Some thoughts from an analyst who attended Netsuite Suiteworld.
A couple things stick out from this article:
- Netsuite is “only” at $400 million annual revenues
- Assumption that companies will largely stop buying on-premises solutions (I disagree but I think the pace of replacement is going to continue to be very slow – people buying are forced to purchase by some event )
- Netsuite is not GAAP profitable and will need to become profitable at some point or the tide may turn against them
- Netsuite is still pretty expensive for most customers who do the math – last I hear their average annual recurring fee was in the $45,000 range. And they appear to continue moving upstream. A $45k annual maintenance renewal is probably not anything most of us have dealt with in our marketplace
That being said there’s a lot of upside to Netsuite provided they’re able to continue to execute and meet the pricing requirements of the mid-market.
Name recognition, true SaaS offering (arguable as to whether that’s required but if for some reason the market demands it they’re going to have a huge lead over re-juggled on-premises offerings).
The biggest potential feature of all SaaS offerings is the removal of annual software upgrade labor. On-premises solutions are too difficult for most customers to self-upgrade and they’re expensive to have a consultant upgrade so most companies fall into an “every three to five years” strategy of only periodically upgrading. At some point there’s danger that these on-premises customers stop paying maintenance (now referred to as subscription) fees because they have not seen any benefits from recent upgrades.
Too expensive (at present) for typical mid-market customers, best fit for large companies without significant niche requirements in MFG/Wholesale (though this will evolve), VARS don’t know how to make a profit with SaaS and most of them are still in “box moving” mode worrying about margin on the initial sale.
As a VAR you need to look at future products like Netsuite from the perspective of how YOU can add value. Accept that these solutions are going to be sold direct in
some many cases and develop your own services (on a recurring basis) or don’t get into this market.
If you cannot see yourself being profitable without a recurring commission on SaaS/Netsuite subscriptions – don’t get into the market.