Me: “Is a NetSuite-Killer a smart or dumb thing to be building right now?”
NetSuite Insider: “NO! It’s a smart thing! Good time to be developing, and there’s huge opportunity. Surprised it hasn’t been tackled recently.”
“In certain areas we’re not strong… In commerce, we’re not capable. It’s one thing I’m trying to fix but the problem is when you’ve been around for 25 years it’s hard to press that reset button, that’s why there’s opportunity.”
The Prize
Here’s a 2 by 2 matrix. Think about which logos sit in that ‘huge businesses with generally unhappy customers’ quadrant.
NetSuite is in there.
$40–50B is spent on ERP software every year, and NetSuite has a large middle market slice of that. My best guess is that they’re worth $25 or $30B inside Oracle.
But I haven’t met any CEO, COO, or CFO who is excited about adopting NetSuite. They all seem resigned. As I heard from one CEO: “We knew we needed an ERP, so we went through the charade of evaluating several options. We all knew we’d end up on NetSuite, and we did. And then it was a pain to implement and cumbersome to use, as we predicted.”
For growing merchants and retailers, NetSuite is the default option, the 1990s Dell of ERP. They want something that is stable and dependable, and that can get them to IPO scale without another change.
But NetSuite was founded in 1999. There have been huge shifts in how companies use technology to run their businesses in the 25 years since then. So where’s the next NetSuite?
Tackling NetSuite is an evergreen concept area — not a new idea. But that doesn’t mean that it’s a dumb thing to try — the market size makes it worth considering.
What would the next NetSuite, specifically for emerging commerce players, have to look like?
Let’s hit the barriers and advantages, and then how to crack the market, where to start, and what to build.
The Barriers
You Won’t Rip and Replace
Let’s start here: nobody is ripping and replacing NetSuite. The key is winning the next generation of their business. Generally those customers are coming off of QuickBooks, and make the transition to NetSuite when their finance/ERP systems begin to break for their increasingly complex businesses.
Ecosystem Strength
NetSuite, like its ERP, SCM, and HCM peers, has built a formidable ecosystem. Armies of consultants and integrators stand ready, their businesses relying on a constant flow of new, confused customers. Accountants and other finance professionals are comfortable with NetSuite, meaning transitioning from or using outsourced support is easy.
Sales Army
Like any hugely successful 25-year old enterprise company (and especially one owned by Oracle), NetSuite’s sales army is powerful. From a go-to-market point of view, they’ll beat you out of the gate, easily, in an equal fight. So you need to make the fight unequal. More on that later.
Trust Hurdle
And finally, NetSuite has reputation and trust. No responsible CFO or COO adopts an ERP without checking with their peers. They need to know that an ERP, one of the fundamental systems that runs their business, serves their needs and will for years. Trust is a currency built over time, and NetSuite has it.
All of this makes NetSuite a tough incumbent to tackle. But there are tailwinds right now that didn’t exist a generation ago.
The Advantages
Integration Explosion
We have 100X the number of integrations than we did a generation ago, covering all parts of a business. But more than that, we have a new generation of credible solutions that can cover chunks of the surface area. Why build an expense management solution at the beginning when you can integrate with Ramp or Brex?
AI Inflection
At Ridge we believe that we’re in the early stages of an AI inflection point, and the next generation of enterprise software will a) deploy AI deeply into product features and flows, and b) be discovering this as we go. Because of this, having an ML-ready data structure is key.
NetSuite’s architecture makes rapid development of new ML-powered features and workflows difficult, and its deep integration into its customer base’s businesses makes rebuilding this impossible on any reasonable timeframe. A new entrant gets to start from scratch with a clean, modern substrate.
Go Beyond Forms
NetSuite, like Salesforce and its other era peers, is grounded in a form and table, static UI world. Since it was founded in 1999, we’ve had generations of automation companies, and functions like DevOps and SecOps push prioritization, automation, and workflows to new levels. ERP can learn from those areas and build automation and action-based prioritization into the solution as a first class citizen.
