Sightings in SaaS

Couple of recent headlines from NetSuite should have been commented on but I have been up to my ears this summer with other projects – like the ones that pay.

First, NetSuite now offers a financial only package. Very useful and a good move by NetSuite. This tells me that they understand that the SaaS model means that collaboration between applications from different vendors is a reality from which they cannot hide. We have always advocated an integrated suite at SightLines, as they have of course at NetSuite, but let’s face the music: Not everyone sees the world like this. Some people would rather run another CRM and link it to NetSuite Financials. Why not oblige them? The fact that both systems are SaaS actually enables this union. Again, we are not saying that it’s a union we would bless, but if dogs and cats living together is your dream, the joining is easier when both come in a SaaS mode, that’s for sure; especially if both parties have a web services api, which they do, by the way.

In another announcement, NetSuite surprised us when it revealed an acquisition of QuickArrow. QA is a SaaS company in the Professional Services Automation, PSA, category. In fact they were direct competitors of OpenAir, purchased by NetSuite last year. Why another acquisition in the same market? My guess is that NetSuite saw OpenAir as a way to add some very important functionality to its ERP offering. OpenAir gave NetSuite instant visibility and viability in the Professional Services arena. QuickArrow is a way to strengthen that position and add customers, frankly. The direction, as explained on the QuickArrow website, is to move those QA customers who need additional functionality to OpenAir, and of course all of them will be offered NetSuite Financials, or the full Suite.

One interesting side note on the QuickArrow acquisition is that salesforce.com will, when the deal is completed, become a NetSuite customer – they currently use QuickArrow. But that’s not a big deal as NetSuite now offers a link from its applications to salesforce.com, check out the OpenAir site for details.

PSA, as NetSuite CEO Zach Nelson noted in the most recent earnings call, is a robust growth area, perfectly correlated to the growth of professional services itself in advanced economies. It also presents a nice fit for the SaaS model because it inevitably presents the company with geographic challenges: Multiple offices, staff in the field, difficult communication channels. Operating a company with this model online makes infinite good sense, from employee self -service for hours and expenses, to multiple offices using the same ledger and rolling it all together at month end. Everyone has perfect visibility into their role and data, from any node on the Internet. That in itself is a very compelling story.

I also find it interesting to see NetSuite’s strategy for growth at work. Obviously the bulk of their growth is and will continue to be organic, but if you have evolved a great knowledge base around running a SaaS business over the past 11 years, as NetSuite has, then acquisitions of other SaaS companies makes sense from two separate angles; you can bring enough efficiencies to bear on the target that it becomes more profitable over time; and you can entice its customers to buy other products in your SaaS universe.

From a pure business point of view, when you have one good reason to do something, the risk is normally too great to overcome. But when you have 2 or more good reasons to act, you have a sound business case and the risk, though ever present, subsides somewhat. The point is that in the future I can see NetSuite, the parent company, owning and running several SaaS companies in various categories. Users of one service will never be forced to purchase other services, but they will have a natural inclination to at least take a look. So the question that remains is from what SaaS category NetSuite makes its next acquisition?

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