If there’s one company that embodies the environmentalist spirit, it’s Google. GigaOM reports Google established a $280 million fund in SolarCity, a solar power company based in San Mateo, California, to develop rooftop solar panel projects. This is Google’s first investment in residential and distributed solar power, and also its largest venture in clean power to date. READ MORE
Santa baby, slip an iTouch under the tree, for me Been an awful tough year, Santa baby, so hurry down the chimney tonight. This holiday season, the little somethings that small business owners are asking Santa to slip under the tree include lightweight notebook computers, next-generation smart phones, HD cameras, and more. With the economy in the doldrums, there’s not a whole lot to celebrate this year and not a whole lot of IT money left to celebrate with. But small business owners who’ve managed to squirrel away a little of their annual computing budget to spend on themselves or their employees before Dec. 31 have a sleigh full of electronic devices to choose from. According to a very informal poll of several dozen small business owners, here are some of the most popular items on their holiday wish lists: Little laptops Sallie Goetsch, a podcast producer at The Podcast Asylum in California, wants a UMPC — an ultra-mobile PC — the latest in lightweight computing. Also known as a tablet PC, netbook or subnotebook, the devices run 13” or smaller, weigh just a couple pounds, have touch screens and/or QWERTY keyboards and come with built ins like GPS and Wi-Fi and a variety of options. Goetsch wants something to take to conferences and events and prefers a UMPC over a smart phone. “I never did learn how to type with my thumbs,” she says. “I’m trying to decide which one, the new HP? The EEE?” Joe Pulizzi, owner of Z Squared Media, a Cleveland, Ohio, content marketing firm and founder of the Junta42 content marketing blog network, wants a mini laptop too. Pulizzi has a 17” Toshiba laptop in his home office, but it’s too big for the road. “Sometimes small is better,” he says. Pulizzi has his eyeona Toshiba Portege with a 12.1” display, built-in fingerprint reader, webcam, digital card reader, and 4 USB ports. Smartphones Linda Musgrove, owner of an Aventura, Fla., trade show consulting firm called Trade Show Teacher, already has a smartphone. But that hasn’t stopped her from lusting after the HTC Touch Pro, Sprint’s Windows Mobile 6.1 smartphone with a slide-out QWERTY keypad, touch screen, expandable memory, 3.2 megapixel camera, Wi-Fi, GPS, and Bluetooth support. The device will do double duty, managing Musgrove’s business and “my crazy family,” she says. Nancy White, owner of Custom Interface, a Bingen, Wash., custom electronics manufacturer, treated herself to an AT&T Tilt smartphone as an early Christmas present. It hasn’t been pure love at first sight — “It takes three screens to get to speed dial” — but she does love the fact that it comes loaded with Microsoft Outlook, “so the interface with my work desktop is fantastic,” she says. Cameras and gadgets When it comes to gadgets, former newspaper photographer Jay Bryant has a soft spot for cameras. This holiday, Bryant, now business development vice president at Live World, a San Jose, Calif., social networking company, has his eye on the Kodak Zi6 Flip Cam in HD. The palm-sized device has a 2.4” screen and weighs 3.8 ounces and has built-in USB port and editing software. “I’m going to try my hand at video blogging,” Bryant says. “And I’m going to start recording some of my presentations to review them afterward to see how I can do better,” Bryant says. Plus, at a suggested retail price of $180, “it’s cheap,” he says. After Andre Preoteasa, IT director at Castle Brands got himself an Apple iPod Touch, he was the most popular guy at the New York City fine spirits distributor. “Everyone in the office is asking to use it. Everybody wants one,” Preoteasa says. “It’s literally a computer in your pocket, and a very posh one.” Reviewers have dubbed the second-generation iPod Touch the iPhone’s baby brother, with many of the same features — music and video player, Safari Web browser, email, iTunes store, etc. — minus the ability to make cell phone calls. Prices run $270 to $400 for models with 8, 16 or 32 GB flash memory. Travis Isaacson, senior director of organizational development at Access Development, a Salt Lake City, affinity marketing business, doesn’t want anything that fancy, just an iPod Classic with 120 GB of memory instead of the old 80 GB model he has now so he can squeeze in more of the business books he downloads from Audible.com. Nov Omana, managing principal at Collective HR Solutions, a San Mateo, Calif. HR industry consultant, doesn’t like it when people sitting next to him at Starbucks or on an airplane peek at his laptop screen. So this holiday his wish list includes a pair of MyVu Shades, eyewear that looks like regular sunglasses but blocks out whatever is showing on a laptop or iPod screen for everyone except the person wearing them. The $199 device, which comes with built-in earbuds, is primarily sold as a way to watch videos in private but Omana thinks it has big potential with business travelers. “The next generation may allow us to just ‘see’ each other in a virtual world or over the net no matter where we are,” he says. John Klebes, business development program manager at Sig Sauer, the Exeter, N.H. gun maker, has his eye on the Livescribe Pulse Smartpen, a $200 digital pen with built in microphone, speaker, display screen and tiny camera. The Smartpen can record notes in written and audio form simultaneously when used with special “digital paper” embedded with microdots. “It sounds like a very useful tool and I wouldn’t turn down one for Christmas,” Klebes says.
