NetSuite’s CEO: Apple Will Change Enterprise Software

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Last year, the cloud continued to be red hot. But keep in mind that the industry is far from young. The roots actually go back to 1998, with the founding of NetSuite (NYSE:N). The company made a big bet that enterprises would eventually access software via the Web.

While NetSuite is far from a startup, the company continues to act like one. Just a year ago, the stock price was at $39.60. Now it’s at $69.20.

So I reached out to NetSuite’s CEO, Zach Nelson, to get his take on the cloud and some of the emerging trends. Here’s what he had to say:

Q. What’s your take on 2012?

A. It was a great year for us. NetSuite’s stock was the No. 2 performer compared to our peer software companies. But we were actually No. 1 for the past three years.

There has been a big transition for NetSuite and the industry in general. In 2012, we saw very large companies move business critical processes to the cloud. It’s not just about things like salesforce automation anymore.

As for NetSuite, we are seeing two-tier ERP. This means a large company will rollout an ERP system for a fast-growing subsidiary. We did this for companies like P&G and Qualcomm.

Q. Your thoughts on the dealmaking in the cloud space?

A. A major M&A driver was that big traditional client/server vendors got caught napping. They needed to build a credible story around the cloud and this meant buying companies. But the strategy has not really solved the problem.

Going forward, there will be a changing of the guard in the business software market. Whenever there is a transition like this, the legacy players are usually not the leaders for the next generation. This is not good for companies like SAP (NYSE:SAP) and Microsoft(NASDAQ:MSFT).

The trend to the cloud is evident when you look at the revenues. You can also see this in the stock prices. People are betting with their own wallets. Even the incumbents are betting with their wallets!

Q.  What about some trends for 2013?

A.  One is commerce as a service. I see this as a big trend in 2013 and for years to come. This is why we bought Retail Anywhere. The Point-of-Sale technology combined with our SuiteCommerce platform allows customers to sell through any channel, whether it be online, mobile, or even a screen on the car. Customers want a seamless integrated experience wherever they encounter your brand, and we aim to provide technology to enable that.

I think it is a misconception that retail is dead. If you look at Apple, the main reason for the company’s success was its integrated retail model. It was a big driver.

Now traditional retailers need to find a way to take the Apple approach. The problem is that they could not do it because much of the technology had been built before the cloud era. Apple, on the other hand, built its own system.

Now with Retail Anywhere and NetSuite, retailers can have the same experience regardless of the channel.

Q.  You also think there will be an “Apple Effect” on enterprise software, too?

A.  I think Apple will become the model for the successful next-generation enterprise software company. And it will not just be because of the user interface. That’s just one piece of it.

The other is having an integrated model. Everything works together. This has actually been the vision of NetSuite since 1998. That is, we believe that the winner in enterprise software will be the company with a suite of applications that work seamlessly together. And so far, we are the only one with the technology.

Tom Taulli is the author of How to Create the Next Facebook: Seeing Your Startup Through, from Idea to IPO and High-Profit IPO Strategies.  Follow him on Twitter at @ttaulli.