Increasingly, we are seeing NetSuite encroach into the enterprise space. What was once thought of as a web-based mini-ERP for SMBs is now a serious platform contender for major organizations.
Companies such as Accenture, Audi, Bearing Point, The Boston Globe, Ceridian, Cornerstone, Kronos, Nestlé, Siemens, SoftwareAG, Solar Winds, T-Mobile, Tableau, and Wells Fargo all use NetSuite. NetSuite claims to be the #1 Cloud-based ERP, offering a unified suite of web-based applications that encompasses HR, ERP, CRM, SCM, PSA, eCommerce, Marketing Automation, and Financials, among other areas. As a cloud-native platform, NetSuite has been built from the ground up with an integrated suite of applications that seeks to automate core processes and provide real-time insights into operational and financial performance, enabling faster and better decisions resulting in improved business performance.
The biggest complaint we hear from NetSuite customers is that NetSuite becomes extremely expensive at scale as add-on features and modules all come at an extra cost, which compounds until what was once a relatively small expense on a nimble platform becomes a large expense on something that has grown to become a critical and monolithic system. Once clients figure this out, it can feel like it's too late for them to reset the relationship to better align cost and value.
NetSuite Product Review:
- Robust, fully featured, integrated suite of applications
- Reporting is easily customized without the need for IT intervention
- System can be highly customized to fit your precise organizational needs
- Pricing is out of market
- Implementation requires heavy professional assistance
- Customer Service is not always responsive and/or helpful
Top NetSuite Competitors
NetSuite is a good solution, but fortunately, there are many competitors: Here are our Top 10:
- Acumatica (ask us about our feature analysis comparison)
NetSuite pricing is a bit of a dark science because the feature sets can be very confusing, plus there is the potential for many add-on modules for added costs, but the base plans are as follows:
- $999/month + $99/user/month
- Designed for businesses with 1 legal entity and 10 or fewer employees
- Includes most major accounting features, plus customer service management, vendor management, marketing automation, and more.
- $2,499/month + $99/user/month
- Designed for businesses with multiple legal entities and 11 – 1000 employees
- Includes all the standard features in the Limited Edition, but enables you to manage multiple legal entities within one account.
- $2,499/month + $99/user/month
- Designed for businesses with multiple legal entities and over 1,000 employees
- Includes all the features of Mid-Market Edition, but is designed to support the higher numbers of concurrent user access to the various NetSuite modules.
All NetSuite editions have the exact same codebase, so there are no technical limitations for platform migrations.
Our numbers below could be slightly skewed as the average size of our clients is larger than the average size of a NetSuite customer, but for illustration purposes, it's an interesting exercise.
In looking at 180 NetSuite deals, we can see that 68% of clients get between 36.4% - 63.6% discounts, and 95% of clients get between 4.5% - 85.5% discounts, with an average discount of 50%. Again, that likely means the average NetSuite customer gets significantly less than a 50% discount, as our numbers are skewed towards the enterprise customers.
Ignoring geography and industry, we further grouped and categorized clients into 9 segments based on a variety of factors including, revenue and employee size, product mix, and annual spend with NetSuite, and then evaluated the discounting across each of these bands. We then looked at 20 deals inside of each of these bands, and while volume isn't precisely aligned to discounting, it certainly does play a significant role, giving us the ability to effectively benchmark NetSuite deals for market pricing.
How to Save
- Benchmark. Everyone should price-benchmark their NetSuite proposal and/or agreement with us. With just a few pieces of information, NET(net) can benchmark your deal (in as little as 1 business day) and show you how much you can save.
- Timing. NetSuite’s fiscal year-end is December (different than parent company, Oracle’s fiscal year, which ends in May). Year-end deals typically get additional discounting to provide further incentive to customers considering a purchase.
- Term. Single-year committed terms offer some pricing benefits, but additional benefits can be secured with a multi-year commitment, so most clients end up agreeing to a 3-year term. On occasion, 5-year agreements are used to secure additional benefits when there is a strong organizational commitment to a long-term strategy.
- Demand Management. Carefully evaluate Editions, titles, and quantities to be sure you are right-sizing your environment. To obtain better deal discounts, many clients over-buy and then have try to negotiate reductions in quantities, and this generally results in a triggered re-pricing provision that enables NetSuite to charge higher fees on remaining quantities.
- Right-License. NetSuite offers both full user access licenses ($99/user/month) and employee self-service (ESS) user access licenses in packs of 5 ($99/user/month). Full user access licenses allow use of the entire application, while ESS limits access to certain functions such as time sheet and expense reporting. Because ESS licenses are offered at an 80% discount over the standard cost, clients should align user demographics to take full advantage of ESS licenses as this can have a substantial impact on potential costs.
- Limited Use Licenses. Similar to self-service packs, other limited use license types can be negotiated with a similar reduction in cost, so be creative in cases where certain users don’t need full platform access. Some clients have a dozen or more user-classes to govern access and all of them have custom cost arrangements.