Perhaps you’ve had this experience: you’re on the red-eye from L.A. to New York. You realize you need to access your e-mail. But you can’t: you’re offline. It will be hours until you land, and you’re stuck. For some companies, this scenario is one of several good reasons to seek out a better mousetrap than Microsoft Outlook and Exchange. Products such as Google’s open source-based Google Gears API, Zimbra’s Suite and Desktop, and IBM’s Lotus Notes & Domino offerings allow users to work offline in a similar environment to their online product. While Microsoft does have offline offerings, they do not have the same functionality as their online product, users say. A seamless transition “What we can offer is a more seamless transition between online and offline,” notes John Kobb, vice president of marketing for San Mateo, Calif.-based Zimbra, which was recently purchased by Yahoo! “You can take it on a plane with you. The administrators are saving the same information on the same server — you can go and access the same information from a different computer,” he notes, whether that computer is an Apple or PC. For small and mid-sized businesses, hosted solutions such as Zimbra’s have considerable appeal, because “you don’t have to deal with storage and backup,” notes Erica Driver, principal analyst for enterprise messaging and collaboration with Cambridge, Mass.-based Forrester Research. Other reasons to look beyond Outlook and Exchange, says Driver, include: wanting a system based more on open-source standards, preferring to cobble together a “best of breed” email/backup/archiving system to what MS offers, wanting a system not based on Microsoft due to lack of MS skills among workers wanting a system that allows workers to move from computer to computer, including Apples to PCs, seamlessly Zimbra’s Kobb also notes the inherent cost savings in using a hosted system that is a “one-stop shop” for messaging, archiving, and anti-spam/anti-virus protection, as opposed to budgeting each of these separately, either through several hosted solutions or in-house hardware. “The total cost savings could be significant, “he says, noting that Zimbra’s hosted solution runs about $4/month per user. Web 2.0 ready Another consideration is that offerings like Zimbra’s cut their teeth on Web 2.0-based technologies, so it’s easier to link them to blogs, wikis, and other collaborative tools than the older Outlook. “This is a real plus for products like Zimbra and Google,” says Driver. “They have been quicker to adopt 2.0 into their products.” Likewise, IBM’s Lotus Notes is well-known for its collaborative abilities, but is largely an enterprise-class product with a higher price tag. The bottom line: MS Outlook and Exchange is not the only game in town. Keep an eye on these alternatives– they may be a way to save your business time and money. SIDEBAR: Email Alternatives to Watch Zimbra offers hosted solutions featuring email, anti-spam/anti-virus, archiving, and collaborative tools. IBM Lotus Notes & Domino offers a range of desktop options, including calendaring, email and collaborative tools. IBM also offers a range of archiving, security, and other solutions. Google Gears API offers open-sourced based browser extension; easy to customize with additional functionality.
Golden Valley, Minn.-based Wessin Transport Inc. not only tracks packages, it tracks its truckers. And business is booming. “We do so to measure route efficiency,” explains Alan Schostag, director of information systems for the 100-plus employee company, which handles some regional shipping for companies like Amway Corp. and Avon Products Inc. Using a GPS-enabled cell phone carried by each driver, the company and its clients can track drivers and their cargo in real time. If it routinely takes drivers too long to make certain runs, the company can make changes. And their clients can chart their progress, too. Wessin uses a solution offered by AirClic, a Newtown, Pa.-based provider of mobility solutions. AirClic offers a hosted solution that allows companies to track assets and employees using barcode, radio frequency identification (RFID) or global positioning system (GPS) capabilities, and the ability to transmit data in real-time to the organization or their clients, wherever they are. “It’s an A-1, fantastic product,” says Schostag. “There were no problems rolling it out, and it’s cheaper than using PDAs” because it can be linked to cell phones, he notes. And other companies are following suit. AirClic’s sales are brisk, tapping into a growing interest in harnessing GPS and related technologies. Fifty-eight percent of the 1,140 IT professionals surveyed in Sept. 2006 by San Mateo, Calif.-based Ventana Research said that GPS-related technologies had “a very important role” in the future of their business. Not just for FedEx anymore AirClic’s MP solution is unique, says AirClic CEO Tim Bradley, because it allows even the smallest company to use it at a cost of $1-$2/day per user. ‘We think it’s a unique product,” he says, because it integrates so many technologies and puts them right in the client’s hand. Small and mid-sized businesses “that don’t have the luxury of IT support struggle to know what’s happening in the field with sales, support, or contractors,” he explains. “You don’t have to be FedEx anymore to have access to this kind of network,” he says. In addition to its use by shipping companies, AirClic is finding a market for its solution among companies needing to track custodial employees at theme parks, those tracking health care personnel, or firms needing to capture time data for payroll purposes. Privacy might be a concern But how might employees feel about being tracked in this fashion? In union shops, it is of some concern. “The Teamsters Union is making sure that protective language is included in any contracts that we negotiate. Our members must be protected from the misuse of information gathered from a technology like GPS in disciplinary actions,” notes Teamsters spokeswoman Leigh Strope. The 1.4-million member union represents many transportation employees. But in general, experts note that the U.S. courts generally side with employers when it comes to personal privacy in the workplace. “Companies can already install software that tracks what you look at on the Internet during the day and who you email,” notes Mark Roberti, editor of RFID Journal, a website and magazine that covers the RFID industry. “If someone is required to clean a bathroom, what difference does it make if the inspection is done manually or electronically?” Wessin’s Schostag says that the introduction of GPS technology some time ago created “rumblings” in the industry, but that they have not met with any opposition among their workers. Wessin’s employees are not union members. AirClic’s Bradley says the best way to address the privacy issue is to “be proactive.” “Working directly with the unions” and explaining the technology to workers gets the best results, he says. Roberti adds that, with any technology, employers need to be just. “If you use the technology in an invasive way, you will have unhappy employees and many will leave.”
