RESEARCH NOTE NETSUITE S IMPACT ON E-COMMERCE COMPANIES

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1 Document L17 RESEARCH NOTE NETSUITE S IMPACT ON E-COMMERCE COMPANIES THE BOTTOM LINE Nucleus Research analyzed the activities of online retailers using NetSuite to assess the impact of the software on their businesses. Analysts found NetSuite helped retailers automate previously-manual processes and grow without adding staff. Customers found NetSuite helped them to gain better visibility into their operations and improve customer service. NetSuite s software-as-a-service (SaaS) applications support accounting and financial management, enterprise planning, manufacturing, e-commerce, customer relationship management, and reporting. Because all the applications share a common customer record, sales, support, accounting, and operational staff all have access to the same information at the same time, reducing the need to reconcile data between systems and consolidate data for reporting. Features of NetSuite E- commerce Edition include: Integration between the Web store and back office systems means orders appear in the accounting system in real time and inventory that is out of stock can automatically be removed from the Web site. Built-in Web site analytics and reporting enable retailers to analyze customer activity to optimize sites and reduce cart abandonment. Multilingual and multi-currency Web site capabilities support e-commerce businesses and operations in multiple countries. Order management workflows and integration with UPS and FedEx shipping automate fulfillment and tracking number notification. Automated upsell and cross-sell recommendations can be generated based on customer activity and what other customers have purchased. EBay stores integration automate processes for selling items on EBay. Customer self service provides customers with a portal where they can track shipments, submit support issues, and access product and service information. Real-time credit card processing, fraud protection, Level 2 processing, and invoice payments support multiple forms of payment. To assess the impact of NetSuite on Internet retailers, Nucleus conducted in-depth interviews with 21 customers running e-commerce sites that were using NetSuite. BENEFIT AREAS Nucleus identified a number of areas where NetSuite customers using its e- commerce capabilities could achieve cost savings and become more efficient, Corporate Headquarters Nucleus Research Inc. 100 State Street Boston, MA Phone: Nucleus Research Inc.

2 TOPICS E-commerce Enterprise Applications Customer Relationship Management Software as a Service including IT and reporting, order fulfillment, accounting, inventory management, customer service, and Web site management. IT cost savings Before deploying NetSuite, most e-commerce customers that had existing operations were using a combination of applications including Microsoft Dynamics GP, QuickBooks, open source applications, and custom-developed applications to support their accounting and e-commerce activities. Customers had two main motivations for adopting NetSuite: Integration. Companies using different applications for their Web sites, credit card processing, accounting, inventory management, and shipping were either spending time manually re-entering information into applications or supporting point-to-point integrations between applications that were brittle and errorprone. Cloud computing. As e-commerce has become more complex, small and medium-sized firms must be able to deliver the same level of functionality and service that larger firms provide to compete. As they explored their options, NetSuite customers found that the economies of scale of cloud computing would give them the functionality and capabilities they needed to be competitive at a much lower price than traditional on-premise applications. NetSuite customers that considered buying standalone applications estimated that the cost of integrating an accounting package with an e-commerce application would be at least $50,000. Customers said: Prior to NetSuite we were running a custom platform that had way too many technologies 27 applications. It worked but if something didn t go right it was at least 30 minutes and sometimes four hours to figure out what was wrong. It was really painful. Before we had disparate applications QuickBooks, ACT!, the shopping cart, and some integration with third-party applications tying them together. It was clunky at best. The biggest benefit is that it s hosted, available anywhere, and we don t have to worry about maintaining our own servers. It is also highly integrated and integrates with other applications outside of NetSuite all the information is in one place. You have all your customer data centralized in one area. And have a platform that has updates and improvements every year. We were looking for something that was all tied together and there was only NetSuite and SAP. NetSuite tied it all together and with NetSuite all the back office, firewalls, and everything else is NetSuite s responsibility. With SAP you have to worry about upgrades and security and SAP is a bear to implement. With NetSuite we get medium-to-large company functionality at the small business price. When you really pull back the covers and look there really is no competitor. Many will host your Web site for you and they might have a little CRM that handles support and might even send off a drop ship purchase order for you but what they don t do is give you the power to have an ultra-flexible inventory system where you can have inventory in your own warehouse and at a vendor 2

