NetSuite sales boost as SaaS goes mainstream

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NetSuite has reported strong second quarter financial results, buoyed by more small and large companies buying into software-as-a-service (SaaS) for the first time.

The company, which develops and sells an integrated, web-based suite of business applications including CRM, ERP, ecommerce, accounting and reporting tools, reported second quarter turnover of $36.6 million (£18.3 million), a 43 per cent increase over the second quarter last year and seven per cent up on the first quarter of 2008.

This helped the company reduce its quarterly non-GAAP loss to $900,000 (£450,000) from $9.6 million (£4.8 million) in the second quarter last year and $2 million (£1 million) in the first quarter this year.

"NetSuite has been moving up-market to service mid-market companies and departments within large enterprises," said Zach Nelson, NetSuite's chief executive. "At a time when rivals are increasing charges and support costs, we were able to report our 35th consecutive quarter of increased revenue."

“We are also adding customers with more complex operations,” Nelson added.

Most telling was the growth of its international operations, helped by sales of its Japanese language version and strong sales in the UK and mainland Europe. International revenue was $7.4 million (£3.7 million), accounting for 20 per cent of total turnover.

“Revenue outside the US has grown quarter on quarter, with revenue growth particularly strong in markets such as Japan,” said Jim McGeever, NetSuite’s chief financial officer.

The company added 400 new customers in the second quarter, including the UK operation of food and confectionary maker Nestle, and increased average revenue to $30,000 per customer per year. The company also announced that 130 customers had taken on its OneWorld product which allows larger businesses to deploy and manage localised versions of NetSuite but still manage them and extract data centrally.

“There is an accelerating shift towards SaaS across the business community. NetSuite has more exposure to this than most other software companies,” Nelson said.

In June the company announced the acquisition of professional services company OpenAir. Investments in development and staffing had a minimal impact on second quarter earnings, though NetSuite is planning further investments in professional services and support staff.

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