NetSuite - Accounting/Business/CRM Vendor announces pre float details
Readers of Accountancy Age may be aware of a US vendor called NetSuite – who has developed an Accounting/Business/CRM software solution. The product is written as a hosted or SAAS (Software As A Service) application – and is accessed via the Internet. The company is backed by Larry Ellison, founder of Oracle
They are currently in the process of floating the company and yesterday (5th December 2007) released a mass of data with pre-float information. In the 9 months to Sept 2007 they reported revenues of $76.8m and losses of $20.6m. Formed in 1998 it has taken the company some time to reach these figures – but they now have c. 5,400 active clients. Out of interest this compares with Salesforce.com ( CRM SAAS vendor) who has c. 38,100 customers and was formed in 1999. Salesforce sales revenue for the fiscal year ending Jan 2007 was $497m.
In terms of the potential value of NetSuite on float it is likely to be in the range $773 to $952m. Not bad for a loss making company and reminiscent of the Dot Com boom at the turn of this century. Time will tell whether investors will get a good return on this investment.
So will NetSuite make it in the accounting software market? The bulk of the $76.8m revenue reported above comes from the Americas region ($63.4m or 82%) so the pickup in the rest of the world including the UK is slower. Certainly the marketing resource applied to the UK has been limited which may have impacted the level of new business. Also UK companies may be slower to adopt SAAS compared to US organisations. SAP has launched its mid-market SAAS solution and is planning to invest heavily in its product so is likely to give NetSuite a run for their money.
Will Sage or Microsoft push against this one wonders? US software vendors in the past have often focused their effort on their local market and countries like the UK has been on the edge of their radar screen. If NetSuite/SAP/Microsoft wants to make it big time in the mid-market they will need to have a truly global offering – with appropriate marketing and support in the UK. There are too many vendors chasing the Accounting Software space. Will some of the smaller players be pushed out? This in part depends on the frequency with which people change their accounting system. Many users keep their system for 5 plus years and so it will take some time for the smaller vendors to lose their client bases. Or will SAAS/ the newer vendors offer a compelling reason for an organisation to change sooner? I haven’t seen a killer argument for accounting software to date.