LinkedIn Twitter
Brian is one of the titans of the technology services arena with more than 25 years experience in the field, 10 of which were served as Senior Director of Andersen Consulting's (now Accenture's) global Software Intelligence unit.

3 responses to “NetSuite’s Revenue in light of the bigger ERP revenue question”

  1. Dennis Byron

    Brian, there is a flaw in your analysis because it makes an abritrary division between the class of enterprise software suppliers as if some only provide the on-premise means of delivering functionality and others provide only the (misnamed in this context) on-demand method. You also imply that NetSuite has no professional services revenue.

    Look at the image of the Oracle quarterlfy statement reproduced in your article, fifth line down. About half of that almost billion dollar a year “OnDemand” revenue stream for Oracle is the same sort of “on demand” revenue stream as about 80% of NetSuite’s total revenue stream (see the respective companies’ 10-K filings for descriptions). And Oracle is already twice the size of NetSuite

    It’s trivial to Oracle at this point from a financial reporting point of view (and it kind of works against Larry Ellison’s bashing of cloud compuiting for Oracle PR folks to highlight it) but Oracle is already playing both sides of the street. As are Microsoft, Intuit, SAP and most of the other enterprise software market leaders (I can’t think of any that is not but I say “most of” to save myself from going through the list and checking them all). And of course Larry Ellison himself is craftily playing both sides of the street since he is the supermajority owner of N.

    Secondaly, you are comparing apples to oranges by highlighting SAP’s 27% decline in licence revenue in 2009 with Netsuite’s 9% gain in total revenue. The comparable SAP figure to most NetSuite revenue is the minus 3% delfation in what you call SAP software and maintenance revenue. The two companies growth/defltation rates within the margin of error after Netsuite’s increase is normalized (reduced) for its acquisitions’ revenue in previous years and its professional services revenue is deducted.

    I have no doubt with your conclusion that SaaS delivery is becoming more popular but it is not happening at the expense of the leading software suppliers.

    Dennis

  2. Wayne Schulz

    I have a couple questions as well (and I am a consultant for a competing on-premise software package but also a big proponent of SaaS – so my thoughts are not entirely un-biased).

    A. On the earnings call Zach Nelson spoke of ending the year with the same number of customers as they started with. The explanation is (without any statistics) that Netsuite is moving upstream and replacing the low end (<$10,000 annual fee) with "better" customers.

    This has me somewhat concerned as there's a FAR more limited pool of "better" customers who fit into the Netsuite niche of Wholesale Distribution, Software Companies and professional services (which I believe were the primary markets discussed). At some point this market both gets crowded and more competitive (I think Intacct – another SaaS player is also big into the services/revenue recognition niche).

    B. How much of revenue growth is simply sales to earlier trial purchasers of Netsuite? I have not idea if this number is material but I believe they spoke of it on the call again without any type of statistics.

    C. I enjoyed hearing that a company with admitted 80% direct sales "for as long as the CEO can remember" has the best channel program.

    Overall as I read the earnings call I was struck by the thought that this could have been any of the the other software companies (Microsoft, Oracle) delivering their earnings. It didn't seem to be that exciting in terms of growth or future prospects.

  3. Mani Periasamy

    I don’t agree with this strategy of deserting small enterprises. Had the product been intuitive, flexible and scalable, I see no issue in supporting the SMEs. When players like SAP and Oracle are trying to get into the SME space, it is surprising that NetSuite is abandoning the initial adopters. As a medium enterprise, I would be concerned. What will prevent them from abandoning the medium enterprise and going after large enterprises few years down the road?

    We at iBE (ibe-erp.com) are developing a product that would be intuitive, flexible and scalable so that we don’t have to give up on part of our customer base.