How NetSuite Affects (and Improves) Software Companies
NetSuite provides an integrated software-as-a-service (saas) business management application for accounting and financials, enterprise planning, manufacturing, e-commerce, customer relationship management, and reporting.
The core application provides functionality for order and billing management, global subsidiary and business unit management, and partner relationship management.
NetSuite differentiates itself on its foundation on a single customer record, so sales, support, billing, accounting, shipping, and business intelligence all access the same data. Other components of NetSuite to support software companies include:
- Revenue accounting. Support for revenue recognition standards, automated revenue calculation, and pre-built revenue recognition reports help companies to manage and support revenue recognition requirements.
- Renewal and maintenance revenue management. Data configuration and workflows to support both subscription-based and maintenance-based ongoing revenue streams enable companies to target renewals and contract end dates, manage billing, and identify cross-selling and up-selling opportunities.
- Industry-specific dashboards and metrics. Role-based dashboards and prebuilt reports provide real-time visibility into licenses, maintenance, and deferred revenue projections.
- Support for software-related financial management requirements. Support for SOP and EITF standards help software companies to manage business growth while institutionalizing support for key audit requirements.
Nucleus found many software companies deploying NetSuite either moved from an on-premise application such as QuickBooks, Microsoft Dynamics GP, or ACCPAC, or had been using custom in-house applications to support their business. To understand the impact of adopting NetSuite on software businesses, Nucleus conducted in-depth interviews with 23 NetSuite customers in the software industry. They asked questions about:
Most software companies moving to NetSuite fell into two categories. Some companies were using homegrown or basic applications such as QuickBooks that could not support their needs for growth or reporting. Others were using multiple on-premise applications and sought an application with lower support costs and a more integrated view of their business. Those in the former category were able to save on general employee productivity because of fewer system crashes and less time spent in spreadsheets. Most of those replacing on-premise systems saved both software license maintenance costs and IT staff.
Nucleus found software companies moving from on-premise applications to NetSuite eliminated an average of $23,000 in software license maintenance costs per year, with a high of $50,000. IT staff savings for those companies ranged from 50 percent to 65 percent of total IT time. These savings reflect the change companies experienced in moving from other applications to NetSuite. Many also recognized that moving to an integrated enterprise application environment in the cloud enabled them to support growth that would have required significant additional investments in software, hardware, infrastructure, and personnel to support. Nucleus analysts estimate that an onpremise application providing similar functionality would cost at least $50,000 in initial software fees, $20,000 in hardware, and $50,000 a year in license maintenance and support costs for a low-end on-premise ERP project.
The amount companies can expect to save on IT with NetSuite will depend on the number and support cost of applications that will be replaced and the amount of IT time spent on building custom reports. In many cases, customers can justify their NetSuite investment based on IT savings alone.