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By Steven Briggs

Table of Contents

Executive Summary
Company History
Products & Pricing
Software Overview
Industry Solutions
Technology Solutions
Productivity Solutions
Business Intelligence
Data Center Reliability and Security
Customer Support
Key Advantages and Disadvantages
Competitor Summary
Report Summary
Terms, Disclosures, Disclaimers & Notices


Executive Summary

Incorporated in September 1998 as accounting software company NetLedger and majority owned by Oracle CEO Larry Ellison, NetSuite Inc. is today a manufacturer of an on-demand and fully integrated business application software suite that include accounting software, Enterprise Resource Planning (ERP) software, Customer Relationship Management (CRM) software and e-commerce storefront software for small and medium-sized businesses (SMBs).

NetSuite’s enterprise-wide hosted ERP application stands in stark contrast to the many software as a service (SaaS) best of breed solutions which attempt to assemble mission critical business software systems from different providers whom leverage different technologies, different user interfaces, different hosting locations, different Service Level Agreements (SLAs) and different help desks or customer support offerings.

SMB customers have traditionally been forced to purchase one business application for accounting, another for order fulfillment, another for human resources, another for customer relationship management or other piece meal or best of breed systems for various other departmental needs. NetSuite’s enterprise-wide ERP system eliminates the cost and complexity of purchasing, implementing, integrating, supporting and upgrading different line of business applications from multiple vendors. Instead of the customer bearing these technical and oftentimes difficult tasks, NetSuite enables companies to advance from islands of disjointed data and multiple dissimilar systems which are limited to providing departmental views to a fully integrated system which delivers an enterprise view and manages all key business operations with a single, integrated system.

As well explained by analyst firm Datamonitor, “Tightly integrated suites that are delivered through the on-demand model represent a win-win situation for the vendor and end-user. Integrated suites address the need of end-users to achieve improved collaboration between different enterprise software, but without the additional costs of employing integration consultants. In effect, the end-user of an integrated on-demand suite passes on the costs of extensive application-to-application integration, data synchronization, and IT management to the vendor.”

Company History

NetSuite’s original company name was NetLedger and its heritage stems from an online accounting software solution. The company was incorporated in the State of California in 1998 and was reincorporated in the State of Delaware in 2007. The company was seeded with both start-up money from Oracle CEO Larry Ellison as well as a host of key staff previously employed at Oracle. The company’s Chairman and CTO, Evan Goldberg, President and CEO, Zach Nelson and many other key management transitioned from Oracle to NetSuite. At one time the NetSuite solution was licensed by Oracle under the banner of The Oracle Small Business Suite, however, that experience was short lived and cancelled.

Over a 10 year period the company has evolved from a simple hosted accounting software system to a complete on-demand ERP application with integrated accounting, ERP, CRM, and e-commerce capabilities which support end-to-end business process management across the organization. NetSuite has hitched its wagon to both the software as a service industry and the SMB target market thereby providing significant upside potential. The SaaS movement is clearly the highest growth component in the enterprise software industry and shows signs of continued acceleration over the next five years.

The SMB market is also regarded as growing market segment. According to analyst firm Gartner, Inc., companies in North America spent approximately $12.7 billion on ERP, CRM and supply chain management software applications in 2006, of which SMBs accounted for $4.0 billion, or 31%. Gartner forecasts that SMB spending on these types of business applications will grow 11.3% annually from 2005 to 2010, compared to 5.8% for large enterprises, thereby providing an ample target market for NetSuite and other on-demand ERP solutions in the years to come.

NetSuite chooses not to disclose specifics regarding average customer size and customer churn. While NetSuite does tout a very small number of middle market and enterprise companies as clients, there is little doubt that the extreme majority of NetSuite customers are small business organizations. NetSuite’s customer turnover has been the subject of many analyst and online conversations. While the company does not disclose that figure, there is ample evidence to suggest that customer churn is extremely high.

As a publicly traded company on the New York Stock Exchange, NetSuite (NYSE: N) has earned a mixed corporate reputation among analysts and the investment community. The company achieved an impressive initial public offering (IPO) in December 2007 and has shown continued revenue growth since that time. However, according to an August 2008 Datamonitor report, “The company's steady growth has, however, failed to impress shareholders and financial analysts. NetSuite's stock has dropped to about 60% of its initial public offering price, mainly due to continuing net losses, negative cash flow from operations, and lower-than-expected deferred revenue figures.” While NetSuite derives about 82% of its revenue from the Americas, it is less clear how NetSuite’s financial and economic performance will be affected by the struggling North American mortgage industry, the liquidity squeeze of the financial markets and the potential for shrinking IT budgets. In fact to the contrary, several industry pundits and economists suggest that the squeeze for market liquidity and cautionary approach to IT spending will cause IT managers to avoid procurements with high up front capital expenditures and implementation risk in favor of subscription-based software solutions which can be implemented more quickly at a lower total cost of ownership (TCO). Despite the optimistic SaaS projections of a down economy, the US national and global economies have never before struggled since the introduction of the current software as a service movement so it is unclear whether a faulting economy will further spur the growth of SaaS business applications.

Key customers for NetSuite include Call Command, Cartridge World,, Linden Lab, Saffron Rouge and Spring Mountain Capital.

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