There was a time when small and mid-size businesses had to pay through the nose for high-end corporate networking gear made for large enterprises if they wanted to get any kind of decent performance out of their business systems. That, of course, assumed that you could schedule an appointment with a sales rep who was more interested in hunting big game clients. But times have changed. With the large enterprise market now saturated with technology, today many networking vendors are developing, packaging, and selling products specifically for small and mid-size businesses. The small business market is now seen as a hot, high-growth target of opportunity. While this is undoubtedly good news for small and mid-size businesses, buyers need to careful. Price and packaging is important in providing access to technologies once the exclusive domain of the Forbes Global 2000. But it is also important to ensure that smaller businesses get access to the support and maintenance services that are critical to business continuity and ongoing operations. Large vendors that have typically done business with big firms can easily fall short of making these key ancillary services available to their mid-market clients. This is because they primarily sell through channel partners who don’t have the resources and know-how to offer these support services. Price is no longer the only issue “Affordability is not the issue anymore,” says Amir Hartman, co-founder of consulting firm Mainstay Partners, based in San Mateo, Calif. “It’s the post sale service and support that small and mid-size businesses have to be aware of.” Large vendors see a huge untapped market in this space, Hartman says. Take Dell, which earlier this month announced its Vostro line of notebook PC computers designed for small businesses that have 1-25 employees. Dell has cut out unwanted applications that normally ship with new computers, and it has streamlined the process and time it takes for a customer with no IT experience to set up the machines down to 6 minutes. Dell says it’s dedicating 6,500 of its customer service workers to be available for 24-hour access. IBM, meanwhile, introduced a BladeCenter system for small businesses; blade servers were previously sold exclusively to mid-size and large businesses. Cisco, earlier this year introduced the Smart Business Communications Center (SBCS), a product specifically built for companies with fewer than 250 users, which supports new hardware products, a unified communications applications and offers basic systems-management tools. The product provides routing, switching security and wireless support, which can be turned on and off independently, at a customer’s own pace, says Ed Kudey, senior manager of solutions development for the Global Small and Medium-Sized Business group at Cisco. More products let you pick and choose Hartman notes that small and mid size companies should expect to see more products that give users the flexibility to pick and chose the feature and functions they want to activate when necessary. Kudey says that Cisco has been supporting this market for eight years and is gratified to see that it continues to grow. Small (250 users or less) and medium (251-1,000 users) businesses now account for just over 25 percent of the company’s business. Like many vendors, Cisco supports this market through value-added resellers. “We spend a good amount of time educating our partners on our direction so they can help us establish a strong eco-system” for small and mid-size businesses, says Kudey. Just as Cisco will spend time consulting with the IT staffs of large enterprise customers, he says they do the same with smaller partners. While Hartman concedes that using established vendors like Cisco, Dell and IBM can offer small and mid-size companies some assurances in product stability and reliability, he argues that users should be clear with both vendors and resellers about support and service expectations. Although support is usually available, some vendors may charge extra to receive that support, he warns. As always, getting the facts before buying is critical.