3 and manage all that. It can seem pricey but you have to really determine what s important to you and determine what it would cost to build it. Improved reporting There were three main reasons why e-commerce vendors using NetSuite said they were able to improve reporting and increase visibility: Having all the data in one place means there is only one system of record for the company, so all employees look at the same data. Dashboards, reports, and the ability to use NetSuite s ODBC module to create custom queries enables business managers and analysts to rapidly drill down into data to identify trends or resolve problems. Access from anywhere means users can be traveling or at a client or vendor site and have up-to-date information as well as the ability to make changes or enter data based on new information or activities. Based on the data collected from users, Nucleus analysts estimate that e- commerce vendors moving to NetSuite can expect a business user productivity increase of an average of 20 percent through reduced time searching for information and building and verifying reports. Customers found that improved reporting gave them greater visibility into business operations and enabled them to free up employee time for other activities: Never before have I had the visibility into the information. It s hard to ignore; it s right in your face. It s pretty easy to see if we have a little bit of a downturn or seasonality is off. When we went into the downturn everybody was waiting I was quick to react. It s a great fit if you have people working out in the field. People have laptops and come to the office once or twice a week. Before they had to come into the office and it was on paper. The benefit of NetSuite is front to back end, you can look at a product within the system and see what the cost is, what your sales are, and your margins all the data about a particular item to make an educated decision about what the price should be. With the old system it was location-based silos of information so we couldn t aggregate it together. We could do reporting but we questioned the accuracy of it every day. We have reporting all in one location so we don t have to pull a report from CRM and compare it with ERP. We can look at the data in real time and we can get the applicable critical information on a dashboard to the right person that needs it. More efficient order fulfillment E-commerce vendors moving from less-integrated systems to NetSuite noted that they automated previously-manual ordering, billing, shipping, and inventory updating processes. This enabled customers to devote their time to other areas like marketing or grow without adding staff. Based on its analysis of NetSuite retail customers, Nucleus analysts estimate companies moving to NetSuite from less-automated processes can increase their order fulfillment efficiency by at least 50 percent. 3

4 For customers with very seasonal businesses, automated fulfillment enabled them to maintain delivery levels without paying overtime or temporary staff: Fulfillment now takes one click. Everything s preloaded and linked to our FedEx account and with USPS. They swipe their charge card and you ve created a shipping label, sent an invoice, billed them, and you re done. If you want to bulk fulfill you can do that too. I now have a system that takes 30 seconds to process an order instead of 10 to 15 minutes. A lot of things we re doing now we couldn t dream of doing. We didn t have the bandwidth to keep up with it. Particularly during the holiday season, when we used to have to manually do all of our Internet orders and figure out what went in the order and what went out the door and what to bill and what not to bill on reams of paper, we would hire four to five temps to do it. Now it s all automated. Improved accounting Because NetSuite s back-end accounting system is tightly integrated with its e- commerce engine, e-commerce customers said they could reduce manual data entry and reconciliation, reduce inaccuracies, and increase accountant productivity while delivering real-time information to business users. Based on its analysis of existing e-commerce customers, Nucleus estimates companies moving from standalone accounting and e-commerce systems to NetSuite can reduce time devoted to accounting by at least 50 percent. In many cases, customers indicated that they were able to consolidate accounting activities to one part-time staff person: We have a single staff accountant and she stays on top of all of it. We have better real-time information of where we re at in the business. We eliminated at least one-half to one person in accounting because of the automatic flow through of data. With NetSuite, accounting is four thousand to five thousand times faster. You can have a part-time bookkeeper easily pull together checks, purchase orders, and everything else versus a lot of people that employ expensive accountants to do the same thing. Every month we used to have to go through and account for every credit card transaction. It would take hours every month; now it takes a few minutes. Improved inventory management Automated returns management and real-time inventory management capabilities within NetSuite enable customers to have better visibility into inventory and reduce inventory carrying costs. Nucleus found that one retailer with both regular retail stores and an online store, for example, was able to reduce inventory carrying costs by more than 25 percent, saying, If you purchase something online and we don t have that item in our warehouse, we can see in real time where we do have it. Instead of ordering more merchandise we keep a leaner stock of inventory at the warehouse and keep the stores as stocked as possible. 4

