Like the consolidation in the on-premise world, NetSuite's acquisition of Open Air marks the beginning of the a wave in consolidation for SaaS. NetSuite's decision to acquire OpenAir for $26M is significant for a few reasons:

• NetSuite gains a toehold in the Services and Project Based world. The Project Based Solutions market is hot and OpenAir is one of the poster children for SaaS in PBS. In addition, NetSuite has needed critical capabilities in project management, scheduling, and related PBS skill sets. NetSuite adds a base of 40,000 active users and 300 new service customers.
• OpenAir customers add end-to-end SaaS business suite functionality. Integration between the 2 products is planned for later in 2008. End users should expect Web services integration frameworks to allow OpenAir customers to complete end to end processes for Order to Cash, Schedule to payment, and Project Design to Completion. Services and project based companies now have a complete offering delivered on a true multi-tenant SaaS platform.

The bottom line for end users
Decision making should still be led by business drivers that may span across growth, regulatory, compliance, and strategic. Key advantages when considering a SaaS solution still include:

• Faster deployment of critical business functionality. SaaS solutions often provide much needed "last-mile" solutions that meet pent up business user demand. More often than not, upgrades to solutions occur with more frequency than on premise offerings. Keep in mind, enterprises should coordinate with IT on long term integration requirements, canonical data model design, and deploy the appropriate ESB's or integration technologies.
• CapEx reductions that free up much needed capital. Use operating expense instead of upfront capital and avoid the long buying cycle of board approval and IT infrastructure dependencies. Take the freed up capital and apply it towards more functionality.
• Growing capabilities to extend solutions via partner networks and tool kits. Vendors continue to expand their Platform as a Service (PaaS) offerings to partners and customers who are looking to ultimately extend processes and apply metadata configurations to "customize" solutions. The toolkit and strength of partner ecosystems should be one of many factors in vendor selection.

The bottom line for vendors
The growing threat (see Workday Flextronics Win) of SaaS as a business and deployment model means that consolidation will accelerate as SaaS vendors aim to bulk up for scale in sales and marketing as well as partner mindshare. Should NetSuite successfully acquire and integrate OpenAir , customers will not only gain key capabilities, but SuiteFlex partners will also gain a new avenue to extend their offerings and last mile solutions on top of one of the industry's top Project Based Solutions, Open Air.
(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2008 by R Wang. All rights reserved