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NetSuite Revenue Recognition
Seminar
June 10, 2010
http://bit.ly/revenuerecognition
SIIA OnDemand Europe Steering Committee / Speaker
October 18-20, London Opportunities
www.SIIAOnDemandEurope.net Rhianna Collier, +1.408.884.3834 or
rcollier@siia.net
Save the dates and plan to join us at the
European
software industry’s most comprehensive annual
Sponsor Opportunities
ISV Brian Rosenberg, +1.917.267.8858 or
conference for understanding the business
drivers around SaaS and Cloud Computing.
brosenberg@siia.net
Agenda
Introduction
Q&A
HOW TO SURVIVE AND
THRIVE
IN THE NEW SOFTWARE
INDUSTRY
Presented by Laura
Sachar
7
•Software-as-a-Service
•Internet Marketing Services
•eCommerce
•Data-as-a-Service, Info-as-a-
Service
•Security Software Services
8
Led Series B round;
Lead VC in NetSuite (NYSE:“N”):
On-demand product innovation
$1.6B IPO in 2007. Highest VC–
and management software.
backed tech IPO since Google.
Led ‘07 Series B and ’08 follow-on: The
technology leader in on-demand
Led the Feb ’09 Series C round: customer collaboration.
The leader in on-demand business Led Series B round; fastest growing
intelligence (BI). corporate performance management (CPM)
on-demand software company.
Early investor in iCrossing: The
largest privately held Internet Early investor: ins.com is now the #1 auto
marketing services company. insurance agent online.
Led Dec ’09 Series B round; First on-demand, application security solution
invitation-only online sample sale that provides automated application security
shopping community testing through SaaS delivery model.
Early VC investor in leading on-
demand email solution provider Data-as-a-Service provider:
(acquired by Dell for >$150m). The largest farm equipment transaction
information database.
9
Demand for
SaaS is
Increasing
POSITIVE SAAS
TRENDS
Source: Gartner; Market Trends: Software as a Service, Worldwide 2008-
2013, Update
11
• SaaS CAGR is forecasted to grow at 5
times the total application market
• The market reached ~$7.5B in 2009
• The SaaS landscape continues to evolve
as vendors extend regionally and
increasingly offer vertical-specific
solutions
• The largest proportion of SaaS revenue is
attributed to customer relationship
management (CRM), content and
communications and collaboration (CCC)
Source: Gartner; Market Trends: Software as a Service, Worldwide 2008-
2013, Update
12
What Makes
a Winner
PUBLIC SAAS
COMPANIES
10
20
/
21
5/
Source: CapitalIQ
14
As of 5/21/10 LTM Revenue Enterprise TEV/Rev LTM Projected
($M) Value ($M) LT EPS
Growth Rate
AthenaHealth $202 $766 3.8x 35%
Concur Technologies 268 1,911 7.1 25
Constant Contact 140 505 3.6 36
DemandTec 79 125 1.6 20
Kenexa 159 247 1.6 18
Keynote Systems 80 89 1.1 20
LivePerson 93 265 2.9 24
Netsuite 169 816 4.8 26
RightNow 159 389 2.5 29
Technologies
Salary.com 46 37 0.8 30
Salesforce.com 1,306 9,945 7.6 30
Successfactors 162 1,182 7.3 29
Taleo 205 708 3.5 24
Ultimate Software 204 777 3.8 23
Group
Vocus 86 180 2.1 20
15
$ Millions
Public Funding to Years to Revenue at EBITDA at
Companies IPO IPO IPO IPO
AthenaHealth $49 10.1 $76 $11
BlackBoard $101 7.1 $92 $9
Concur $30 5.3 $20 ($25)
ContantContact $37 12.2 $50 ($2)
Dealertrack $48 4.9 $121 $34
DemandTec $42 7.8 $43 $1
Kenexa $55 18.5 $66 $12
LivePerson $42 1.5 $1 NA
LogMein $25 6.4 $52 ($0)
Netsuite $85 9.2 $109 $18
Omniture* $67 10.5 $80 $8
RightNow Tech. $32 7.6 $62 $6
Salary.com $6 7.9 $23 ($3)
Salesforce $65 5.4 $96 $19
Success Factors $55 14.9 $63 ($59)
Taleo $37 6.2 $78 $6
Ultimate Software $25 8.4 $43 ($2)
Vocus $26 6.4 $28 ($1)
Average $46 8.4 $61 $2
