NetSuite's leap over to Azure cloud - a shot to the pills for AWS?
The Microsoft love that dared to speak its name
NetSuite, the ERP-as-a-service firm, is shifting its entire business – and therefore that of its customers - off Amazon’s Web Services (AWS) and onto Microsoft’s Azure.
Zack Nelson’s firm plans to shift its 24,000 customers to Microsoft’s cloud as the basis for their hosted business by the end of 2015. Azure will become the platform not just of NetSuite’s customers, but also ISVs and developers building plug-ins to the cloud ERP service.
NetSuite justified the move in terms of Azure’s powerful storage and compute capabilities and talked of Azure as a “world-class” cloud computing platform. But NetSuite isn’t stopping there: the conversion to Microsoft is wholesale.
NetSuite is laying in the plumbing to make it easier for Microsoft customers to use its cloud in serious business environments. Specifically, there will be single sign-on to NetSuite from Windows apps using Azure Active Directory.
Coming in the next months, too, is integration between Office 365 and NetSuite. The idea is to make it easier to shift data from NetSuite to Excel and Power BI for analysis. Oh, and NetSuite is also dumping its own existing collaboration set up for Office 365, too.
It’s a fascinating development for many reasons.
NetSuite started life as one of a gang of SaaS revolutionaries diametrically opposed to the old way of doing business, as epitomised by Redmond.
NetSuite had more in common with Salesforce, whose success constantly overshadowed that of Nelson’s firm, and AWS as the proponents of cloud.
Now, NetSuite is getting in bed with the old guard.
It’s a potential black eye for Amazon, whose cloud star has done nothing but ascend, with growing financials and glowing plaudits from press and analysts eager to prove how smart they are by saying how clever Amazon has been on cloud. Never has anybody actually left AWS; once you taste Jeff, you never go back.
Which begs the question, then, why did NetSuite jump?
Founded in 1998, NetSuite is only slightly older than Salesforce, and with similar growth of between 30 and 40 per cent a quarter. It’s a growth rate comparable to the SaaS firms nipping at the heels of giants like Oracle and SAP, too.
Surely that's "success"?
Well, actually, The Reg is beginning to hear strong and convincing rumors of customers becoming concerned over the increasing amounts of money they are beginning to pay to Amazon for AWS.
Cost is a factor when you’re a firm like NetSuite - a loss-maker, still, after 17 years - $100m and growing annually at 42 per cent year on year. You need to insulate yourself against the future.
Another factor could be that very growth: in a canned statement paraphrasing Winston Churchill on the defeat of Rommel at El Alamein in WWII, Nelson reckoned “We’re at the ‘end of the beginning’ of the cloud.” Its time to get serious. Time for “fluid movement across NetSuite and Microsoft applications.”
When I’ve spoken to Nelson his pitch has been for NetSuite not in the core of big businesses, rather in the departments, regions and suppliers feeding into the center.
For all that growth, NetSuite - like Salesforce - is tiny compared to the incumbents in this field: $556m revenue for its last 12 months.
NetSuite’s ERP needs to grow - and in a new way: beyond being something you simply dump the core business records into. That opportunity is rich analysis and there’s little better for slicing and dicing the raw meat in your ERP than the kitchen knives of Microsoft’s Office apps. That’s why SAP’s used Excel as an analytics front end for years.
But there’s another side to this: that of Microsoft.
With rumors of a Salesforce purchase refusing to die what seems to be emerging is a Microsoft strategy of buying or partnering with makers of SaaS and putting them on its core Azure platform. This is more or less what Microsoft did with Windows, only it didn’t buy makers of apps – it partnered. More apps meant more customers as potential users and buyers of the Windows platform.
Today, the platform is Azure. This strategy should come as little surprise, given it was a signature of Microsoft’s Windows server and tools unit that worked so closely with open source while the rest of Microsoft spat venom at them. That unit was, briefly, under the direction of a once obscure exec named Satya Nadella.
I’ll go out on a limb and bet, Microsoft is in sign-up mode: expect it to court others in the business SaaS space – Netsuite rival Workday, also on AWS today.
NetSuite brings something else to Microsoft and Azure: a much needed PR and momentum black eye to AWS in what's turning into a straight fight between these two for paying business customers. And it brings something more, too: raw customers and their data.
The more data goes into NetSuite, the more is going into Azure and the more vital to NetSuite customers Azure becomes as the digital platform to their business. It becomes both more useful and harder to leave. It also serves Microsoft to build Azure as a some kind of vast warehouse of data, a planet sized brain it can probe using machine learning.
Don’t buy the PR spin: this is not a beautiful new friendship or love at second sight.
We can also only guess at the complicated terms that have been agreed: you can bet Microsoft helped sweeten the deal by probably giving NetSuite Office 365 for free or next to free – it has for other customers.
What this is, is two firms with different needs hoping to walk away with something hard and tangible that boots business for both. ®
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