Cloud Computing

Q&A: NetSuite's President of EMEA, Pete Daffern

You’re the President of EMEA, what’s NetSuite’s Strategy for the region?

We've got customers in every country you can think of; but from an evolution of where we're at today vis-a-vis where we want to go; the GDP of Europe is dominated by Great Britain, France and Germany. The easier countries for an American company to do well in are the UK, Benelux, and Scandinavia. Germany's there right at the top of the list, so one of the things we’re [doing is] putting data centers in Europe.

We’re not going to sell to the majority of organizations in Germany without a datacenter out there, and in the not too distant future, we’re going to be going after the major economies of Europe. It’s not a question of ‘if’, it's a question of ‘when’. And when we go, it's not about winning one or two opportunistic deals, it's having the presence to be a major force in those countries. We’re going to get there as fast as we can.

Are the data centers to do with EU data laws, and are those rules difficult to keep up with?
We are 'safe harbour' compliant, but the EU data privacy rules say 'No, you need data centers in Europe,' so that's all in process now. That allows us to properly serve Europe. It evolves so quickly, and so often I lose track of it all, but we have a bunch of people tracking this all the time. We're about to spend a lot of money on these data centers, so these are all the things that we look at. 

How Green are those data centers?

The guys who put [those] in place will be looking at all of those kinds of considerations. Evan [Goldberg, NetSuite CTO] in particular is the greenest individual on the planet, so trust me that will be right on the top of his list of criteria.

How Cloud-ready is Europe compared to the US?

We've got some really good customers in the likes of Germany and France, but there's no doubt that in the UK the whole notion of having to having to sell people on the Cloud is gone. It's now 'talk to me about how you're going to solve my business problem.'

All the [early] adopters of technology trends tend to be west coast technology-based companies. And then it kind of goes east. The middle & east [states] of the US hit at the same time as the UK, and then the rest of Europe is slightly behind that. But also a part of that is because of how Software companies such as NetSuite evolve - when you’re building a company you've got to be efficient with your investment dollars - you focus on the United States. It's a lot easier to build in the United States first and then go from there.

What about your approach to Africa & the Middle East?

We have a handful of partners who are just very focused on building partners in the Middle East and Africa, and that's the way it will remain because most of those countries dictate that you need to do it through a partner anyway. So long as we can sustain good partnerships, I don't see that changing for a long time. 

[NetSuite CEO] Zach Nelson has said ‘2014 is the year we kill Sage in the UK.’ Thoughts?

Sage are in a very vulnerable position. They're only strong in the UK, they've got a very fragmented product line that [includes] all different code bases from different acquisitions. The Cloud is coming at them very fast, and any small-medium business is looking at viable alternatives. And we're a very viable alternative; If you look at our business, more than 50% of our business last year was down to people re-platforming from Sage, which tells you everything right there.

So what can companies like Sage do to fix things? 

They can't, that's why their CEO just left. Why would you leave? You'd leave because you go, ‘I can't fix this.’ But they have to do what they're trying to do. Mark my words, they'll get rid of X3, they'll get rid of Sage 200, they'll throw it all at Sage Cloud, Sage 1, and I know that's what they're doing. They've bet the farm on their Cloud technology because they have no choice.

Would you make them an offer if the opportunity arose?

NetSuite is always looking to enhance its business in some form. As it stands today, I can't imagine that NetSuite would do that. But Zach's always looking for acquisitions that make sense to the business. You should fully expect us to make a handful of acquisitions each year for the foreseeable future. 

This year’s SuiteWorld made a big deal about a new UI and mobile experience – are wearables next?

I think a lot of that stuff needs to be proven out in terms of what the business case is. We are in a massively advantageous position, in that it's easier for us to adapt new technology that's sticking than it is for any of our competitors. We don't have to worry about the legacy of what platforms we do or don't support, adding new technology, or any of the backward compatibility stuff. 

The company’s seen 31% Year on Year growth - is it sustainable?

It can't go on for infinity, but we're pretty committed for the next handful of years that we can be aggressive about our growth. There's a lot of change going on, and we're just getting going.

Part of that growth has seen NetSuite going on the massive hiring spree that’s been going on – how does that change a company?

The bigger you get, there are always those concerns that you're changing the culture. In my past life I was CEO of a company where I was brought in because the previous CEO wasn't doing a great job and [it was] the same deal at the company [I worked] before that. And the one thing that I didn't have as the CEO of those companies was a deep understanding of the space I was playing in, the competitors, and all of the history, and the vision. That takes years and years to acquire, and it's hard.

Understanding the space and having the vision is a rare thing. You can point to a boat load of companies, Apple's probably the best example, where unless you've got the guy who really gets what's going on, it goes away really quickly. NetSuite is the only company in this space where it's got the founding team still running the company, and that's very unique. And they're probably more engaged today than they've ever been.

Are you finding that there’s a skills shortage problem when you go out to try and find all these people to hire?

It's very hard. And we're pretty picky. We've probably got the best onboarding program I've ever been involved in - we're doing a really good job of indoctrinating our people in what NetSuite's all about. The other good thing about that is you get face-to-face time with these people in a classroom experience, and some people don't make the grade. 

We love bringing university graduates [and] we've got a big program [SuiteAcademy] around all of that. We've got it going in Boston, Denver, London, Australia - we've probably hired about 90 graduates in the last year. Zach's very passionate about it, I'm very passionate about it, and you can recruit some great talent. 

Is that why Netsuite is doing so well?

No, I think we're going to start seeing the benefits of that over the next few years. You see NetSuite doing really well because it's a really modern, completely integrated product in the Cloud, and people are starting to get what that means. 

At SuiteWorld Zach talked about Non-GAAP Profits but you often show GAAP loss in your results. How do you reconcile the two?

The problem with the profit as you see it is that it's totally misleading, because on a GAAP basis you've got things like acquisitions, options and what the company stock price is doing. You should be looking at cash flow - profitability is not something you should look for in a business like us. You need to look at the growth, and it's fantastic – thirty-odd percent - which is amazing for a SaaS-based company that's in its 15th year.

We spend as much of that money as we can on growing the business. The amount of money getting spent this year is something like $140 million more than last year - that's a lot of money. Most companies don't spend that in 10 years. 

So which space is NetSuite targeting more - SMB or Enterprise?

It’s absolutely a combination of both. If you think about it, the great thing about the Cloud is that you've got one piece of technology that applies to all sizes. You don't have that with any other business. You have products, in the case of Sage50, that are specifically designed for one size of company, and when you out grow it, you've grown it, so you've got to go and start again with something else. With our stuff; 10 users, 10,000 users, it doesn't matter. 


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Dan Swinhoe

Dan is a journalist at CSO Online. Previously he was Senior Staff Writer at IDG Connect.

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