Have you ever dreamed of marching into a competitor’s business, sidling up to a customer, and whispering in her ear that she could get a better price at your place? Stop dreaming. For marketers on the Web, that fantasy tactic is now within reach. There’s a new breed of comparison-shopping software that lets businesses target potential customers when they’re browsing for products on the sites of competitors, giving marketers a chance to lure buyers away with better deals. Say a shopper is browsing at an online store. When she clicks on a specific product, the software generates an ad featuring links to vendors offering the same item for lower prices. It’s similar to a bargain-hunting site, such as Shopping.com–except that it offers competitive prices wherever consumers shop. Price-comparison advertising represents a new wrinkle in online marketing. Rather than placing banner ads on sites with related content or bidding for keywords on Google, the ads target consumers based on what they’re shopping for at any given time. For merchants who can compete on price but not ad dollars, the ads can be an efficient way to drive traffic and sales to online stores. “It’s a step toward getting their names in consumers’ minds,” says Harry Wang, a research analyst at Parks Associates in Dallas. Most of the services are less than a year old. But businesses are starting to jump aboard. Steve Hafner, founder of the travel website Kayak.com, uses the technology to compete with giants like Expedia and Travelocity. He had been deploying the usual Web marketing tactics, such as buying keywords on Google and running banner ads on travel websites. But while Kayak.com was attracting more than three million visitors a month, few of them were actually using the site to book travel. In January, Hafner learned about a comparison-shopping advertising service that was recently launched by WhenU, an ad software firm based in New York City. He decided to give it a try. Here’s how it works: WhenU has enticed millions of consumers to download its price-comparison software by offering screen savers and other freebies. Now each time those consumers shop on the Web, the software goes along with them. When they visit a travel site and search for a specific flight, the software grabs the information and generates a pop-up box that invites shoppers to “Save More” by clicking a button that links to Kayak.com. Kayak pays a fee each time a shopper clicks on the box. Because clients set a budget that caps the frequency of the ads, WhenU is able to juggle several competitors at once. Within a month, thousands of shoppers a week were seeing Kayak’s comparison-shopping ads. And those ads were generating a click-through rate of 8 percent to 10 percent, compared with a 1 percent rate for Kayak’s search engine ads, Hafner says. Even better, those shoppers who clicked on the ads were 50 percent more likely than those arriving via banners or search engines to book trips on Kayak.com. Compared with the company’s other marketing tactics, the comparison-shopping ads “are at the top,” Hafner says. “They deliver very targeted traffic.” Hafner declined to say how much he’s paying, but Bill Day, WhenU’s CEO, says cost-per-click rates range from 20 cents to several dollars, depending on the product and ad frequency. WhenU clients, he says, experience a click-through rate of between 3 percent and 20 percent, compared with an average of 3 percent for all online ads. Of shoppers who arrive via WhenU, between 1 percent and 7 percent make a purchase, Day says. Several other companies have released similar tools. Vendio Services, an e-commerce software maker in San Mateo, California, offers a free downloadable toolbar, called Dealio. The application travels with shoppers as they search for products in dozens of major online stores, providing them with links to cheaper offerings. Unlike WhenU, Vendio doesn’t charge merchants. Businesses simply register on Dealio’s website to have product feeds added to the catalog. The lowest prices get top billing. Of course, the success of price-comparison ads rests mostly with shoppers, who must download software to access the deals. Day claims that 10 million to 15 million shoppers see WhenU’s ads each month. Still, it’s too soon to tell whether the tools will really catch on. “Consumers are just getting used to comparison-shopping sites,” says Patti Freeman Evans, an analyst at JupiterResearch in New York City. “Pop-ups might be the next stage, but I’m not sure if they’re ready yet.” For one thing, pop-ups are often associated with spyware, which has a reputation for sneaking onto computers and wreaking havoc with Web browsers. Day maintains that WhenU’s software doesn’t record Web movements or generate irrelevant pop-ups. Consumers must check a consent box before downloading the software, and the ads feature WhenU’s logo. The up-front approach is a key selling point for Hafner. “We wouldn’t use a product that wasn’t transparent to consumers,” he says. “Our philosophy is that we don’t like spam, so let’s not spam other people.” Resources To learn more about comparison-shopping advertising and other behavior-based marketing techniques, visit the online trade magazine iMedia Connection, which features news stories, tips, and free e-mail newsletters.
Ask most salespeople to name their rules of thumb, and “know the customer” is likely to be somewhere near the top of the list. That often means collecting reams of news clippings, keeping copious notes on clients’ personal lives, and combing websites for information that could shed light on a customer’s needs–or simply provide an excuse for a friendly phone call. You’ve probably heard of RSS, or really simple syndication. From a sales perspective, the technology has two main applications. First, it allows websites to “broadcast” content to a self-selected group of people. Visitors to an online store, for example, can sign up for an RSS feed and receive notifications about special promotions and new products every time the site is updated. On the flip side, businesses can also use RSS to gather up-to-the-minute intelligence on everyone from clients to competitors. For example, the software has changed the way client representatives at Peoria, Ill.-based Marquette Group keep tabs on customers. Before, each rep at the advertising firm spent about 10 hours a week searching the Internet for relevant information. In an effort to streamline the process, Marquette subscribed to a Web-based news clipping service, but found it sluggish. Also, because of the price, $550 a month, all nine reps had to share a single account, which was a big hassle. So when Dale Granda, the firm’s vice president of sales and marketing, first read about new RSS software called AdSpark last fall, he signed up quickly. The Web-based application–sold by Client Dynamics in Irvine, Calif.–helps Granda’s account executives create supercharged dossiers on their clients. The program imports client information from Marquette’s customer relationship management software. Account representatives also enter search terms manually–the name of a contact’s favorite sports team, say. Then, they spend an hour a day scanning headlines culled from 6,000 local, national, and international news sites. Sometimes the juicy tidbits spark ideas for new ads. They also give reps a good reason to call clients, who are now contacted four times a month instead of two. “It strengthens our relationships with clients on a professional level, as well as a personal level,” Granda says. The software has cut research time in half. And, instead of sharing one account, each rep has a subscription, for $99 a month per person. The technology can also provide insights into the competition–some business software companies, including San Mateo, Calif.-based NetSuite, are even incorporating it into CRM applications–so think twice about what information you disclose on your company’s site. Salespeople at Corporate Toners, an online toner cartridge store in Canoga Park, Calif., copy feeds containing pricing information from their rivals’ websites and paste them into their NetSuite dashboards. Each time an interested buyer calls, sales reps check out the latest prices being offered by rivals and offer a better deal. That has improved Corporate Toners’ conversion rate on sales calls by 40%, says COO and co-founder Kapil Juneja. Juneja, for his part, is debating whether to add RSS feeds to the Corporate Toners website. If he does, he plans to be careful about how much he reveals. Resources Resources Sign up for a free Web-based news reader account at newsgator.com. To learn more about business software that incorporates RSS technology, visit netsuite.com or clientdynamics.com, both of which offer online demonstrations.
