-estimates Business ByDesign. Regardless of SAP’s issues around getting the economics right, when you lift the lid, it’s one heck of a powerful beast. Customers I have met are (cautiously) happy but then SAP is pouring resource into making the first 100 successful and highly referenceable. If and when SAP puts its foot on the marketing gas pedal, NetSuite will find that SAP’s brand value carries it a lot further in the initial RFP stages. That alone provides SAP with an edge but is not an automatic slam dunk.

What should buyers be thinking about?

  • NetSuite is marketing aggressively to the SAP user base that may be stranded when support for R/3 4.6c ends 31st December, 2010. SAP could step back from that position. Existing SAP users should clarify their position.
  • NetSuite’s CEO is careful to ensure that potential customers don’t run away with the idea they are an automatic replacement for SAP. Even so, eager sales people might lure you into believing otherwise. As always, make sure you understand what’s coming out the box and what’s extra.
  • Read the comments to Frank’s post. They provide useful insights into where NetSuite fits and the issues customers face.
  • NetSuite plays best in service industries and high tech but even there has functional limitations. If you are in manufacturing ensure you understand the functional trade offs you may need to make.
  • When considering NetSuite consider how readily your existing IT resources will be able to plug any gaps.
  • Assume that you will need custom development and budget accordingly.
  • Ensure you understand NetSuite’s pricing. The company will heavily discount to draw customers in but will wish to recoup over successive years.

Note: this is not meant to be an exhaustive list but an indication of key issues buyers might wish to consider.

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Tagged as: ERP, NetSuite, SAP, Zach Nelson

  • Dennis, you did some excellent research here to nail down specifics on NetSuite limitations on localizations, which I only mentioned generally in my post. I'm pleasantly surprised that NetSuite has made this much progress so far in the territories you mention, but it clearly still has much work to do.

    Following my post, I spoke to NetSuite about where they fit and don't fit. They clearly understand that they are not a functional equivalent of SAP. NetSuite's Crossroads initiative is really targeting those older SAP customers where SAP is "overkill." So, as I told them, basically they and I agree.

    Regarding the standard costing issue, if they have at least "one customer" who has scripted a custom solution, then that one customer is the one they encouraged to talk to me. I can tell you right now, that is not a solution for the majority of manufacturing companies, including high-tech manufacturers. Lack of standard costing is a show-stopper out of the box and very, very few prospects are going to be willing to write custom code to work around this deficiency.

    These are the sorts of nuances that get lost in the sales cycle, as you mentione, which illustrates why someone needs to be providing a balancing word to the marketing hype that vendors are putting forth.
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