NetSuite partners with Oracle to expand in China

Cloud-computing firm teams up with Oracle to expand its business on the mainland as IT spending by governments, companies surge

PUBLISHED : Saturday, 06 July, 2013, 12:00am
UPDATED : Saturday, 06 July, 2013, 3:30am

Fifteen years since it pioneered a cloud-computing business model for software providers, NetSuite aims to expanding its operations on the mainland through its alliance with Oracle.

Zach Nelson, the president and chief executive at NetSuite, said strategic co-operation with Oracle would help to grow the company's business in China, the world's third-biggest information technology market after the United States and Japan.

NetSuite, the leading cloud-based supplier of business-management applications, formed an alliance with industry giant Oracle and global professional services firm Deloitte last month to deliver a new software-as-a-service (SaaS) offering to medium-sized companies employing fewer than 500 people.

SaaS is a segment of the cloud-computing market in which companies and consumers buy, lease, sell or distribute a range of "on demand" software over the internet - much like the way consumers get electricity from a power grid. The software is hosted in the service provider's data centres. "Cloud" is a metaphor for the internet, which is depicted as such in computer network diagrams.

Under the terms of their alliance, Oracle's human capital management (HCM) cloud application and NetSuite's cloud enterprise resource planning (ERP) system will be integrated to create a SaaS offering for customers.

Deloitte, meanwhile, will develop a new business unit with consultants to help customers adopt the soon-to-be-integrated technologies faster.

The HCM cloud product of Oracle, the world's largest enterprise software company, provides a range of human resources-automation capabilities, from recruiting and managing talent to forecasting future workforce needs. NetSuite's cloud ERP helps manage a business's financials, sales, services and fulfilment operations.

Their SaaS offering will allow medium-sized companies, or divisions of larger organisations, to have a single, lower-cost system run their businesses, instead of cobbling together applications from different suppliers.

"We believe this partnership will help drive significant leads into our [business] pipeline in China and the rest of the Asia-Pacific," Nelson said, adding that the arrangement with Oracle was "open-ended and we fully expect it to broaden in scope".

It is an alliance that has been a long time coming, since Oracle co-founder and chief executive Larry Ellison is also the controlling shareholder of NetSuite, which was founded in 1998 as NetLedger.

Oracle, which is also the industry's biggest supplier of database software, mostly competes against the likes of German firm SAP in supplying traditional on-premise business-automation systems to the world's biggest corporations. Oracle's revenue in the financial year that ended on March 31 remained flat at US$37 billion. In contrast, NetSuite has focused on providing its cloud-based offerings to medium-sized companies, as well as the subsidiaries and smaller divisions of large enterprises.

Its revenue rose 31 per cent last year to US$308.8 million, up from US$326.3 million in 2011. Nelson said NetSuite had a strong presence in the Asia-Pacific region, with fast-growing operations in Australia, New Zealand, Singapore, Malaysia and Hong Kong. But he has also been looking for an opportunity to "expand that footprint on the mainland".

"We already have partners in [mainland] China that are selling NetSuite, as well as international companies that run NetSuite software at their divisions or subsidiaries in the market," he said.

Bryan Wang, principal analyst and country manager in China for Forrester Research, said NetSuite may benefit from Oracle's vast sales network "if it plans to leverage local internet data centre players to launch cloud services on the mainland".

Microsoft, for example, teamed up with mainland data-centre services provider 21Vianet to start offering its Windows Azure cloud product in the market. NetSuite has two data centres in the United States.

"Although NetSuite supports China's tax system and local laws, many Chinese customers still require customisation," Wang said in relation to the firm's need for more local partners.

Forrester predicts total information technology spending by businesses and government on the mainland to reach 773 billion yuan (HK$978 billion) this year, up from 662 billion yuan last year.