Zach Nelson thinks every company needs to become a cloud company. And he’s not just talking about technology companies. The stakes?
“If you’re not building your own business model to take advantage of the cloud…you’re going to be out of business in the not-too-distant future,” said Nelson, the former CEO of NetSuite, speaking at Oracle CloudWorld this week. Oracle acquired NetSuite in November for $9.3 billion, and Nelson is now executive vice president for ERP cloud strategy at Oracle.
Nelson’s specific point here isn’t that companies must buy cloud-based software and computing (though he does advocate that). He’s talking about established businesses—shoemakers, ad agencies, campus bookstores—connecting their business to the internet in some way, so they can offer a data-driven digital service along with their core product or service business.
Nelson knows his topic. NetSuite was arguably the first cloud software success, launching in 1998 to deliver software that customers bought and used via the internet. The company pioneered the software-as-a-service model that now dominates the industry. NetSuite will continue selling its NetSuite applications and will function as its own business within Oracle, now that the acquisition has closed. NetSuite has more than 40,000 companies, subsidiaries, and divisions using its business-management applications.
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With this perspective, Nelson offered the five lessons he learned guiding NetSuite since 2002, including more on that first lesson.
1. Every company is a cloud company.
Ten years ago, Nelson was making this same case during a trip to the Philippines and, stretching for the wildest example he could think of, said cattle ranchers need to be cloud companies. A hand shot up from a guy who said he’s Manila’s sole supplier of Kobe beef, and he’s already digitally tracking every one of his herd. Companies that resist this movement, Nelson said, are bound to “be disrupted by someone in your industry that does understand this.”
2. Embrace hybrid business models.
“Life used to be simple,” Nelson said. Companies used to be able to neatly fit their offerings into product or service buckets. Today, a company that makes farm equipment needs to not only make an incredible tractor, but it needs to make the data it collects via online connections a vital part of its business. Can it sell aggregated data on tractor usage back to farmers, so they can run a better operation? Will the farmer want to pay for the tractor itself based on usage? As more physical products get connected to the internet, more companies will see business models that blur the line between products, services, and usage-based subscriptions.
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