CRM in brief: Zach Nelson, CEO, NetSuite

In the latest in a series of short interviews with CRM vendors and users, MyCustomer.com sits down with Zach Nelson, CEO of NetSuite, to discuss the move to on-demand software.

By Stuart Lauchlan, news and analysis editor

To coincide with this month's on-demand vs on-premise focus, Zach Nelson, CEO of NetSuite, one of the leading providers of integrated web-based business software suites, talks us through the move to a new business paradigm...

MyCustomer.com (MyC): How much of a choice is there to make between the on-demand and on-premise approaches?

Zach Nelson (ZN): Business leaders are naturally curious when they hear about choices between 'on-demand' and 'on-premise' software. Understanding the distinction is not nearly as important as understanding just how small the distinction truly is. In the modern enterprise, the residence of any particular piece of software is not nearly as important as how much it can do for you, and how easily it can be integrated with the rest of your business systems.

MyC: What are the main differentiators?

ZN: On a very basic level, on-premise software is owned by a company and operated within its four walls. Responsibility for day-to-day hardware and software maintenance falls largely, if not exclusively, on the internal IT staff. Licensing terms vary from monthly to perpetual arrangements, typically with an additional software support charge levied on top. Uptime and remote access are also the domain of the internal staff — if the software is in New York but the company opens a new San Francisco office, IT must either replicate that software in the new office, or provide a secure access method, such as a VPN.

In contrast, on-demand software is managed and maintained outside of a company's four walls. A third-party vendor handles day-to-day operations - as well as long-term upgrades and support — and ensures that the application is always available to contracted users. The vendor often combines usage licenses and support into a single licensing fee, which it typically charges on a monthly or yearly basis. Particularly where major and novel on-demand applications are concerned, the same vendor that develops the software commonly provides the on-demand access and user support. With commodity technologies such as email, a third-party application service provider (ASP) unaffiliated with the software developer usually provides the access and support services. Most people think of modern on-demand software as being accessed through a web browser, but in fact, these applications don’t have to be web-based.

MyC: Is there something of a leap of faith in moving to the on-demand model?

ZN: Although some people in the industry talk about on-demand as a new or unproven experiment, in reality, on-demand software has nothing to prove. It has been a thriving business model since at least the 1970s, when many companies would lease access to mainframe applications over long-distance teletype terminals. Most retail establishments use on-demand software every time they swipe plastic credit card authorisation services are simply specialised providers of an on-demand payment processing programme.

What has changed dramatically is not the nuts and bolts of storing data and applications off-site and entrusting their operations to outside management, but the user experience and integration capabilities of on-demand applications. In the early years, access to an on-site computer could mean a dramatic boost in speed and productivity over the extremely slow terminal linkup. Today, reliable and fast global internet access — combined with web-based applications that can be run from virtually any desktop or mobile computing device — have made on-demand applications virtually interchangeable with on-premise applications. When put to the test, most business clients would be unable to tell if the back end of a program they use is hosted five feet or five time zones away. Most companies of any appreciable size don’t maintain redundant data centres in each of their offices — instead, they develop architectures that allow remote offices and traveling employees to access on-premise applications remotely, in effect becoming on-demand providers.

MyC: Integration with existing and legacy applications has been cited as a concern by some. Is this an inhibitor to on-demand take-up?

ZN: The real technology question facing businesses today is not how any single piece of software will be delivered, but how all of your crucial enterprise systems will integrate and interact with each other. Whether an application is on-demand or on-premise plays no significant role in the integration equation — instead, what matters is the degree to which data must be shared and synchronised. Simple operations, such as passing an address to a mapping program and obtaining a map and directions in return, can be done quickly and easily between any group of applications. A stand-alone, 'best-of-breed' mapping program doesn’t need customer records, and poses little integration challenge. But linking together two significant systems with overlapping data becomes considerably more complicated, leading to synchronisation schemes that cannot completely protect you from having outdated information in at least one application, at least some of the time.

Regardless of where they are hosted, the more you rely on disparate components to run your business, the more the responsibility falls on your shoulders to properly integrate the systems. Linking two key systems together can be a manageable task for an internal IT group. Building a hub-and-spoke model around a single sales application can hold a company's front office together. But when your business grows and each application needs to talk directly to every other application, the task becomes considerably more complicated. To put it on the bottom line, consulting groups such as Accenture charge millions of dollars per engagement to solve those types of problems.

MyC: Is on-demand here to stay or just another software industry fad?

ZN: Make no mistake, the possibilities of on-demand software are exciting and well worth investigating. Aside from the conventional desktop world, which is slowly but surely being drawn to cloud computing, the rich variety of interactive applications available on smartphones is a testament to the power of the on-demand world. Still, don’t be dazzled by the relatively unimportant details of how an application is paid for and delivered. The real issue is not where your programs and data are physically located, but how easily and accurately you can deliver business knowledge and functionality to your users.

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