NetSuite looking bright for the future

NetSuite looking bright for the future

Summary: In the last year, NetSuite has gone from the company that was beset with issues to one where executing well and attention to resolving channel issues has paid off."For the first time in our history, we were...

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In the last year, NetSuite has gone from the company that was beset with issues to one where executing well and attention to resolving channel issues has paid off.

"For the first time in our history, we were...profitable," [on a non-GAAP basis] said Zach Nelson, NetSuite's CEO on today's earnings call. Nelson attributed the better than expected result to: "Continued selling price increases, reaching an average of $34,000 per customer...increased 20% in the year. We saw the average number of users per customer increase. OneWorld has reached 200 customers and accounts for 35% of new business bookings. When you look only at OneWorld business, the value goes up to $100,000 per customer."

International markets grew 51% the last year, indicating that the early saas adopters in the US are now being  strongly followed overseas. The company plans to devote most of its forward R&D to flshing out the OneWorld and international product lines. Like many other companies, NetSuite is taking a cautious view on future hires, believing it can expand at a pace that outstrips competition while keeping headcount under control. In the immediate short term, NetSuite believes it will be close to profit break even in 2009 and will be cash flow neutral.

The impact of the recession on NetSuite's business was apparent as customers are now looking to negotiate terms. Customers are requesting quarterly and monthly booking terms which is having an adverse affect on overall deferred revenue and cash flow. Even so, NetSuite is not letting customer pressure dominate the business model and cash flow management is becoming part of executive compensation in 2009. That has to be welcomed.

Interestingly, Nelson talked about both on-premise and saas application ISVs embedding pieces of NetSuite into industry specific application landscapes. I've long felt that the real opportunity for saas is in underserved vertical markets and it is good to see NetSuite taking a non-combative position where it can win business without insisting on having the whole feast. This contrasts sharply with the strategy followed by Microsoft, SAP and Oracle, which would prefer customers to take everything from them.

One disappointment was that the company chose not to give overall 2009 guidance. The company says that conditions are changing very rapidly. Understandably, that makes it difficult for companies to be comfortable about predicting the future.

Unusually, Nelson didn't take his customery pop at SAP, instead preferring to talk up the company's strategy of providing software to divisions or subsidiaries that find larger solutions too cumbersome or costly. Question: why is SAP allowing this to happen when it has ByDesign languishing? I wish I knew.

Larry Dignan has the detailed numbers.

Topics: Enterprise Software, Banking

Dennis Howlett

About Dennis Howlett

Dennis Howlett is a 40 year veteran in enterprise IT, working with companies large and small across many industries. He endeavors to inform buyers in a no-nonsense manner and spares no vendor that comes under his microscope.

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4 comments
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  • NetSuite = ripoff for SMB's

    I talked to a NetSuite agent once. They don't list any prices on their website, so I was very skeptical about the kind of price range they'd be asking for. When I asked for a finance system that allowed for a product list to be added (but no inventory tracking), no payroll necessary, but credit and debit card processing, and the ability to use it as a PoS (point of sale = "cash register") solution, they said they had the perfect fit for me. They wanted me to run a trial first for me to try it out. I asked a lot of questions about it. I mentioned that I came from using Simply Accounting, which is a Sage Software product (they make Peachtree Accounting too), and although he was from Mississauga, Ontario (Canada) he had never heard of Simply Accounting at all. It's only the top-selling small business finance software in Canada. Whatever. I told him it was basically just like Quickbooks. He said they get a lot of people moving from Quickbooks. I asked what size of companies do they cater to. He replied "companies with anywhere from 2 to 2000 users". Again, whatever.

    Anyway, they were pushing the idea of running a free trial first. They didn't want to divulge the price, but I managed to squeeze it out of him.

    For the modules that I was asking for, they want $99.

    per user.

    PER MONTH!

    I never did the trial.

    I found Simply Accounting Pro 2009 (equivalent to Quickbooks Pro 2009) on Staples Canada's website for half price a few weeks back. That's $74.99CDN (normally $149.99). For the whole year. And I don't have to buy it every year either. Nor do I have to worry about internet connectivity or performance issues (not everybody has perfect internet access). Small businesses should avoid NetSuite like the plague.
    Joe_Raby
  • NetSuite = Good Value for the right company

    I listened to the call last night. The performance by
    NetSuite was very strong and they are well aligned
    with just who their customers are.

    Most of their customers are midsized businesses who
    have outgrown the Simply accountings and the
    Quickbooks applications. Normally they have sales
    teams and marketing to manage, more complex accounting
    requirements and customer tech support to manage. And
    possibly an ecommerce requirement.

    Their results show that there's good value in the
    application if if fits your business.
    Rob M1
    • I'd rather recommend Dynamics software instead

      Subscription based services leave you with nothing when you unsubscribe. Dynamics gives you software for local installations that you don't have to update year over year. That's where subscription offerings will cost you more. You don't have a choice with upgrade offerings. Not every company wants to upgrade year over year, and many companies will sit on software investments for several years before they even consider another rollout. If you compare a year of NetSuite to several with Dynamics, you're saving money with a conventional ERP package.
      Joe_Raby
      • Lease vs buy

        The total cost of ownership, including hardware
        and IT guys should be included in your
        calculations.

        And anyway, it's the old lease vs buy argument,
        not much more than that.

        Each deployment model has it's place. No need
        to get religious over it.
        Rob M1