Al Mcgorry is a small-business man who thinks big. So in 2002, when this CEO of a 12-person software consultancy in Sacramento heard of a new, inexpensive service called Oracle Small Business Suite, he thought that Oracle’s CEO, Larry Ellison, was finally offering a scaled-down version of the software that its big, multinational customers use — at a cost of a quarter of a million dollars and up — to run their businesses. But unlike traditional Oracle products, this one was simple to use, integrated, delivered over the Web, and at only $49 per month, surprisingly affordable. McGorry was hooked. The fact is, it wasn’t an Oracle product at all. This innovative new business software solution was the work of a small San Mateo company called NetLedger (later NetSuite) that was launched in 1998 by Ellison and a young protege, Evan Goldberg. NetLedger got to use the Oracle name at a time when upstart Internet companies needed all the branding advantages they could get. In return, Ellison got a foothold in the small to midsize business space. It was an inspired partnership. So much so that NetSuite reached No. 12 on the Inc. 500 this year, with four-year growth of 5,763%. Its 2003 revenue was $16.5 million, and 2004′s number will approach $50 million. And if you ask Goldberg and his team, they’re just getting warmed up. “This is a massive, massive market,” he says, citing the nearly seven million small to midsize businesses in the U.S. alone. It’s a fact not lost on Ellison. At the same time he was funding NetLedger, he was also helping bankroll another Web-based software company targeting small and midsize businesses: SalesForce.com. And now, years later, Oracle has launched its own product — which bears more than passing resemblance to NetSuite’s — aimed at the small and midsize market. That gives Ellison a stake in three companies that are, or soon may be, fighting a turf battle for the small to midsize business dollar (he owns more than 50% of NetSuite; Goldberg, other employees, and venture capitalists own the rest). If you’re Larry Ellison, those are pretty good odds. And if you’re Al McGorry, the competition is pretty good for you, too. For McGorry, the NetSuite product, which started as a simple competitor to QuickBooks, delivering accounting software over the Internet via subscription, has made a huge difference in his business. Instead of buying software on disks that you (or well-paid engineers) load onto your computers, the software is accessed over a Web browser, allowing you to log on from anywhere. All of your employees can access real-time data, which is backed up every night on class A servers. There are no upgrades to buy, and there’s far less maintenance. And the software is constantly growing, adding the ability to manage contacts, keep appointments, track sales, manage employees and payroll, manage customer orders and inventory, and build and maintain a website. As the service evolved, the name of the company was switched from NetLedger to NetSuite to reflect its lineup more accurately. “Everything just fits together,” says McGorry, who had been using at least four different software programs — none of which were integrated like the Oracle Small Business Suite — to do the same thing. But then in 2003, McGorry’s annual cost for the suite doubled to $1,200 a year ($99 per month). And in 2004, he had to write a check to NetSuite for $7,200 ($399 per month for one user; $99 per month for each additional user). That figure allowed him to increase the number of users from one to three, but it’s still an eightfold increase in his annual payment, which is always required up front. An avid reader of Internet technology bulletin boards, McGorry says that many in the small-business community were apoplectic each time the price jumped. “People were ripping them apart in these user-community forums,” he says. “My God, there were a lot of defections.” Still, McGorry says NetSuite makes sense for his growing business, Capital Datacorp, which has annual revenue just shy of $5 million — especially since it has engineers who work almost exclusively in the field and other employees (including himself) who occasionally work from home or at a customer site. On a recent trip to the Alps, McGorry, thanks to NetSuite, was able to duck into a tiny Internet cafe and get up-to-the-minute sales figures. To goldberg and zach nelson, NetSuite’s CEO since 2002, customers like McGorry are proof that they’re on to something. Trying to keep up, they hired nearly 100 new employees in 2004 — most of them sales staff — bringing the total to about 300. They’re already expanding into Europe, Asia, and Australia, having established sales offices in Canada and the U.K. in the past year, and they’re working on translated versions for countries from France to China. In advance of an IPO planned for late 2005 or early 2006, they’re on a tear to grab market share, and their confidence is riding high. “This is a CEO’s fantasy product,” says Nelson, a nearly evangelical promoter of NetSuite. As he demos the software, his enthusiasm is infectious. When it comes to competitors, he patently dismisses them, regardless of their size (like Microsoft and its Great Plains product) or market share (Intuit’s QuickBooks, the 800-pound gorilla of small-business software). Nelson is, rather boldly, even dismissive of Oracle’s ability to move into the smaller market space. And yes, that’s his boss’s other company he’s talking about. NetSuite is like the Chihuahua that thinks it’s a German shepherd. But it’s a fast-growing Chihuahua, and NetSuite has one big advantage. While its competitors targeted specific slices of the market (QuickBooks focusing on accounting, SalesForce.com on sales-force automation), NetSuite was first out of the gate with all-in-one business software delivered over the Web. Is there even anyone else in the race? “No, believe it or not,” says Yankee