How NetSuite Outperforms Salesforce.com for Generating Revenue

cloud computingMost business people see software as a necessary element in doing business in today’s competitive environment.  What they will likely not see is the different ways business software opens capacity to be more competitive.   There are two major philosophies that drive the way business software is organized:

1.     master data; versus

2.     transactions data.

This article will contrast Salesforce.com, which is organized around master data, and NetSuite, which is organized around transaction data.

Master data is information in a system that is static, or rarely changes. In a CRM environment, like Salesforce.com, key master data is information such as contacts, name, addresses, titles, phone number, and company information. Given that this data usually doesn’t change, it is used primarily as building blocks for transaction data. In an ERP environment, such as NetSuite, the system has master information on customers, suppliers, employees, and other business partners. There is also information on product data such as the description, price, attributes, categories, relationships to other products, as well as inventory balances.
It’s important to distinguish master data from transaction data.  Conceptually, transaction data represents the commitments made by the people in the business to move things around, act, and to change people’s situations. It usually represents the promises we make to one another. The most typical transaction will look like a sales order. A customer, who is stored as a record in our master data, wants to purchase a good (also stored in the master record). When the customer commits, the company produces a sales order that will specify information such as which product, the quantity, the payment terms, and the delivery promise. Transaction data is extremely important to the growth of a business – because it is only when transaction data is produced that a company actually makes money. Thus, transaction data is directly tied to revenue, whereas master data is tied to the information that will lead to revenue.
How do you want to organize your business model?  Do you want to organize around master data or transaction data? Indeed, producing transactions performs very well with good master data.  But good master data alone may not make it easy to transact if you systems are not designed with that in mind.  Because transactions are where businesses work on fulfilling commitments, and fulfilling commitments means we are taking care of promises, especially to customers, this can in turn directly affect growth. Assuming equally quality, the question ultimately becomes – do you want more transactions or more master data?
If a company focuses on measuring more transactions, they have a higher likelihood of generating more money. Salesforce.com likes to tell you they are focused on the customer, but they are less focused on transactions — they are more focused on master data.  Yes, it makes sense to know your customer well and this starts with master data; but it ultimately needs to get to transaction else it is not meaningful or relevant.
In contrast, NetSuite is designed around transaction data and increasing transaction throughput. This different focus means that a business can better measure the elements of the business that ultimately underlie growth. NetSuite tracks master data just like Salesforce.com, but it differs in that it is encouraging transaction.  It is well known that if you use Salesforce.com, as soon as a customer makes a commitment to buy your product, you need to jump to another system to manage that transaction.  See this article: “Best-of-Breed Business Systems: Traps & Lies” for another viewpoint.
In summary, NetSuite as a business management platform is fundamentally organized around information structures that drive growth and allow you to measure business performance.  Through the point of view of master data versus transaction data, Salesforce.com can only help you prepare for transaction; but it stops short of producing it.

Master Data is Static

Master data is information in a system that is static, or rarely changes. In a CRM environment, like Salesforce.com, key master data is information such as contacts, name, addresses, titles, phone number, and company information. Given that this data usually doesn’t change, it is used primarily as building blocks for transaction data. In an ERP environment, such as NetSuite, the system has master information on customers, suppliers, employees, and other business partners. There is also information on product data such as the description, price, attributes, categories, relationships to other products, as well as inventory balances.

Transaction Data is Action

It’s important to distinguish master data from transaction data.  Conceptually, transaction data represents the commitments made by the people in the business to move things around, act, and to change people’s situations. It usually represents the promises we make to one another. The most typical transaction will look like a sales order. A customer, who is stored as a record in our master data, wants to purchase a good (also stored in the master record). When the customer commits, the company produces a sales order that will specify information such as which product, the quantity, the payment terms, and the delivery promise. Transaction data is extremely important to the growth of a business – because it is only when transaction data is produced that a company actually makes money. Thus, transaction data is directly tied to revenue, whereas master data is tied to the information that will lead to revenue.

How do you want to organize your business model?  Do you want to organize around master data or transaction data? Indeed, producing transactions performs very well with good master data.  But good master data alone may not make it easy to transact if your systems are not designed with that in mind.  Because transactions are where businesses work on fulfilling commitments, and fulfilling commitments means we are taking care of promises, especially to customers, and this can in turn directly affect growth. Assuming equal quality, the question ultimately becomes – do you want more transactions or more master data?

Transactions Produce Revenue

If a company focuses on measuring more transactions, they have a higher likelihood of generating more money. Salesforce.com likes to tell you they are focused on the customer, but they are less focused on transactions — they are more focused on master data.  Yes, it makes sense to know your customer well and this starts with master data; but it ultimately needs to get to transaction or else it is not meaningful or relevant.

In contrast, NetSuite is designed around transaction data and increasing transaction throughput. This different focus means that a business can better measure the elements of the business that ultimately underlie growth. NetSuite tracks master data just like Salesforce.com, but it differs in that it is encouraging transaction.  It is well known that if you use Salesforce.com, as soon as a customer makes a commitment to buy your product, you need to jump to another system to manage that transaction.  See this article: “Best-of-Breed Business Systems: Traps & Lies” for another viewpoint.

In summary, NetSuite as a business management platform is fundamentally organized around information structures that drive growth and allow you to measure business performance.  Through the point of view of master data versus transaction data, Salesforce.com can only help you prepare for transaction; but it stops short of capturing and measuring it.

Copyright © Marty Zigman 2011

“NetSuiteCRM+.” Photo. Cloud Commerce: Leverage The Cloud – Level the Playing Field. 2009. 02 Nov 2011.        <http://www.cloudcommerce.com/crm/salesforce-vs-netsuite.php>.

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Marty Zigman

Holding all three official certifications, Marty is Southern California's NetSuite expert and leads a team of senior professionals at Prolecto Resources, Inc. He is a former Deloitte & Touche CPA and has held CTO roles. For over 25 years, Marty has produced leadership in ERP, CRM and eCommerce business systems. Contact Marty to setup a conversation.

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