Unbundled Needs
Finally, ERP is unbundling right now, if you look closely around the edges. This shouldn’t be a surprise, since ERP was created in the first place by bundling different enterprise needs into one solution. But in 2023 does it make sense to pay for marketing automation and warehouse management in the same solution? Now that we’re in an era of clean APIs and class-leading point solutions, it makes sense to rethink what a comprehensive ERP solution should be.
But even if not self-serve (and in many cases, that wouldn’t make sense from a business point of view anyway), having a strong SLA to get to running utility is critical. By doing so, you’re aiming right at a NetSuite weakness and customer sore point.
Cracking the Market
While I don’t know exactly how to win here, there are some key ingredients. Let’s start internally and work our way out.
Own the advantages above — integration, AI-enabling, and automation first. Build them deeply into your architecture and identity from day one. Anyone can say they have integrations, or automation baked in, or easily enable AI, but the difference is in how deeply these things drive your company and product identity, and how that creates superpowers for your customers. For example, can you derive signals from a returns management solution like Loop, combine that with customer satisfaction data from Gorgias, reference that elegantly against your inventory system, and deliver an alert and action for your supply chain manager to adjust an order of upcoming inventory?
Be 10x better at Something
You won’t be 10X better at everything than NetSuite, but you need to be 10X better at something, and that something has to map to what your first market cares about. Is it inventory prediction? Is it automated workflows from your OMS? Is it supply chain analytics, or customer LTV?
Lean into something that’s dramatically better than what NetSuite does, and expand from there.
Unbundle, within reason
While it doesn’t make sense to have all 13 modules in one ERP in 2023, it also doesn’t work to stitch together 13 different provider solutions.
Because ERP is so broad and we’ve had a generation of DTC merchants with problems to solve, we’ve seen a wave of narrow point solutions that hit 3% of ERP’s product surface area, or serve a very narrow market segment. That can be a way in, but ‘this is our wedge and we’ll expand from here’ is much more difficult to do than we often believe in startupland. You also don’t want to do everything to start, or maybe even ever. That’s too much. So there’s a balancing act between providing a broad enough solution to have a footprint in your customer, but not large enough to make your task impossible.
Time to Utility
It takes many months and consulting dollars to get NetSuite implemented. A modern alternative will have to be better. The ultimate aim may be to have some self-serve or PLG motion, not because this category lends itself perfectly to that, but because it forces product and implementation accountability for you, and communicates a customer empathy that NetSuite can’t match.
Strategy is Strength
Modern ERP isn’t about building the perfect product. It’s about building the smartest path.
Your product strategy is critical here. What are you building now, and what are you integrating with? What are you building and integrating next and when? And so on. There will be thresholds of value you get to for customers, and if designed right you’ll be able to capture surface area and revenues to match that.
Where to Start
Go to QBO
If your customers are growing merchants, the biggest opportunity right now for building a NetSuite Killer is to start where they come from: QuickBooks Online. The merchant path from QBO to NetSuite is well trodden, with specific triggers: account consolidation of entities, cross-border management, inventory complexity, revenue mix complexity and flexibility, and so on. You know where most of your customers are coming from, and you know why they’re leaving QBO as they move to NetSuite. So intercept them there, with solutions that headline those QBO gaps. Whatever functionality you choose, you should get a lot of head nodding from customers. If you don’t, you’ve missed the mark.
There are two strategies here: help those businesses stay on QBO longer by extending it in its shortcomings, or start with a real replacement to it and take all of the business right off the bat. I think both are viable, but different to execute.
Be Goldilocks
There’s a constant tension in this area on what functionality to provide — narrow can get you early customers but risks pigeonholing you; broad covers customer needs but is an impossible task for a startup.
