Larry's Kids

NetSuite, Oracle, and SalesForce.com- all spawned by Larry Ellison- are entering a high-stakes battle to sell you software that gives you unprecedented control of your company.

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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.

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