Netsuite CEO claims SAP being squeezed

LONDON — Netsuite Inc. chief executive Zach Nelson has claimed that rival SAP AG was effectively forced to make a multibillion dollar entry into cloud computing last week because industry trends were changing – and customers were tiring of the multi-year on premise deployments the German vendor has traditionally sold.

SAP this month spent US$3.4 billion to acquire SuccessFactors, in an attempt to dramatically scale its cloud computing operations.

“It was a forced acquisition,” the outspoken Nelson – a veteran of cloud computing – told Computerworld UK at the Business Cloud Summit in London.

“It doesn’t solve SAP’s core problem. No company runs its business on SuccessFactors – it’s fine for HR stuff but it’s not a management suite.”

SAP [NYSE: SAP] also has a smaller Business ByDesign cloud unit that has principally targeted small and medium sized businesses as customers. While takeup has been steady, some observers have questioned its popularity and Nelson agreed: “Business ByDesign has no momentum.”

Nevertheless, Nelson said he recognized the popularity of SAP systems in businesses, adding that brand strength matters: “SAP is the one of the oldest and the biggest.”

[See also “Making sense of CRM field”]

On Microsoft, he gave a negative cloud verdict, in spite of its extensive efforts: “It’s a non-entity in the cloud apps space. It’s not a key focus.” He had more positive words for Oracle Inc., whose CEO, Larry Ellison, owns over half of Netsuite shares.

While Netsuite’s “initial focus” as well as its “sweet spot” was selling to small and medium sized businesses, it was broadening to serve larger firms with its system integrator partnerships, such as Wipro and Accenture.

Nelson insisted that Netsuite is benefiting from the tougher economic climate that is slowing down project investment.

Firms were shying away from multi-year projects to launch major enterprise resource planning systems, he said. Instead, they were gaining an increased interest in the established cloud players that can provide quick time-to-launch for systems.

Nelson said the traditional security, regulatory and uptime concerns around cloud were no longer as big a concern for companies, which recognised the industry was maturing.

“Every type of business can be a cloud business,” he said. “We’ve got everything from finance firms, government departments to small cattle businesses as customers.”

“The biggest risk is not moving to the cloud and not having the flexible, quick and cheaper deployment of your competitors.”

Asked what he thought of the British government’s drive to use software-as-a-service with the G-Cloud project, he agreed that it was a sign of the technology becoming more mature and trusted.

However, he said the government needed to clarify its plans. “There’s a desire to get there, but it’s not an exceptional move yet.” Netsuite was watching the developments, he said.

Given SAP’s large acquisition of SuccessFactors [NYSE: SFSF], Nelson conceded that Netsuite itself would always assess offers, but it was not something being actively sought. “As a public company we have to consider offers,” he said, adding: “Larry Ellison owns half of us though so you’ll have to ask him!”