NetSuite Looks Beyond ERP With $26 Million OpenAir Acquisition

NetSuite's $26 million acquisition of OpenAir Inc., announced this week, demonstrates the company's realization of what best works in a software-as-a-services environment.

OpenAir offers a SaaS for services-based companies to manage billable time and projects, and it's those types of generic, automated business functions that companies seem most willing to try out in a SaaS model.

OpenAir offers SaaS for so-called professional services automation and project portfolio management. That include functions that marketing firms, law firms, consulting companies, IT services firms and IT departments use to track and manage projects and employees' time. NetSuite plans to integrate OpenAir with its SaaS ERP suite using Web services by the end of this year.

OpenAir, launched nine years ago, has only 56 employees, yet it's offerings have been well received; last month it won the 2008 Software and Information Industry Association's Codie award for best business software solution. Its customers "absolutely love its products," said NetSuite CEO Zach Nelson in a prepared statement.

But integration plans aside, OpenAir also provides NetSuite with a SaaS offering that may be more appealing to some companies as a standalone application than NetSuite's own ERP suite for small to midsized businesses.

While NetSuite's revenues continue to grow at a healthy rate, many companies remain reluctant to use SaaS for running their core business operations such as financials, order fulfillment, purchasing, and other aspects of an ERP suite. Small and midsize companies are more open to the idea of SaaS ERP than large companies.

In the overall SaaS market, vendors delivering SaaS products that automate functions that are less unique to a company's core operations--such as general human resources functions, expense management, and sales automation--are doing exceptionally well, in some cases getting their offerings onto the desktops of tens of thousands of users at typically SaaS-averse large companies. That's because such functions don't necessarily need to be integrated with onsite software running core business operations, and require little or no customization. Professional services automation also includes a generic set of functions that make sense for SaaS.

Meanwhile, NetSuite recently hired a former Salesforce.com executive, Per Brondum Jakobsen, as VP of product management, Jakobsen was VP of products strategy at Salesforce.com from 2005 to December 2007, and then served a short stint as a senior VP at Cloud9 Analytics before joining NetSuite. While at Salesforce.com, Jakobsen oversaw both the team that launched a version of CRM for the financials market and the implementation of it for 25,000 seats at Merrill Lynch.