Wednesday, November 19, 2008

Netsuite claims new deal flow more predictable

On-demand enterprise system provider NetSuite appears to be bucking the trend these days. According to NetSuite CFO Jim McGeever, sales slowed in late September, but since then the flow of deals has become "much more predictable." He made these remarks today in a presentation to the UBS Global Technology and Services Conference.

Tom Steinert-Threlkeld reports:
"What has happened in October and so far in November is that when people said they were going to buy, they actually bought," McGeever said.

Going by the boards have been deals with small customers, who spend less than $10,000 a year with the company, he said. The deals with big customers, aka "elephants," are getting done. Elephants who didn't complete deals at the end of September, will complete them before the year ends, he said. "We don’t expect to lose any of them," he said.

NetSuite got its start by selling to very small businesses. In 2002, the average ticket was $447 per customer. Now, sales growth comes entirely from customers spending more than $10,000 a year. The biggest growth area: Customers spending more than $100,000. "The larger deals seem relatively strong," he said.
I'm not sure what to make of this. Our research at Computer Economics shows that 44% of U.S. and Canadian organizations have delayed the start of major projects in the August to October timeframe, and 16% have cancelled such projects outright. The only explanation I can come up with for NetSuite's success is that its on-demand model is selling well these days as it minimizes upfront investments. Still, the claim that it is doing well in large deals is counter-intuitive in this market.

If you have insights, email me or leave a comment on this post.

Related posts
Workday: evidence of SaaS adoption by large firms
All not sweet with NetSuite

1 comment:

Anonymous said...

I am one of the founders of Plexus Systems, provider of on-demand manufacturing ERP systems. Our experience currently is very similar to NetSuite - slower sales in September, then a resurgence of sorts in October and November. We are doing very well while our competitors are hurting. We attribute this to an extremely strong product combined with our SaaS model and subscription-based pricing.