NetSuite’ has been badly hit by “gale force economic winds” that knocked it $8 million into the red, but CEO Zach Nelson remains upbeat about the outlook for the Cloud ERP firm.
Revenue during the third quarter 2009 rose 4% to $41.7 million for the quarter and the company generated $2 million, making it cash-flow positive for the year. It was also the company’s best new business quarter ever. But increased business costs, especially in the areas of marketing and administrative costs, rose sharply to hit the company’s results.
“We modelled the third quarter results to be seasonally flat from Q2 so the fact that we exceeded most of our metrics is indeed exciting,” said Nelson. “Record revenue, record cash flow, continued non-GAAP profitability, our best new bookings growth in a year, reduced downsell and increased upsell in the installed base and the largest number of OneWorld customers ever sold. All of these bode well for the fourth quarter and beyond.”
“I am seeing a sea change in the attitude of customers and prospects around the world. The takeaways from meetings in London, Sydney, Manilla and New York were enlightening. It's pretty clear to me that customers are coming to understand the enormous disadvantage of running their operations on an antiquated approach to business management built around cobbling together multiple applications, most of which were designed before the World Wide Web even existed. You can see how much money is wasted on multiple application on premise deployment of legacy software.
“It's clear to me that we are moving from the early adopters of NetSuite and heading into the mainstream adoption curve,” suggested Nelson. “We had our best new business quarter in over a year. When you compare that with the double digit, year over year new licence sales declines registered this quarter by traditional on premises competitors like SAP, Epicor and Deltec, it's easy to see that companies of all sizes are voting for NetSuite.”
Nelson says that the firm's single suite approach is winning attention from customers. “We sold a record number of OneWorld deals during the quarter,” he said. “The types of companies we are winning reflects the mid sized multinational companies typically found in the Asian and European markets as well as large complex organisations serving the globe.”
Hecites Commco, a Kansas City-based distribution and light manufacturing company and a leading home improvement millwork distributor, as an example of a company that switched from SAP R/3 to NetSuite OneWorld. “It's interesting to note that Commco evaluated SAP's Business ByDesign but still elected to go with NetSuite,” he said. “The CEO of Commco said that in their evaluation Business ByDesign had roughly 30% of the functionality of NetSuite. He said that in his eyes SAP's offering fell short.”
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