Group analyst Sheryl Kingstone. “Not the way they do it.” Ultimately, the company’s greatest challenge may be its ability to retain its small-business focus. Can a company that’s owned by one of the wealthiest men on the planet, a company that’s growing spectacularly, expanding globally, and competing against the likes of Microsoft and Intuit, stay close enough to the small-business mentality of its customers to truly understand them? Goldberg says that one of the company’s advantages is that it’s run entirely on NetSuite software, which forces it to evaluate its own product daily in a real-life setting. But will NetSuite be a candidate for its own software if it keeps up this pace? “It’s an interesting question that we think about,” says Goldberg. “Will we still be using NetSuite when we have 10,000 employees?” Early in his career, Goldberg’s own focus was on big business. He went to work for Oracle as a database architect in 1987, right after earning his degree in applied mathematics at Harvard. Then, after eight years, Goldberg — with the blessing and backing of Ellison — set off with three other Oracle employees to create his own multimedia software start-up in San Francisco. An early, ill-fated competitor to Macromedia Flash, the company was called mBed. It never connected, but as Goldberg struggled with managing his fledgling operation, he began to sense a greater opportunity. He had gone straight from software genius to CEO and was now dealing with employees, sales, and all sorts of start-up issues. And he needed help. “The main thing I learned,” says Goldberg, “is that, if you were a small or growing business, the tools that were available to you were extremely limited.” Goldberg called Ellison in 1998 to suggest that they create small-business applications. Ellison encouraged Goldberg to focus on accounting but to do it, unlike QuickBooks, over the Web. “Larry really was, even at that point — and this is in 1998 — sure that this was how all software was going to be delivered,” says Goldberg. “And he was trying to transition Oracle to do that for big companies.” Goldberg wanted to pursue sales-force automation, but Ellison pushed for accounting first, arguing that that’s the core of all small businesses. Accounting it was. “The entire vision of the company,” says Goldberg, “came together in about five minutes.” Thus, NetLedger was born in late 1998 in a small office south of San Francisco above a hair salon and an Indian restaurant. Goldberg says that while the first four employees were all ex-Oracle, the next 50 were deliberately not. “We really knew,” he says, “that because we were delivering software for small and midsize businesses, we needed a different culture at the company. We needed different blood.” The company was launched on QuickBooks and stuck with the Intuit product — for the first two months. “I remember that day when we imported the QuickBooks file [to NetLedger's nascent online software program], and our business was sitting there, right on the Web,” he says. “We could see everything that was happening. That was a great moment.” The first product, also called NetLedger, debuted in 1999 at a cost of $4.95 per month. At that price, Goldberg got NetLedger in a lot of hands, which was the goal. One of those early customers was Rene Vandockum, a small-business man running a San Diego company called Racebolts.com, which imports and sells titanium nuts and bolts for motorcycles and racecars. Vandockum dropped QuickBooks because of NetLedger’s integration, tying together the front and back offices. But the software was hardly perfect. “Back then,” he says, “it was down a lot, awfully slow, and every time a new version came out, the whole thing crashed.” But it was cheap, offered good (and free) customer service, and was constantly improving and adding features. It was during this early phase that Goldberg was stunned to learn that his friend and former colleague at Oracle, Marc Ben-ioff, had decided to target the same market. “He came in three months after we started NetLedger and sheepishly said, ‘Yeah, I’m doing a company. I’m going to do sales-force automation for small businesses delivered over the Web.’ ” It was precisely the plan Ellison had talked Goldberg out of pursuing. Benioff’s business — launched in 1999 with a $2 million investment from Ellison — became SalesForce.com, which is now the market leader in the category and has a post-IPO market cap of $1.7 billion. “He went a different route,” says Goldberg of Benioff, “with a different approach that allowed him to get to market quicker — but focused on a more narrow area.” I’ve always allied myself with somebody who lives and breathes sales and marketing so I can live and breathe technology.” -Evan Goldberg The news brought a heightened sense of urgency. By 2000, NetLedger had launched its Web-store application. By 2001, it had delivered its own sales-force-automation application. With that came the realization that it no longer made sense for Goldberg to serve as both CEO and chief technology officer. “My whole career,” he says, “I’ve allied myself with somebody who lives and breathes sales and marketing so I can live and breathe the technology and product design.” He knew he needed a professional CEO. His first choice lasted just a year and is now a VP at Intuit. After Goldberg dispatched a headhunter to try again, the executive recruiter sent an e-mail to virtually every executive at Intuit with a subject head reading: “Larry Ellison.” The message said Ellison was starting a great company that was going to be huge. “I actually know some people over there,” says Goldberg, “and Steve Bennett [the CEO] wrote me and said, ‘Interesting way to recruit.” Despite the aggressive approach, no successful candidates turned up. In early 2002, Goldberg called Nelson. They had known each other at Oracle, and once they started talking, says Goldberg, “it