You can read about the first part of this story here.  This post will take over from the point we realized that NetSuite and our reseller/solution provider were not the type of organizations we wanted to continue working with.

I met our solution provider, Ray Tetlow, the founder of Skyytek on the Oracle Small Business (OSB from now on) user forum.  At the time we were struggling with version 7 of OSB.  It was really incomplete and badly tested software.  Not only was it painfully slow but a lot of the features that we made our purchasing decision on just did not work.

However to be fair to OSB we had a crappy QuickBooks conversion, (which OSB not Skyytek did for us) and we were trying to customize the software to meet our messed up business processes before we had it implemented.  Honestly we thought we were smarter than we really were and could do it on our own.

That is where Ray Tetlow entered the picture.  Personable dude, professional, good salesperson.  I liked him immediately.  He took a look at what we were doing, commiserated with me on the sad state of OSB affairs and told me first thing I had to do was STOP trying to match the application to our messed up business processes.  OSB has a decent workflow, learn and embrace that and then make changes if needed.  You might learn something about how your business actually works as opposed to how you think it works.  He was right, same thing I tell my customers now.

We engaged Skyytek and in about 45 days we had a decent implementation of OSB.  It was not perfect by any means but at least the bleeding had stopped and “everything will be fixed in version 8″.  I have two funny OSB sayings from those days.  One was “Working with OSB is like having someone pounding on your big toe with a framing hammer.  You are just happy when they stop.”  And my favorite; Working with OSB is like being married to an underwear model who does not like sex.  It has its advantages but can be very frustrating.”

I could go on and on about all the OSB product related crap but Ray kept us in line and when it became time to renew we switched from a direct OSB account to a Skyytek account.  I met Ray a couple of times at various events, we hung out and I considered him sort of a friend.  I was a reference account for Skyytek and NetLeger as it was now called (NL from now on) on a number of deals.

About 6 months before the end of our current NetSuite licenses were to expire we started to negotiate a new three year deal with Ray.  The way NetSuite as it was now called (NS from now on) parsed out the bits and pieces the software that we were used to using was now going to cost three times as much because now we needed the super premium tier or something like that.  In any case the price for 26 seats with all discounts was $125,290.44.  WAY more than our previous expense for the system but we were on a roll and did not want to mess around with our business process with a switch to a new system.

We agreed to the estimate contingent on our ability to lease the software.  In fact the estimate names the leasing company as the Bill to.  We were approved for the lease with the requirement that I personally sign for the lease.  That was not acceptable to me so I told my friend Ray that we would need some more time to find our own lease as we did not have 125K in cash at the moment.  That is when the pressure started.   Below is the actual Skyytek estimate header.  Notice the Bill To and the date of the email?

The first thing that happened was that our reseller called and said if we did not close this deal “today” or something like that then we would lose all of our discounts.  I was pressured to take the lease terms as they were.  I said we could get our own financing, just give us a week. A week later we ran out of emails through the NS system, we get something like 60,000 per year.  We contacted our NS reseller and received an estimate back for an additional 60,000 emails for $2,388.00.  That works out to almost 4 cents an email.  I am not sure how much it costs to send an email but at 4 cents per that has to be the most profitable business in the world.

It became obvious that we were dealing with a bunch of greedy @#$holes.  This also goes to show you what lock in will do to your pricing structure.  You take ethics and customer service out of the picture and they can they can charge anything they want.  Below is a picture of the estimate for the emails.

Then the real pressure started.  On 11/9/2006  I received an email stating that if our account was not brought current they would lock us out of our account AND send us to collections.  Keep in mind that the balance due was the estimate for the lease, no invoice had been issued or order placed AND we still had 5 months on our current license that was PAID IN FULL.  They actually used locking us out of our paid system as a negotiating tactic.  Also keep in mind that locking us out would have put my 40 person software company out of business.