- Customer Access Licenses. NetSuite also adds charges for your customers to access your system to do advanced functions, like paying their own bills. Most customer actions, such as updating their profile, ordering your products and services, seeing their accounts payables information, and raising support tickets, is offered at no additional cost, so this is another good area to focus on depending on your specific use case.
- Negotiate Better Discounts. At scale, NetSuite can be incredibly expensive. One way to combat this is to consider the costs at scale, and make sure it is in line with viable market alternatives and the value you’ll receive from the solution. We have seen scattered discounts across the pricing spectrum, and they are not always related to deal size or volume, so be sure you’re getting the best deal possible upfront.
- Include Added Features. One of the many drawbacks of NetSuite is that many of its added features are offered as paid add-ons. As a result, try to get as many additional features included in the original deal to fit your use case, and be sure to negotiate incentive pricing (better than the original deal discounts) to add-on new features.
- Volume. A Staggered Deal Structure with a Committed Ramp-up of user access licenses is a way to get the pricing benefits of increased volume, but to delay the activation (and the associated charges) of a certain agreed upon number of licenses until such time as those licenses are deployed. While this provides for better pricing, the structure is committed and puts the risk of realizing the projected deployment solely on the customer.
- Sandbox. Also consider your need for a Sandbox environment. NetSuite prices this at 20% of the license cost you pay, but it can be purchased for 1 month, 1 quarter, or a half or full year.
Terms and Conditions Alerts
The standard NetSuite agreement has many contractual flaws. Here are some to consider:
- Downsize. Be sure you can decommission/recommission licenses without losing pricing protections.
- Renewals. Be sure to include a clause in your contract that enables you to renew at your current prices because if you don’t have that clause, you could see a significant increase in your renewal costs.
- Swaps. Anticipate that not all solutions will work out as planned. Include swap and transfer rights to enable idle or underutilized investments in users and/or functionality to be ‘traded-in’ and redeployed towards gainful use.
- Future Price Holds. Future purchases on all titles, versions, editions, and quantities should be able to be made at the same discounts. Once an organizational commitment has been made to NetSuite, future negotiating leverage is dramatically reduced, so it’s important to ensure that future purchases are given the same treatment with pricing discounts, otherwise each new purchase will result in a new negotiation where NetSuite has a considerable advantage.
- Price Locks. Once your annual costs are known, be sure to lock in your fees for the term of your agreement, so that they do not increase annually. NetSuite routinely charges a 7-10% annual increase without this protection (and sometimes even with it), so contract compliance and financial management is also important with NetSuite.
- Caps on Renewals. Once the existing term expires, NetSuite is known to significantly increase costs (sometimes by 20% or more), so be sure your agreement gives you the added protection of a rate cap on the possible increase for your next renewal.
- Termination. Be sure to consider how much notice you might want, and in what format you might want your data returned to you, and what (if any) costs would be incurred should your agreement be terminated for whatever reason.
Supplier Performance Management
NetSuite agreements require ongoing strategic supplier performance management. Not only do clients outsource their entire value chain when doing a deal with NetSuite, they also become subject to contractual SLAs, and need to consider internal KPIs to ensure they are getting the right level of value from these investments. Combined with the many contract issues in the standard terms and conditions, there is a lot that can go wrong.
Systems Integrators (SIs)
Clients typically hire an SI to do the (i) implementation, (ii) data migration, (iii) configuration, (iv) customization, (v) integration, (vi) training, and/or (vii) post-implementation support.
As a result of its market dominance and rich feature sets, customers pay a significant premium for NetSuite solutions, but to make them work, they must typically pay another fortune to specialist firms to help them integrate the acquired products with legacy applications to realize organizational objectives.
Here is our list of the Top 20 NetSuite Systems Integrators (SIs) in alphabetical order:
- 360 Cloud Solutions
- Aarialife Technologies
- Abaci US
- Advaiya Solutions
- Aminian Business Services
- Big Bang
- BlueBridge One
- Cloud Genius Advisors
- Cumula 3 Group
- Eide Bailly
- eMerge Technologies
- Encompass Solutions
- Fast Four
- Keystone Business Services
- SCS Cloud
These SI agreements are extremely important to negotiate as they often result in significant delays, huge cost overruns, and failure to achieve important objectives. Depending on your specific situation, you may benefit from one of several different implementation pricing models, but all agreements should include transparent timelines and cost estimates based on reasonable assumptions about tasks, resources, rates, and responsibilities. In addition, contractual instruments should be tuned to include all the appropriate documents to minimize potential disputes. Various terms and conditions should be reviewed and negotiated to ensure customers have the proper protections to minimize the impact of change orders, added costs, delayed value, and the loss of functionality. Negotiations with SIs is as much art as it is science, so we strongly encourage all clients to seek professional assistance in structuring their SI agreements.
NET(net) can help you maximize your savings on NetSuite, so if you are looking to improve value, Act Now.
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