Source: River Cities Capital Funds, “SaaS Valuation and Capital Efficiency
Benchmarking Study,” and SEC Filings and Wachovia Securities – May 2008
report on the state of the SaaS market
* Omniture was acquired by Adobe in September 2009
16
Key Metrics
STARVEST SAAS
EXPERIENCE
• Revenue Periods: $1-5M; $5-15M; $15-
30M
Revenue Growth
Capital Efficiency
Gross Profitability
Sales & Marketing as % of Revenues
Research & Development as % of
Revenues
Capital Expenditures as % of Revenues
18
$1-$5M $5-$15M $15-
$30M
Capital 22% 50% 88%
Efficiency
Gross Profit 46% 45% 65%
19
Other Key Metrics
20
Exits
TOUCH DOWN
22
Source: Software Equity Group “Software Industry Equity
Report,” Q1 2010 23
• SaaS is significantly outperforming the
total application market
• Key SaaS indicators include revenue
growth, capital efficiency, gross profit,
S&M & R&D as a % of revenue
• Additional metrics include recurring revenue, churn,
TCV/ACV and bookings
• SaaS exit opportunities:
• SaaS companies require 50-70% more capital for
cash flow break even
• Public SaaS companies have partially recovered
valuation since the end of 2008
• Continued increase in SaaS valuations is likely
24
Aligning Sales, Finance, and Service
For the New Software Economy
Paul Turner
Director Solutions Marketing
NetSuite
© NetSuite 2010
NetSuite: Quick Take
Background Performance
Founded 1998 6,600+ customers, 750+
Publicly traded on NYSE: “N” software companies
5 Star Rating
”
revenue in 2010
30
But Subscription Comes in Multiple Forms
31
What it Means
Sales Finance Service
Structure Order Management Cost-to-serve
Comp Billing / Invoicing Cust sat visibility
Renewals Revenue Renewals
Forecasting Recognition
Renewals
Effectively Managing Recurring Revenue
Requires Important Milestones
Metric & Value Tracking
Upsell & Renewal Customer Sat
Management
Multi Quota
+
Renewal
+ Opportunities
Forecasting &
Comp Planning
+ Your
+
Support Quote/Order
Software
Co
Monitoring Usage+ +
& Ongoing Client Recurring Billing &
Management + Revenue
Recognition
Services Invoice/Rev. Mgmt.
Hard to Achieve When You’re Running This…….
evenue Amortization
Deferred Revenue
Upsell
Renewals
% of Completion Rev Rec Renewals
Forecasting
Rev Rec
Future Billings
Collections
Commissions
Mgt Reports
Prepaids Amortization
Allocations
Positioning Sales for Renewals Success
Big Ideas
Managing Up-sell vs. Down-sell
Sales Management: Key Takeaways
Up-sell #1 Up-sell #1
Up-sell #2 Up-sell #2
Flexible Billing is Required To Avoid
Spreadsheet Hell
One time invoice from order Milestone billing
On-premise software product Implementation project work
Training materials, user
manuals
Time and materials
Fixed bid implementation
Implementation project work
Custom user training
Schedule based on calendar
Subscription
Usage-based billing
Maintenance
Pay per call customer support
Support
Subscription
Finance: Key Takeaways
Forecasting
Rev Rec
Future Billings
Collections
Commissions
Mgt Reports
Prepaids Amortization
Allocations
NetSuite Provides a Cloud Single
Business Suite for Software Co’s
Customers
CEO CFO
Vendors
Partners
Drive Recurring Revenue Management Globally
LOCAL GLOBAL
Currency Consolidation
Quota Sales
Forecast Revenue
Orders Dashboards
NetSuite SINGLE NetSuite
Taxation
ECOMMERCE DATA Currency
CRM+
SOURCE Management
Partners
Compliance
Language NetSuite
FINANCIALS Control
Website
Many Websites
Up to
50%
Lower TCO
46
Delivers Hard Benefits to
Software Companies
Improvement area Business Result Company
Dedicated PS team
52
Best Practices
© NetSuite 2010 53
Resources
Upcoming Event Available Whitepaper
54
Q&A
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