SaaS

Software as Service is the term for a new delivery model that is changing the balance of power in the software industry from the vendor towards the customer. Instead of installing and managing software on a server or your desktop, you subscribe to it as a service, so you only need a web browser on an Internet connected PC. The chracateristics of a SaaS system are:
1. The application is owned, delivered, and managed remotely by one or more providers
2. The application is based on single set of common code and data definitions which are consumed in a one-to-many model by all contracted customers at any time.
3. The application is licensed on pay-per-use or subscription basis
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NetSuite a $1 billion pointer for SaaS in 2007

Written by dahowlett on

From: www.accmanpro.com

Earlier in the month, Phil Wainewright commented on rumours swirling around that NetSuite would go public. Now it seems such a move is in the wind with a $1 billion valuation. Or at least Mike Arrington says so. Mid-month, BusinessWeek had discussed the possible deal in some detail.

NetSuite is a company with top line revenue for 2006 of around $70 million. If $1 billion is achieved, that translates into a 14 times multiple. Given they are looking for $100 million as fresh capital then that seems like one heck of payout for the original investors. Even if they only achieve a similar multiple to Salesforce.com’s current market cap, then that’s still around $670 million.

I’ve no idea whether this will happen. There’s certainly no official confirmation or denial. And I won’t speculate. But of one thing I’m sure. If NetSuite does pull off a blockbuster IPO then it will catapult SaaS accounting and SFA into the spotlight in a major way. It simply won’t be possible for the smaller business supplier incumbents to ignore that amount of noise. It will validate the idea there are many businesses out there crying out for something different. Something fresh. Something that adds value. Many of the SaaS applications I’m seeing genuinely offer that promise.

I’ve been trying to get close to NetSuite for a while but without success. I want to know a lot more about their market strategy because as far as I am concerned, they just don’t show on the UK accounting market radar. Sure - they were at the AccountancyAge Awards gig. But other than that? I’m probably missing something fundamental here. But then maybe not.

Zoli talks about the data coming from Freshbooks - another SaaS accounting player. (Many would say not, I say yes.) I’ve previously discussed the disruptive value of Freshbooks’ provision of market intelligence. If NetSuite is planning on capitalising on its rapidly accumulating data store then an IPO would be a good point at which to announce.

It all adds spice to the 2007 pot methinks.

Technorati Tags: FreshBooks, NetSuite, SaaS

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