5 Improved customer service Nucleus analysts found that sales and customer service teams can use NetSuite to provide customers with faster, more accurate responses to inquiries because they have better visibility into information. Additionally, providing customers with selfservice access to order information can enable them to track their orders and returns while reducing customer-service-related phone traffic. Smaller organizations found they were able to provide a higher level of service to customers that helped them with their overall reputation for customer satisfaction: There s really not a number of people that you could add [to our staff] that would correlate to the customer service you re able to give with NetSuite. We know before a customer even calls what they need and what they re ordering. We would have to at least double our staff to support the same volume of sales. When a customer calls and they have a problem, we create a case and start the dialogue with the customer and the manufacturer. In some cases it takes us 9 months to resolve a case because replacements only come in once a year but a workflow is set up so we can keep marketing to the customer and let him know we re not closing the case until he decides we re done. There s been a simplification in processes. It s a nice audited string without the hassle. Because everything is connected you can track orders very easily and see what happened and when. Until we started using cases inside NetSuite we [were terrible at customer service]. I d get calls every day from some customer. That s how you damage your reputation In the past year I ve never gotten a call. That s been massive for us. Nucleus found companies moving from multiple systems to NetSuite experienced an average productivity gain of 20 percent for customer service representatives. In many cases, customers reported that they were able to compete with larger e- commerce retailers because the level of service and automation they provided to customers made them appear like a much larger operation. Improved e-commerce marketing and Web site management Companies moving from custom applications found the integration of NetSuite s e- commerce functionality with accounting, CRM, and other functionality reduced the time needed to manage the Web site and made it easier for them to change pricing, test promotions, and add new products: We have three Web sites and no Web person. If I have to change an item, I change it one time and I don t have to go to each Web site and change it. I can change items dozens of times a day. The e-commerce platform is integrated with ERP so it s great when we have to add new items. We can import them very quickly and effectively and set pricing and we only have to do it once instead of entering it in both ERP and e-commerce. Based on its analysis of NetSuite customers, Nucleus found companies moving to NetSuite from custom site development and multiple applications could reduce their developer costs by an average of 80 percent. 5

6 Nucleus analysts also found that NetSuite s automatic upsell recommendations and shopping and merchandising tools helped e-commerce vendors attract and retain customers at their site: Merchandising of the product is important; search engine optimization is very important. We use all the best practices and tools within NetSuite to make the site as search-friendly as possible. We are adding Google checkout and we re also doing product feeds to Google products and to Bing shopping and comparison shopping sites. We do a lot of cross analytics with comparison sites knowing which products are being clicked across and what s really selling helps us streamline what we push and promote a little bit better. Support for multiple currencies and channels based on the same database also enabled NetSuite e-commerce customers to grow internationally and provide e- commerce to their wholesalers: It s really allowed us to grow, especially internationally, because the system can be easily accessed internationally. Some of the other e-commerce packages out there don t give you as much functionality to handle multiple price levels or wholesalers. Without NetSuite, we d have to set up different sites or wholesalers wouldn t have the ability to order online. Advanced partner access is huge. People want to be able to log in and see real-time inventory, place an order, and track it that has become the norm. CONCLUSION Many companies wanting to build an e-commerce presence have two choices: They can make a significant investment in software, hardware, integration, and support resources to manage the shopping cart, credit card processing, fraud alert, accounting and inventory updates, and Web site changes and promotions needed to have an effective Web presence, or They can build a Web site and manually process orders and make accounting and inventory updates, which can be manageable for small companies but certainly isn t scalable. One of the most common benefits NetSuite e-commerce customers cited was the ability to grow and have a more professional Web presence without adding resources. They did this by taking advantage of NetSuite s integration of the Web site with back-end inventory and accounting functionality and by taking advantage of the NetSuite cloud to support both ongoing upgrades and enhancements and greater capacity during peak times. Nucleus found that integration and the economies of scale of the cloud enabled NetSuite e-commerce customers to increase sales while being more efficient and professional in their transactions with Web consumers and partners. 6