The Future of On-Demand Software
As the market for on-demand and SaaS products takes off, it is critical to recognize what characteristics will distinguish the next generation of leading vendors.
By Zach Nelson, NetSuite
Sep. 11, 2006
Larry Ellison once told me that one of the best things that ever happened to Oracle was for IBM to say it planned to build a relational database. Sure, a massive, wealthy competitor was entering Oracle's market, but at the same time, IBM validated the need for its flagship product.
Everyone knows how that story ended: it took IBM many years to bring its relational database to market. In the meantime, Oracle sold them hand-over-fist to anxious enterprise buyers looking to leverage the latest technology.
On-demand software may have just reached this tipping point: Microsoft announced it plans to build a suite of on-demand business applications.
The good news? It took us eight years to build our on-demand suite at NetSuite. Will business buyers wait nearly a decade for Microsoft's solution? Probably not. That means the on-demand vendors of today have a significant head start in the market.
The future of on-demand software will be even more compelling. The very nature of on demand dictates that its offerings must evolve to meet customer needs more frequently - and that will make for a tough game of catch-up for newcomers.
An "Overnight" Success
Much has been written about the reasons why on-demand software has taken off. Here is my shortlist:
The genesis of NetSuite took place in 1998 when entrepreneur Evan Goldberg founded a multimedia tools company. Evan realized that it was incredibly difficult to run a business with accounting on one database, the Web site on another, sales on another. Accounting would say they sold $X, and sales would say they sold $Y, and so on. The truth was fleeting.
As the future of the company began to wane, through a phone conversation, Oracle CEO Larry Ellison told Evan to go and build an application that solves this problem. NetSuite was founded as NetLedger. They built the backend first and on top came a suite of applications that would run an entire business.
When I joined the company in 2002, the company name became NetSuite. Our mission quickly crystallized into becoming SAP for the mid market - basically, an SAP for the rest of us. So it is really after eight years of hard work, that on-demand has become an "overnight success."
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Everyone knows how that story ended: it took IBM many years to bring its relational database to market. In the meantime, Oracle sold them hand-over-fist to anxious enterprise buyers looking to leverage the latest technology.
On-demand software may have just reached this tipping point: Microsoft announced it plans to build a suite of on-demand business applications.
The good news? It took us eight years to build our on-demand suite at NetSuite. Will business buyers wait nearly a decade for Microsoft's solution? Probably not. That means the on-demand vendors of today have a significant head start in the market.
The future of on-demand software will be even more compelling. The very nature of on demand dictates that its offerings must evolve to meet customer needs more frequently - and that will make for a tough game of catch-up for newcomers.
An "Overnight" Success
Much has been written about the reasons why on-demand software has taken off. Here is my shortlist:
- Longstanding Need - The software solves old-fashioned business problems, rather than marketing a trendy new type of software.
- New Markets - On demand has finally begun to make a dent in the small and mid-sized enterprise market which has historically been tough to serve and suffered from a dearth of appropriate products.
- Increased Functionality - The functionality of the market-leading products has grown tremendously.
- Abundant Connectivity - Neither bandwidth nor access points are a problem anymore.
- Comfort with the Web - The comfort of enterprises with Web-based interactions and applications has grown tremendously since back in 1998 when few individuals even did their banking online.
- Browser Preference - Before the Web took off, enterprises used to want software that looked like Windows. Now they want interfaces that mimic a browser or Web page.
- New Technologies - Advances such as AJAX have led to new features and interfaces that are equal or superior to those offered by packaged software vendors.
The genesis of NetSuite took place in 1998 when entrepreneur Evan Goldberg founded a multimedia tools company. Evan realized that it was incredibly difficult to run a business with accounting on one database, the Web site on another, sales on another. Accounting would say they sold $X, and sales would say they sold $Y, and so on. The truth was fleeting.
As the future of the company began to wane, through a phone conversation, Oracle CEO Larry Ellison told Evan to go and build an application that solves this problem. NetSuite was founded as NetLedger. They built the backend first and on top came a suite of applications that would run an entire business.
When I joined the company in 2002, the company name became NetSuite. Our mission quickly crystallized into becoming SAP for the mid market - basically, an SAP for the rest of us. So it is really after eight years of hard work, that on-demand has become an "overnight success."
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