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The Enterprise System Spectator

Friday, February 15, 2008

All not sweet with NetSuite

NetSuite is probably the second best-known example of a vendor offering enterprise applications under a SaaS model, after Salesforce.com. The company was founded in the late 1990s as NetLedger, but later changed its name to NetSuite to avoid the financials-only connotation of its original name. Larry Ellison is a major shareholder.

Though the company has gotten a lot of media attention in its attempts to disrupt the business applications market, things may not be going as swimmingly as the firm's press releases indicate.

Jason C, notes on his blog, that NetSuite appears to be losing customers:
In scanning the company's S-1 filing with the SEC there is a note that the customer base was "over 5,400". That should have caught my eye. It didn't. But today, reading the earnings press release I saw the company added 432 customers during Q4, bringing the customer count to "over 5,600". Interesting. I would not have expected it to be 5,832 as there has to be some churn in this business. But what does it say when your rate of churn is about half of your customer add rate?
He further points out that a 2003 press release on NetSuite's website indicates their customer count at that time was 6,000.

So, either NetSuite was (ahem) exaggerating its customer count in 2003, or else it has fewer customers today than it did five years ago.

Jason points out that the apparent drop in customers is a confirmation of customer dissatisfaction, as indicated in two posts on Dennis Howlett's blog. Read the first post and the second one to get an idea of the problems being reported: salespeople over-promising, pricing surprises, and post-sales support problems.

My take
Most of the problems sound like a throw-back to the bad old days of ERP in the 1990s. Few of them appear to be unique to the SaaS model. If legitimately reported, they appear to be the result of an organization under a lot of pressure to make its revenue numbers.

On the other hand, small and mid-size businesses--where NetSuite is focuses--are not exactly the most sophisticated buyers of enterprise systems. I suspect there are many false expectations for how easy it will be to implement NetSuite, likely encouraged by a sales force eager to close deals.

NetSuite has responded to Howlett's commentary on the drop in customer counts by pointing out that its most recent press release is talking about "active customers" only. However, that explanation doesn't fly in my book. Whether active, or newly-sold-but-not-implemented, or inactive, the fact remains that NetSuite's reported customer count today is less than it trumpeted five years ago.

I have great long-term hopes in the on-demand model for enterprise applications. But it won't succeed if vendors oversell and under-deliver.

For raw unfiltered commentary, see this feedback on an old Business Week article that is still getting comments. Note: there's no way to verify that comments are actually being written by NetSuite customers. Still, it's a pretty sad commentary.

There's even a website, NetSuite Consumer Fraud, set up for gathering complaints for a class-action suit.

If you have first-hand experience with NetSuite, drop me an email, or post a comment below.

Update, Feb. 16. The first poster in the comments section points out that four comments on the Business Week article are from the same individual, using different names. Probably so. That's why I called the comments "raw, unfiltered commentary." Still, I don't know of another software vendor today, major or minor, where I've seen this much negative feedback displayed in such a public fashion. Click through on all the links above and be sure to read the many comments on those articles.

I say, where there's smoke, there's fire.

Related posts
Dave Duffield debuts new on-demand ERP
NetSuite scoops Microsoft resellers
Computer Economics: The Business Case for Software as a Service

by Frank Scavo, 2/15/2008 03:34:00 PM | permalink | e-mail this!

 Reader Comments:

you should know that 4 of the first 5 comments come from the SAME individual.... Tara, webehikin, and beachbum are all one and the same. If you looked through the posts and compared to the website of consumer fraud to which you refer it becomes obvious.
While I have MANY complaints regarding the system and company practices, my most recent complaint is that we were "auto-renewed" for another year at a higher rate without permission. We were IN NEGOTIATIONS with our rep to remove modules to try to make the system for affordable for our needs. The rep was slow to return our calls and emails (if he returned them at all) and seemed to be stalling. I now know why, one of their sales tactics is to stall negotiations and then wait until you are "auto-renewed" and therefore trapped. This is one of the most blatant unfair business practices I have ever been subjected to in my five years as a business owner. When we complained we were forwarded to an A/R specialist who told us we could discontinue using Netsuite but we would still be required to pay for the year. Unbelievable! Buyer Beware!
I really struggle with netsuite. For a whole year Outlook 2007 was incompatible with Netsuite... the ability to save email messages from Outlook disappeared. This was promised and took over 12 months to arrive.

Since then they are talking about tigther integration... the beta of which should have been in the 2008.1 release... then stalled to July... and August... and still nothing (november).

Their employee resonse on the user-group refers to their time with the Outlook 2 integration as "an adventure".

Really... as a public company you would expect that they couldn't sell stuff they couldn't do. Wouldn't they be realising revenue against functionality they didn't yet have?

Anyhow.. give us a forum to tell the truth about Netsuite!
Has anyone retrieved their accounting data out of Netsuite? Please let me know how. Netsuite won't help.

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