The answer is to be goldilocks about it — just enough. The best path is to carve out something like 25–50% of NetSuite’s surface area and solve those needs. Like supply chain, inventory, procurement, and order management together. Or finance, accounting, procurement, and order management. There are several paths and combinations that can work, and it’s entirely possible that NetSuite ultimately gets replaced by 3 companies that each capture part of its business.
Win Niche Trust
Pick your niche and build for it. Win the trust of early customers, build that trust messaging into your org and integrate it into your product. Speak their trust with marketing and sales.
Trust and reputation is super important in this area. You can get there by listening carefully to early customers and building what they really need. This niche will be a lot smaller than your ultimate TAM but that’s ok — you can expand to adjacencies. But the world’s ERP needs vary a lot, which is why traditional providers can’t serve them all. So be better at a first important niche, and work outward from there.
Speak to the Ecosystems
Your product will not win alone. Don’t make that mistake. QBO and NetSuite have deep ecosystems, and this gives them powerful advantages. At the top of this are accountants and financial firms that support emerging businesses. They know QBO and NetSuite in and out, guide business to them, and maintain lock-in. You’ll need to win a chunk of them over to make it, which points to an early ecosystem, community, or partnerships strategy.
What to Build
A System of Prioritization and Action
ERPs are essentially systems of record. You need to be that too, but the real opportunity right now is to be a system of prioritization and action, for different parts of the organization. New tools should help users understand what’s important in the business, and react accordingly. This will rely both on new uses of interaction data, but also external signals not traditionally used by ERP systems, drawing more deeply from marketing or supply chain, for example.
The powerful thing about it is a fully different identity than NetSuite, that ends up baking into multiple layers: data, ML, and UI. When that works, it is truly differentiating, and creates a whole new generation of ERP.
Business Data -> Interaction Data
The core ERP data models haven’t changed much in decades. That’s not a bug. Businesses are run much the same way they were when NetSuite was started in 1999. You get products from manufacturers, need to vet them and manage your BOM and COGS, have inventory and product information, take orders, collect revenues, fulfill them, and so on. There are some changes around the edges — more cross-border, more sales and marketing channels, subscription models, and so on. But the core is pretty similar, and it’s not worth spending time innovating on the basic business data.
Where the opportunity is now is in using the interaction data around the core business data — driven by your team and the plethora of integrated systems, to make your customer smarter. This interaction data is not native to NetSuite, but can be powerful to create insights, prioritization, user-specific UIs and workflows, and guide automation.
Thoughtful Integrations
It used to be an impossible task to tackle NetSuite without bucketloads of funding. You had to be as good as them in the bulk of their modules, and much better in a couple.
Today it’s different. There are enough adjacent solutions that are proven to work as business-critical systems to rely on as integration partners.
Those integrations are inherently better, and more elegantly woven in than ever before, and this opens up an early product strategy window that didn’t exist a generation ago.
AI Native
Your data architecture should enable rapid experimentation and development of AI-driven user experiences and workflows, surface alerts and actions, pare down information, and give role-based context in a given UI. The opportunities to integrate AI deeply into the product will reveal themselves over time and you won’t know them at the beginning. So spend time at the beginning to design an architecture that leaves room for flexible future development.
The Bottom Line
Tackling NetSuite is not for the faint of heart. You’re more likely to fail than not. But if you do succeed, there’s a huge prize there — not only in building a massive business yourself, but helping a new generation of businesses also run better. And now, perhaps more than through most of the last 25 years, there is an opportunity to do it.
If you do try, let’s talk.
_
Thanks to my teammate Mary Boyajian for feedback on this piece, and various operators and investors for their insights — including but not limited to Kyle Hency, Aaron Schwartz, Maia Benson, David Eckstein, Scott Orn, Nicholas Nadeau, Nima Elyassi-Rad, Ali Asaria, Jake Cohen, others, and several people who shall go unnamed because their LinkedIn still says NetSuite. :)
