Negotiating a Good NetSuite Contract

cloud computing

When a business considers purchasing NetSuite, the investment is usually one of the main concerns that come up in the conversation.  It’s important to look at the investment in relationship to the value you are receiving.  Understand that NetSuite is more than software; it is a service.  As you learn about the price, consider it from this perspective.

As I’ve discussed in my “What is NetSuite” article, NetSuite is not just a software package, but rather, a combination of Software and Service (SaaS). In this model, the NetSuite cost is not only associated with the software that you purchase, but in the continual service provided by NetSuite.  This model is similar to paying for electricity — every month you pay for your power via the utility company.  In contrast, you can produce electricity with your own generator.  But most do not; why?  Because the economics and expertise required to run and maintain an electrical generator is prohibitive.  Such is happening to traditional software offerings and Cloud computing.  See this article on Open Source and how traditional business software is losing its charm.

What are some of the concerns associated with a NetSuite contract?  The number one concern is that there will be an unreasonable price increase in the future.   This concern is related to all Cloud-based subscription services, not just NetSuite. In assessing future prices, consider that NetSuite has fixed and variable price elements.  The fixed NetSuite price is for base services, including specific modules to run your business.  The good news is that the base service is quite rich; there are only a hand-full of modules.  NetSuite has target minimums they must meet to offer their service.  The base service is reasonably priced in contrast to the marketplace alternatives.  Just like others in the Software industry, expect a discount from list, but only so far.

NetSuite has a variable price component based on user licenses represented by employees in your company. There are two main types: full license and the self-service packs.  The full licenses allow use of the entire application.  The self-service licenses are limited to light functions such as time sheet and expense reporting.  The self-service pack licenses are generally sold in five packs at the ratio of one full license to five self-service licenses.    If your company is growing, this may be an area where you want to model the investment into the future so you don’t have surprises.

As with any business contract, there is room for negotiation.  If you are concerned about future price increases, it may make sense to lock into a longer term.  Generally, the minimal term for a NetSuite contract is one year. How far you commit to the future is something you can negotiate.  It’s a give-and-take.  Can you pay faster?  Are you growing and will need future licenses as you add employees?  Think ahead to what you care about and what you can give.  It’s all reasonable and open to discussion.

Learn More

Considering you are reviewing this article, I suspect you may want to have conversations about adopting NetSuite.  We help prospective customers gain perspective on the total implementation effort which includes grounding your up-front and ongoing investment.  One area to consider is getting good implementation help.  Our approach is to carefully tailor the plan to your unique situation.  If you want to learn more,  let’s talk.

Copyright © Marty Zigman 2012-2013

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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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| Tags: , , , , , , , , , , , , , , , , , , , , , , , , | Category: ERP, General, Infrastructure, Management, NetSuite, Strategy | 3 Comments

3 Comments

  1. Posted April 12, 2012 at 1:22 pm | Permalink

    In my experience, the potential unexpected costs for NetSuite subscriptions are related to advanced reporting needs and integration throughput requirements. This can be avoided by proper requirements gathering and sharing all details of the requirements with NetSuite before signing.

    Submitting detailed requirements to NetSuite allows them to quote and provision your system correctly and puts you in a better position to negotiate added costs if a component required for your business is missed.

    On the advanced reporting needs, if NetSuite reporting and search functionality does not meet business requirements, the ODBC connector may be required for external reporting requirements.

    On the integration throughput, if you are integrating to an external system via web services, put some serious pre-sales thought and dialogue into how frequently integration calls will occur and how many will occur simultaneously. NetSuite has varying levels of web service connection options, some of which require a dedicated server. Moving to a dedicated server for this reason alone is an expensive line item so be diligent with integration planning and requirements. Again, it is best to document the business requirements including transaction volume and timing.

    If you question your ability to document your requirements and assist NetSuite in the provisioning of your system, find a knowledgeable company to assist you.

  2. Posted June 12, 2013 at 3:48 am | Permalink

    Agree with this post though it still cant afford by small start up. I did a research and found the same featured which is perfect alternative to Netsuite & its name is BizAutomation.com

  3. Posted June 13, 2013 at 7:32 am | Permalink

    One thing startups may not realize is that there are some great NetSuite offers from Startup America Partnership.

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