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NetSuite targets SAP R/3 customers with discounted SaaS ERP offer

Trying to capitalize on anger over SAP support fee hikes, NetSuite offers SAP R/3 customers a guarantee to cut maintenance and support bills in half.

Hoping to win SAP R/3 customers who are angry with SAP's support fee hikes, NetSuite is promising to cut their annual bills in half if they switch to its SaaS ERP.

Whatever they're paying annually for SAP maintenance and support, NetSuite says it will charge half that amount for an annual NetSuite subscription and support for a comparable number of seats. NetSuite typically sells one-year subscriptions but will consider multi-year subscriptions and apply the offer, a spokesman said.

The vendor is also offering all SAP customers 100 free hours of professional services for a NetSuite implementation, seeking to capitalize on the delayed rollout of SAP's SaaS ERP , Business ByDesign. In particular, NetSuite is targeting enterprise-size customers that are thinking of running SaaS ERP in a division or subsidiary, executives said.

NetSuite is calling the program "Business ByNetSuite." NetSuite costs $99 per user per month, plus a base fee of $499. That price includes maintenance but not support. Business ByNetSuite comes with 24/7 support, but the vendor didn't provide its cost.

"For SAP R/3 customers, NetSuite is the antidote to the incredibly high costs associated with SAP license fees, complexity, implementation and ongoing maintenance," NetSuite CEO Zach Nelson said. "This offer is great for NetSuite, great for SAP customers, but not so great for SAP."

For more on SaaS ERP
Learn whether SaaS ERP can be profitable

Learn whether SAP Business ByDesign customers are happy with their choice

The offer is catching SAP R/3 customers at a time when many are considering ERP upgrades. NetSuite's moves also coincide with software incentives SAP is promoting , largely to prop up the small and medium-sized business (SMB) customer base. SAP blamed its lower-than-expected third-quarter earnings on an abrupt spending freeze by SMBs. SAP is offering financing assistance, software discounts of up to 20% on Business-All-in-One (its ERP for midmarket customers) and other discounts on midmarket Business Objects software.

NetSuite's discount is the second aimed at a competitor that the San Mateo, Calif.-based vendor has launched in as many weeks. Two weeks ago, NetSuite took aim at , offering to replace customers' implementations with NetSuite CRM+ for half the price.

This is NetSuite's second dig at SAP this year. In its June launch of NetSuite for Manufacturers -- geared to midmarket light manufacturing -- the company said it was taking "aim at SAP's core market," and wanted to "exploit the prolonged delay of SAP's Business ByDesign."

Asked why it keeps pitting itself against SAP and not Oracle – Oracle CEO Larry Ellison owns a majority stake in NetSuite, and analysts have speculated about whether Oracle might buy it – NetSuite said it was because of differences in customer sentiment.

"We really haven't heard the same kind of angst from the Oracle customer base," said Mini Peiris, NetSuite's vice president of product marketing. "That's mainly why we're looking at what's going on in the SAP customer base right now."

SAP customers, particularly European user groups, have been vocal in their distaste for SAP's Enterprise Support offering, which will increase the fees for maintenance and support from 17% of net licensing fees to 22% over the next four years. User groups have said they don't see the value in Enterprise Support . SAP has said it is working with user groups, and customers are seeing the value in Enterprise Support.

In an effort to ease SaaS integration fears, NetSuite has also partnered with three SaaS service providers – Berwyn, Pa.-based Boomi; Mountain View, Calif.-based CastIron Systems; and Austin, Texas-based Pervasive Software.

NetSuite's offer is more likely to be attractive to large SAP customers looking to buy a lighter-weight ERP software for smaller operating units -- a strategy many companies are pursuing -- than it is to entice SAP customers to rip out their R/3 software, according to Paul D. Hamerman, vice president and principal analyst at Cambridge, Mass.-based Forrester Research.

And it's a reason the delayed rollout of Business ByDesign is hurting SAP, regardless of the economic conditions, Hamerman said.

"They're losing opportunities to sell Business ByDesign," Hamerman said.

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