NetSuite looks to lure SAP users

On-demand ERP vendor NetSuite is launching a new scheme to lure high-paying SAP R/3 customers. Under the deal, NetSuite will charge an SAP R/3 customer 50 percent of whatever their R/3 maintenance costs are for an equivalent number of NetSuite seats, along with support.

The scheme will be offered as an "antidote" to "the ridiculously high costs associated with SAP implementation, complexity and ongoing maintenance," said NetSuite CEO Zach Nelson.

NetSuite's campaign is not targeting SAP's SMB offerings, such as Business All-in-One, because "the customers that are coming to us are R/3 folks," said Mini Peiris, NetSuite's vice president of product marketing.

Nor is NetSuite portraying its software as a complete replacement for an R/3 backbone. Instead, the vendor is targeting new or existing divisions of companies running R/3.

"If you're starting off a new division or breaking off a new subsidiary, R/3 is almost definitely overkill," Peiris said. "Those organisations should be looking to NetSuite to get them up and running quicker."

In targeting SAP, NetSuite is undoubtedly hoping to capitalize on discontent regarding SAP's recent move to transition all customers to a fuller-featured but more expensive Enterprise Support offering.

But there's no sign that NetSuite will make a similar challenge to Oracle, the other giant in the ERP space. Oracle CEO Larry Ellison is a major NetSuite investor, and NetSuite even held a 10th anniversary party at one of Ellison's homes recently.

"We're basing this on what our customers and prospects are saying, and so far we haven't seen Oracle customers wanting to do a swap," Peiris said.

As for any possibility of an Oracle customer migration campaign, "that might be something we'll look at down the road," she said.

NetSuite is offering 100 hours of professional services to assist customers with the switch. It is also partnering with three data integration vendors - Boomi, Cast Iron Systems and Pervasive Software - for companies that would want to continuously exchange NetSuite data with their main SAP system.

NetSuite's move comes about a week after it made a similar announcement aimed at Salesforce users.

One industry observer expressed a measured view of NetSuite's move against SAP.

"This is in line with NetSuite's continued attempts to gain more visibility in the market and to appeal not just to its SMB base but to raise its sights to higher-end mid-market customers," said China Martens, an analyst with The 451 Group. "However, we'd question how many R/3 replacements NetSuite has been involved in so far, given that the company tends to compete more with SAP's SMB apps."

"We do see all this sabre-rattling as a tad dangerous, given that the vendors it's going after are still better placed to make deep price cuts," Martens said. For example, Salesforce might be planning to announce a big price break at its annual Dreamforce conference next week, she added.