NetSuite’s 99.5 Percent Solution

NetSuite was providing Web-based applications when it wasn’t cool. The San Mateo, Calif.-based provider of a turnkey e-commerce, accounting, customer relationship management (CRM) and enterprise resource planning (ERP) package has seen the hype, the fall and slow ascension of the application service provider (ASP) industry.

Like other Web-based application providers, NetSuite has had to quell usually unfounded concerns about reliability and uptime. In a move designed to reaffirm just how sure of itself it really is, NetSuite today announced that it offering its customers a guarantee of 99.5 percent uptime or — as they say — your money back. In this case, customers will receive a credit for that month’s service if NetSuite does not deliver its application services with 99.5 percent uptime.

Of course, NetSuite is quick to point out it has no intention of losing a month’s worth of revenue. “We’re already delivering it. It’s always been the target, but now it’s guaranteed,” NetSuite Chief Executive Zach Nelson said.

“Some companies offer guarantees, but if you read the service agreement, it’s typically a sliding scale,” he said. “You get so much of a refund for a given amount of downtime. It’s a toothless guarantee.”

Included in NetSuite’s new license agreement, the guarantee covers Monday through Friday 24/7, but NetSuite does “reserve two weekends a month for maintenance usually between 1 a.m to 4 a.m, even though we don’t always use it,” Nelson said. “Maintenance on weekends is very common, even for large e-commerce companies.”

The holy grail of service levels is 99.999 percent (or “Five 9s,” as it is often called). That extra 0.49 percent comes at a high price. Nelson points out that even large banks and investment firms don’t attempt to offer that kind of uptime. You can get it, but “you’ll pay three times for it — it’s an exponential increase.”

One of the reasons NetSuite is making its guarantee, Nelson said, is due to its patent-pending techniques for monitoring the application server and database as well as for technology for updating the application without causing downtime. “We can control the process. Updates ideally are done on the weekend, but if we need to issue a critical patch, we can do so during core business hours without taking the application down.”

That Don’t Impress Them Much
Salesnet, a Boston-based ASP that competes with NetSuite in the CRM market, isn’t impressed by NetSuite’s move: “NetSuite is not the first software-as-a-service provider to offer an uptime guarantee — but they are first to try to spin this into news,” said Salesnet chief marketing officer Dan Starr in a statement released today. “Perhaps NetSuite has had difficulty scaling its business, leading to customer rumbling, and therefore explaining their new money-back uptime guarantee.”

That said, Salesnet doesn’t itself offer to refund the entire month’s fee if service levels aren’t met. However, a company spokesperson said the company has never had a customer request a refund due to unexpected downtime. Should Salesnet not meet its guarantee of 99.6 application uptime, the spokeswoman said, the company’s policy is to offer credits on a pro-rated basis based on the following formula:

Service Level Credit = (Hours of Unscheduled Downtime) x Total Monthly Subscription Fee/hours of scheduled uptime.

Next From NetSuite
Nelson said that NetSuite currently has about 1,000 customers running their e-commerce business using the company’s offerings, but added that it plans to increase its focus on online transactions. “We will be stepping up our e-commerce initiative,” he said. “We’ll be offering the NetSuite Mall, showing off our customers. We’ll also add Google and other search engine optimization. Because we host the application, it’s easy for us to tag pages for search optimization.”

Dan Muse is executive editor of internet.com’s Small Business Channel and EarthWeb’s Networking & Communications Channel.