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Unlike companies such as Best Software and Microsoft who have spent millions – even billions – of dollars buying CRM and ERP applications, and then asking customers to patch them together, NetSuite was designed to be a single integrated application spanning front-office, back-office and eCommerce. No integration of these components is required in NetSuite. In addition, Best and Microsoft require customers to manage the applications themselves, resulting in costly initial installation and on-going maintenance expenses. In contrast, NetSuite is designed as an on-demand application where the upgrades and maintenance are handled by NetSuite – not the end-user customer – at no additional charge.

The study also dispels a number of misperceptions. First, some have postulated that hosted solutions are cost-effective short term solutions but over time it is less expensive to move applications to on-premise. As this study shows, over the short and the long-term, NetSuite's on-demand approach is much less expensive than traditional "manage it yourself" software. Second, even when a software company owns both the front-office and back-office software applications, if the applications weren't designed to work together, this is an enormous amount of cost a customer incurs trying to get data to move from one system to the next.

The Yankee Group study, written by Sanjeev Aggarwal, Small & Medium Business Strategies Senior Analyst, concluded, "The TCO for on-demand solutions is much better than that of traditional on-premises solutions even when evaluated over a three to five year period. On-premises solutions require significant investments in IT infrastructure and application deployment, support and update resources."

NetSuite's TCO is dramatically lower than Best's, providing from 24% to 59% cost savings relative to Best. The total dollar cost savings ranged from $199,000 to $298,000 in the four scenarios studied:

20 Users
3 Years: $166,225 for NetSuite; $410,117 for the Best SalesLogix/MAS 90 combination
5 Years: $257,926 for NetSuite; $556,559 for the Best SalesLogix/MAS 90 combination

100 Users
3 Years: $427,535 for NetSuite; $635,906 for the Best SalesLogix/MAS 90 combination
5 Years: $639,532 for NetSuite; $838,793 for the Best SalesLogix/MAS 90 combination

"Our integrated, on-demand solution not only gives companies complete business management without the headaches, it's also considerably more cost effective than the stone-age approach to software of shipping disks and integrating incompatible applications," said Zach Nelson, NetSuite CEO. "The Yankee Group study is just another proof-point that on-demand integrated suites represent the next generation of business applications."

Larry Kennedy from New England-based Intente, a NetSuite solution provider, has implemented NetSuite for businesses across a number of industries. Speaking from his experience, he noted, "By reducing implementation, hardware, data center and people-related costs, on-demand solutions like NetSuite offer a lower TCO than licensed software solutions. Furthermore, NetSuite's integrated solution covers both front- and back-office application areas and is much easier to use and efficient compared to several applications that have to be integrated."

The comprehensive TCO study by Yankee Group encompassed many parameters including:

• Subscription costs versus license costs for an equivalent number of users
• Application support and maintenance costs
• Implementation and customization costs
• Host server computers, storage and maintenance costs
• Internet access costs
• End-user technical support costs
• End-user IT support personnel requirements
• User training costs