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Thomas Otter

I'd be interested in your take on marketing spend. Some folks endow SaaS with mythical powers of viral adoption and short sales cycles, but looking at the numbers of both SFDC and Netsuite I just don't see it. It is rather odd that those that knock SAP and Oracle for high SG&A havent applied the measure to the SaaS darlings...

Mark Crofton

Your assertion about margins is interesting and I don't disagree with your reasoning. However, once all the elephants have been shot by any of the big game hunters, you gotta go after the smaller game. There are by definition only 1000 Fortune 1000 firms. So even if the margins are not as good (and i'm unclear on the difference in margins to be honest with you. If you set up an entirely different cost structure, indirect, partner-supported etc, you will have a different cost struture) you still need to keep hunting.
SAP has publicly spoken a great about and has launched a number of initiatives aimed at the mid-market. (http://searchoracle.techtarget.com/originalContent/0,289142,sid41_gci1135109,00.html)
As far as autonomy, I'm not sure to be honest. SAP has Donna Troy, the SVP of SMB reporting right into the president of global field operations (but not to the head of the Americas region, McDermott)

Jason Wood


From an investor perspective, it's always been viewed that large apps vendors don't want to REALLY attack the SMB for a lot of reasons. But the principal reason is margin per sale. When your primary product carries 98% gross margins, the last thing you want to do is provide something for significantly lower costs that maintains even 70% of the high end functionality.

In SAP particularly, I have to look at McDermott and the culture he's developed and wonder how a true SMB strategy fits. McDermott is fostering a true "big game hunter" mentality, and that permeates the company's entire sales chain now (at least in my opinion).

Would you agree that for an SMB strategy to work within the confines of SAP, ORCL, et al it would have to have a level of autonomy, even perhaps having the division head not be a direct report to the worldwide head of sales?


Mark Crofton

I don't disagree that selling to SMBs takes a different approach (indirect, channel selling is quite different than a having a large enterprise field org) I just don't see the need to have it in a separate company. It's still unclear what you gain. SAP seems to have realized that it will take a different approach, but we've set up the channel organization within SAP. Aren't we better able to leverage our corporate knowledge, employees' experience not to mention spread our fixed costs (PPE and G&A) b/c we're not two separate entities?

Zoli Erdos

Mark, I agree with your analysis:
"If you look at where Oracle doesn't compte (in the app market) it's at the bottom end; smaller-mid and below" - but for me the conclusion is the exact opposite. 2 separate armies for two very different battlefields.

Jason Wood


Ultimately I can see NetSuite becoming part of Oracle, but there are compelling reasons why Larry and the NetSuite team might want to avoid that, too.

1) There's virtually no way Oracle shareholders (Larry included) would capture the same kind of equity premium by bringing NetSuite in-house. Investors would be forced to look at NetSuite as a small part of a bigger, slower moving equity and simply wouldn't be able to comfortably assign the SaaS premium it would likely get as a standalone public entity.

2) NetSuite, like SFDC, wants to ultimately become a platform for smaller, SaaS functionality. That's a message much easier digested by customers and partners alike if NetSuite isn't under the Oracle umbrella.

Mark Crofton

Not sure why it makes sense for Larry to take NetSuite public (other than to let some of the other execs cash out).

I posted on this yesterday:
My thought is that Oracle will acquire NetSuite some day to compete in the SME market. If you look at where Oracle doesn't compte (in the app market) it's at the bottom end; smaller-mid and below. This is the area of the Sage's and Microsoft Dynamics (and to a degree the SAP Business One offering). Oracle's EBS Special Edition could therotically play here, but my understanding is that that offering is more aimed at the middle of the mid-market. I always thought a Oracle NetSuite offering would fit nicely in this space.

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