was immediately apparent that this was exactly who I wanted — he was the yin to my yang. And he gets into the company in a way that makes it really, really fun to work here.” Five years older than Goldberg, Nelson, 43, had already been on the scene in Silicon Valley when Goldberg arrived from the East. A graduate of Stanford, Nelson had bounced from Motorola to Sun Microsystems and eventually to Oracle, where he became VP of worldwid. It started with obtaining the naming rights for Oakland Coliseum, where the A’s and Raiders play. Network Associates Coliseum proved to be an unpopular stadium name, but it was a marketing coup. In fact, the A’s are now a NetSuite customer, and Nelson has already negotiated for ad space behind home plate. But he doesn’t want to stop there. “Someday we’ll have our own arena,” he says. “That’s my goal.” At MyCIO, Nelson pulled off another stunt, draping the company’s entire 11-story building — a la Christo — in a billboard. “It was at the peak of the dot-com craziness,” he says. “We broke every ordinance known to man. You could see it from five exits away. It was beautiful.” Just before the company was set to go public, though, the bottom fell out of the market. So, here was Nelson, a former Oracle marketing whiz with CEO experience, looking for a new gig. And he had one other important advantage. Goldberg knew that any CEO he brought in would have to pass a crucial test: the Larry test. “And that’s a relatively high bar,” says Goldberg. “But Zach obviously had had a lot of exposure to Larry [at Oracle].” While Ellison rarely sets foot in the offices at NetSuite, he is a constant presence. The background image on Nelson’s PC is a photograph of Ellison at the helm of his America’s Cup boat. “When Larry calls,” says Nelson, “everything stops.” And he calls regularly, usually toward the end of the month as sales results are coming in. He often advises Nelson on topics such as sales structure and how to get to market. He calls Goldberg about products, especially the “dashboard” — the system’s front page, which brings critical bits of data such as new sales, year-over-year figures, appointments, etc., onto one easy-to-read and customizable page (see photo on page 69). “When we launched the dashboard [in 2002],” says Goldberg, “Larry called me and said, ‘Okay, now you finally have something in your product that I want to use.’ And ever since then, he logs on basically every single day to see how we’re doing. He’s effectively the product manager.” When Nelson joined NetSuite, he asked Ellison how anyone could run a business without such a product. “Larry said that CEOs historically have been able to make decisions based on 1% of the data that they actually need to make the decision,” says Nelson. “Here, we give you almost 100%.” Larry has a wealth of knowledge, and he’s not shy about sharing it. I call him belligerently consistent.” -Zach Nelson Sitting in Nelson’s spacious San Mateo office with a yin-yang glass coffee table in the middle of it, Goldberg says to Nelson: “I remember that the first thing you said to me when you got done talking to [Ellison about joining the company] was, ‘He takes this thing very seriously.” That would surprise no one who knows Ellison — or has watched Oracle’s pursuit of PeopleSoft. “Larry has a wealth of knowledge about what works and what doesn’t, and he’s not shy about sharing it,” says Nelson. “He’s very focused. I call him belligerently consistent.” All of which makes NetSuite’s evolution toward higher prices and bigger clients and Oracle’s turf even more interesting. As NetSuite works hard to broaden its customer base, seeking larger and larger clients, is there a danger of leaving smaller customers behind? Racebolt.com’s Vandockum certainly thinks so. With only one employee and annual sales of around $100,000, he’s stayed with NetSuite through years of missteps and growing pains but says its pricing structure is shutting him out just as the product is hitting its stride. Over five years, he’s seen his annual payments go from about $80 a year to $1,800 a year and claims NetSuite wants nearly $8,000 next year ($4,800 for the main user, plus $1,800 for a second user, and $1,000 for an annual live tech support package that used to be free). Vandockum is considering letting his contract with NetSuite expire in May and returning to QuickBooks Pro. One reason: He says computer-based, as opposed to Web-based, software means faster response times to questions when customers are on hold. QuickBooks Pro will be a one-time $250 purchase, and Caldera Volution, a Linux-based website builder he’ll use for his online store, will charge $70 a month. But he’s dreading the change. “The switchover is a big drag,” he says. “It’s a lot of work.” While Nelson is adamant that NetSuite is not abandoning small businesses, he emphasizes that the company is targeting “growing” businesses. Seventy percent of its customers have fewer than 100 employees, but NetSuite is also signing up 400- to 500-user customers that are divisions of companies such as Weyerhauser and DuPont. And it just landed its first 1,000-user account. Still, Nelson acknowledges that the price bumps have been tough on smaller customers. Of the $399-a-month fee, he says, “Most small businesses, we know, can’t afford that.” That’s why NetSuite introduced NetSuite Small Business in August — priced at $99 per month for the first user and $49 per month for each user after that. The product has been positioned for businesses that have outgrown QuickBooks, and the price does make it far more attractive to smaller users — but some longtime users will undoubtedly be disappointed. NetSuite has helped even the smallest of companies grow more sophisticated, and these clients have been conditioned to expect more. The Small Business version, for example, doesn’t satisfy Vandockum’s desire to customize his website. Capital Datacorp’s