NetSuite buys QuickArrow: Should we expect Oracle-style acquisition or a SaaS platform for small businesses?

July 23, 2009 Appirio

Ryan Nichols
Yesterday’s announcement of NetSuite’s acquisition of QuickArrow was more significant than the $20M price tag would indicate, for anyone who follows cloud computing but especially for existing customers of QuickArrow and OpenAir, the other point SaaS app for Professional Services Automation (PSA) that NetSuite scooped up last year.
For the industry, this acquisition is a proof point for the power of on-demand platforms vs. silo’d SaaS applications. Building and maintaining a point SaaS application like PSA from the ground up is hard work. QuickArrow and OpenAir have poured tens of millions of dollars of VC funding into each and every level of their SaaS application stack… hardware and network infrastructure, database and application servers, and lots of horizontal application functionality like UI, analytics, and security. Contrast that with what we do here at Appirio – we’re building a superior application for professional service firms with a fraction of the effort on the Force.com platform, because we’re able to focus 100% of our development effort on the needs of professional service firms, and 0% on infrastructure. More from Appirio on that topic in the coming weeks.
But what about the existing customers of QuickArrow or OpenAir? They need to consider whether they should expect any better behavior from NetSuite than they’ve come to expect from their on-premise counterparts…. especially since NetSuite is partially owned by none other than Larry Ellison. NetSuite now has 3 different SaaS platforms to support professional service firms, with significant overlaps in functionality and fundamental differences in design. The question is whether we should expect NetSuite to take the low road and become an Oracle-like consolidator of SaaS applications, or whether NetSuite will invest what’s required to become a cloud platform for small business.
Let’s look at what the two alternatives mean for customers:
  1. NetSuite does an Oracle-style roll-up: If this acquisition is mostly about acquiring customers and squeezing more dollars out of them over time, then NetSuite will be following the tried and true footsteps of Oracle. Expect little rationalization of this confusing portfolio. Instead, existing customers of QuickArrow and OpenAir should expect increasing pressure every quarter to pay more for the products they need and buy “bundled” products they don’t need, and receive less and less innovation from their solution as the R&D teams of the acquired companies experience “synergy.” A great deal for NetSuite, not so great for the customers of OpenAir and QuickArrow.
  2. NetSuite assembles a SaaS platform for the small business: NetSuite also has the option to take the best-of-breed functionality from each of their existing solutions and build it into a new solution built on the same platform as NetSuite financials. This path will require more investment from NetSuite, but certainly has a more positive outcome for small services businesses that don’t have an existing financial solution other than QuickBooks and are ready to make this sort of switch. Naturally, it will take NetSuite a while to get to this end state, and customers who want to take advantage of this functionality will have to perform a migration of their current, end-of-life PSA solution. But this approach will give NetSuite a compelling offering for small services firms just getting started building out their technology infrastructure.
Of course, many customers will lose in either of these scenarios – especially enterprise-class service organizations currently using QuickArrow. What does this acquisition mean for companies like Adobe, Advent, Borland, Genesys, Informatica, Software AG, and Symantec (all QuickArrow customers according to their website)? These are companies that run Oracle or SAP for their financials, not NetSuite. These are companies that are going to have to take a hard look at how they want to support the needs of their services teams going forward whether Zach Nelson follows in Larry Ellison’s footsteps or not. Enterprise service companies are between a rock and a hard place.
If you fall into this category and are concerned about the affects of the QuickArrow and OpenAir acquisition on your professional services business, drop us a line. We’d love to show you what we’re up to.

Previous Article
Lost withOUT the Cloud – NY Times on Cloud Computing
Lost withOUT the Cloud – NY Times on Cloud Computing

Mark Tognetti Recently Jonathan Zittrain, a law professor at Harvard, and the author of “The Future of the ...

Next Article
Learning from our customers – ThomasNet
Learning from our customers – ThomasNet

Learning from our customers: ThomasNet’s migration to the cloud Inspired by what Marc Benioff said at Struc...