Larry's Kids

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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.

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