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NetSuite just picked Microsoft as its ‘preferred’ cloud partner

May 5, 2015, 4:06 PM UTC

33. Zach Nelson

CEO, NetSuite Nelson has his eyes on the prize: $1 billion in annual revenue. Thanks to a hot niche -- business software delivered via the Internet -- he may achieve his goal. (Revenue for the last four quarters rose 28% to $288 million.) Investors are bullish: Shares of NetSuite are up some 56% this year. --SNM
Photo: David Paul Morris/Bloomberg/Getty

For years, Oracle has taken a special interest in cloud business software upstart NetSuite. After all, Larry Ellison helped found the company back in 1998.

But that was before Oracle started calling itself the world’s biggest cloud company and prioritizing its own portfolio of enterprise resource planning, human resources, and marketing applications delivered as a service.

These days, NetSuite’s former ally looks much more like a competitor than a collaborator. So NetSuite has found itself a powerful new friend in long-time rival Microsoft.

NetSuite CEO Zach Nelson overcame his historical reticence to approach new Microsoft CEO Satya Nadella about a potential relationship last year. “We connected, which is something that would never have happened before,” he said.

That meeting blossomed into a far-reaching strategic alliance, announced Tuesday at NetSuite’s annual conference, including joint engineering projects.

For a start, the new relationship creates close ties between NetSuite’s cloud business software and Microsoft’s Office 365 cloud applications, making them far easier for companies to use them together. In the near future, for example, finance teams using NetSuite’s planning tools will be able to visualize their data more easily using Microsoft’s cloud business intelligence technology. NetSuite is already in the process of moving its entire workforce onto Office 365.

The new relationship also establishes Microsoft Azure as the “preferred” cloud service for developers building applications that work with NetSuite’s business management applications.

The first big advantage that customers will see: single sign-on, which helps centralize password control. For Microsoft, the endorsement amounts to another differentiator against formidable rivals such as Amazon Web Services. Mind you, NetSuite will work with other cloud services if that’s what customers really want. But over time, Azure will offer clear advantages, Nelson said.

Here’s what Nucleus Research analyst Rebecca Wettemann had to say about the deal:

This is a shot fired across the Oracle bow, as Oracle’s cloud [enterprise resource planning] offering continues to evolve and Oracle’s ERP story sounds more and more like NetSuite’s. NetSuite’s rapid payback and time to value in the ERP space has often been perceived as only for small companies, even though NetSuite has been supporting larger deployments for some time. The partnership and its security and platform capabilities (as well as the Microsoft pedigree) will make NetSuite a more formidable Oracle competitor. This also marks the move of NetSuite away from Oracle infrastructure and the Oracle cloud.

Approximately 24,000 businesses use NetSuite’s business process software including GoPro and Siemens. Aside from the Microsoft relationship, the company this week is rolling out an addition to its e-commerce platform, SuiteCommerce. The update offers a unified view of orders, product returns and inventory information across both online and in-store sales channels.

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UPDATE May 5, 2015: This article was revised to include the comment from Nucleus Research.