Look at the date of the email below, November 9th.  The date of the contingent estimate was October 31st.  Although I cannot prove anything, to me this looks like a well thought out strategy between Skyytek and NetSuite.  What kind of company starts this type of aggressive collection process on a long time customer/reference account with a PAID IN FULL account after 9 days?

We received a bunch of final payment notices threatening to cut off our service and this issue was not resolved until we started contacting the NetSuite CEO on this matter.  They finally canceled the “order” on Jan 29, 2007.  As they were prepping for an IPO it makes sense that to keep in on the books for the previous year.  I wonder how many other estimates they had on the books in 2006 that they called orders?

During all this drama we decided to switch to another accounting/CRM/SFA system.  We contracted with Silicon Digital Systems to move our data from NS to this new system.  Data migration is always a complex process and SDI has a system where they write scripts that pulls the data from one system into their database and then ports over to the new system.  They do it this way so we can check and test the system and then do a final data pull once everything looks good.  I think it cost around 35K for this service.

SDI seemed to have enough experience and I thought this would go somewhat smoothly.  NOT.  According to NS you own the data but they own the access to it.  Since your data is shared with many other companies you do not get direct access to the database you have to go through their web service interface.  Apparently this changes all the time so a script that works one day may not work another.

It was taking so long we had to renew our agreement that was to expire in March 07 for another 6 months.  Sometime around August it was clear that SDI was not going to be able to perform on their contract to convert our data and it would end up in court.  After numerous threats the President of SDI left this somewhat frantic voice mail explaining that NS was deliberately blocking access to our data as a punitive action for us trying to leave the system.

Pretty bold statement but I would not be surprised if it was true.

Once again I wrote to the NS CEO and explained that I don’t know what the truth is but this is going to end up in court and it would be best for all parties if we could just get our data and move on.  He denied everything but somehow we had clear access to our data the next day or so and SDI could do their job.  I think we got a full extraction the first of September.

Anyway that is the long, sad story.  I have all the supporting emails and documentation for any skeptics out there.  In any case I will never work with another SaaS vendor that does not guarantee to give us a full copy of ALL our data in a real relational database at any time .  With the NS UI all you can get is customer information in a csv file.  You have NO access to any relational or transactional data.  If you want that you have to use their web service interface and then at their speed or connection quality. Once you get on NS it is almost impossible to leave.  They own your ass and they know it.

So this is what we learned

1. If you are going to go the SaaS route make sure you have full relational export access to your data including all transactions and attachments.  This should be a menu option, not something a programmer has to write a script for.
2. Find out the pricing of all the options up front and get a fixed price for all options as long as you are a customer.  If you don’t you will end up paying 4 cents an email and thousands for extra storage.
3. Actually negotiating price is with a company like NS is pointless.  There are stories out there of companies getting a 75% discount on the first year, spending a lot of time and money to implement and then when they can’t easily switch the “new” pricing comes out at x00% of the old pricing.
4. When you negotiate a renewal with an SaaS vendor keep in mind that they have you over a barrel and they know it.  Expect to pay somewhere close to list price for renewals.  Factor that in the overall cost.
5. Not all SaaS is the same.  SaaS stands for software as a service, like your cable company.  Some vendors charge you a monthly fee based on the number of users that month.  If it does not work out you can easily leave.  Other vendors like NS charge you for the full contract up front; it is not really a service at that point.
6. Watch out for the big fees up front for the “first seat “and complex pricing models.  NS has a very complicated model where you buy the first seat for some large fee and then the rest of the seats are sort of reasonable prices.  Both Salesforce and ZOHO CRM have a much simpler pricing model.

I have heard many anecdotal stories about the NS product, executive team and business practices but just wanted to present the facts in this case.  That is why I included the emails and estimates.  Please contact me if anything needs clarification or correction.  adam(at)d-tools.com

For more information on NetSuite and their sales and management tactics see NetSuite Consumer Fraud and NetSuite Nightmares.  Same story, different people.

Part 2 of Why we left NetSuite here.