Watchers view NetSuite IPO as first of many

NetSuite has filed to go public in a move that could lift the profile of the software-as-a-service movement yet further and test the appetite for business software floatations.

The nine-year-old company, majority-owned by Oracle chief Larry Ellison, is seen by some supporters as having the sort of growth potential that has powered  Salesforce.com and others to high valuations on the public markets. 

NetSuite may also have a broad appeal because it offers a suite of accounting and related business applications, rather than focusing on salesforce automation or customer relationship management as have done two high-profile SaaS companies, Salesforce and RightNow Technologies.

So far, NetSuite sales have gone mostly to small companies but deployments such as Carphone Warehouse suggest that, like Salesforce, NetSuite could grow its share of large businesses.

“What this signals is the increasing acceptance of software as a service,” said a Salesforce spokesman. “It’s prime time, as shown by the emergence of a tier of niche players like NetSuite that are focused on small and medium-sized businesses.”
Mike Fitzgerald, managing general partner at early-stage investment firm  Commonwealth Capital Ventures, said, “The market is certainly ripe now for this activity and this is further validation of the SaaS market opportunity. This is a good SaaS company with a recurring revenue stream. It’s real evidence of the new wave. It takes a long time to grow SaaS companies because of the revenue model, but there will be more coming along.”

Michael Gregoire, chief executive of on-demand talent management firm Taleo, said, “Over the past several years, SaaS has evolved from an alternative to on-premise applications to a compelling business model and wise investment, as the publicly traded SaaS vendors are significantly outperforming the traditional software providers.”

In its filing, NetSuite states that it took $67.2m in 2006 revenues, up 85 percent over the previous year. It is not yet profitable although losses were halved to $3.7m for its most recent quarter, compared to the year-ago figure.

If NetSuite’s float is successful, it could build support for more business software firms to come to the market, in contrast to the scarcity of such offerings in the last few years. That could in turn be good news for IT buyers that have seen choices limited by vendor consolidation, particularly in software.

The protection of Ellison might already have stopped NetSuite from being sold. Companies such as Microsoft, SAP and even Oracle itself have set their hearts on winning more business from smaller firms and have struggled to appeal to buyers persuaded of the virtues of on-demand software.

Ellison also owns a controlling stake in storage firm Pillar Data Systems.

See also:

NetSuite plots easier ERP

SaaS firm updates suite with wizards and multi-currency support  21 Jun 2007

Netsuite offers lure to tempt Sage customers

Netsuite, the US-based accounting software provider, has launched an aggressive campaign aimed at poaching customers from rival Sage  31 May 2007

NetSuite adds e-commerce tool to back office apps

NetSuite upgrade adds e-commerce tools and links to eBay and Amazon.com  15 Feb 2007

Technology: at your service

The traditional approach to selling software and services can be more of a burden than a boon. That’s why one firm is working with a software giant to give clients what they want  18 Jan 2007

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