McGorry can’t see himself giving up the features he loves for the cheaper, scaled-down version either. Nelson is quick to say that he hopes to retain Vandockum as a customer and may consider offering some limited higher-level functionality, such as website customization, at a reduced price. “The last thing you want to do is see a customer leave,” he says. “I bet we’ll work it out.” But there are skeptics — especially at the competition. Although NetSuite recently built an ad campaign on poaching QuickBooks customers, Bill Lucchini, director of QuickBooks Enterprise at Intuit, says he doesn’t consider NetSuite to be a small-business company anymore. “I think of NetSuite as a midmarket company,” he says. “If you want to put 10 users on its system, you’re talking over $6,000 a year, and that’s just not a small-business solution.” Like NetSuite, QuickBooks is segmented into multiple products, depending on the size and needs of the businesses. They range from the new $99 SimpleStart program to the $3,500-a-year QuickBooks Enterprise software, which targets companies with 20 to 250 employees (with live tech support built into the price). And Intuit now offers its own Web-based small-business solution, called QuickBooks Online, for $19.95 per month. Nelson dismisses Intuit’s new offering as a “neutered version of QuickBooks Enterprise.” He is equally dismissive of SalesForce.com’s move into the midsize market. “There’s only one thing you can’t do with SalesForce.com: sell anything,” he says. “SalesForce.com is about managing leads and prospects. The minute they become customers, all that data leaves SalesForce.com.” For his part, Marc Benioff professes scant respect for the suite model. Which is all the more surprising because it’s a model that Oracle has embraced, and Ellison, of course, helped fund SalesForce.com and still retains a small stake — although he did step down from SalesForce’s board in 2001 because of product conflicts. At NetSuite, Ellison relinquished the title of chairman in March 2003 but remains on the board. But the sibling and oedipal rivalries may just be getting started. Last summer, NetSuite shed the last vestiges of the name Oracle Small Business Suite, which had been slowly reduced to about 5% of the company’s sales. Nelson says this was done to allow NetSuite to establish its own identity. But it also likely had something to do with the fact that in September, after years of testing it overseas, Oracle released its Oracle E-Business Suite Special Edition. Oracle is explicitly targeting small to midsize businesses with a full suite of integrated business software delivered, of course, over the Internet. The difference is that instead of renting the software in perpetuity, as with NetSuite, customers purchase a one-time license (the minimum order is for 10 users at approximately $2,000 each) and then pay local resellers to maintain the software. Nelson denies that there’s any real competition between the two Ellison-controlled companies, saying they only cross paths a couple of times a month. But with its first 1,000-user deal in the bag and another in the pipeline, there are sure to be more and more awkward moments in front-office waiting rooms when Oracle’s salespeople walk in and NetSuite’s walk out. “We’re going to continue to march upstream,” says Nelson, “still servicing small businesses but also reaching much larger companies over time.” But, according to the Yankee Group’s Kingstone, both NetSuite and Oracle have their work cut out for them. NetSuite’s challenge is that new customers have to dump years’ worth of expensive software to use them. And the bigger the company, the more entrenched they are. As for Oracle grabbing a slice of the small-biz pie? “They have never been able to pull that off,” says Kingstone. “In the back-office, yes, in the front-office, no.” Of course, Oracle’s new E-Business Suite is only just getting started here in the States. When big businesses want to innovate, what do they do? They take a bunch of guys, throw them out, and let them create a small business.” -Zach Nelson Ellison declined to be interviewed for this article, citing the desire to avoid any perception of conflict of interest, as his three kids duke it out in corporate boardrooms across America and beyond. It’s hard to know if he’s conflicted or overjoyed. But it’s even harder to imagine that any of his progeny would have set off down this path without at least his tacit approval. The executive overseeing marketing for Oracle’s small to midsize business market, Frank Prestipino, downplays any rivalry, but his words about NetSuite’s product aren’t entirely brotherly. “If financials are all you’ll ever do,” he says, criticizing NetSuite for not being as customizable as Oracle, “and you don’t care what your general ledger is going to look like, and you’ll take whatever comes, then great, that’s the thing for you.” He also suggests that NetSuite’s rental model is ultimately more expensive than buying the software outright, and points out the lack of manufacturing-systems software in the suite. But does he expect to see NetSuite pop up more frequently as a competitor, as NetSuite moves upmarket and Oracle moves down? “Yeah,” he says, “I would say so.” But for all NetSuite’s drive to go after bigger fish, Nelson zealously espouses the small-business model and its contributions to society. “When big businesses want to innovate, what do they do?” he asks. “They take a bunch of guys, throw them out of the building, and let them create a small business.” That, of course, is pretty much what Larry Ellison did with NetSuite and SalesForce.com. But how much longer will each one be happy serving its own niche? “That’s always been true with software,” says Nelson. “Everybody wants to be where they’re not.” Rob Turner, who wrote about celebrity entrepreneurs in Inc.’s December issue, can be reached at dashboard@inc.com.
