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Cloud ERP Is Kicking Like Bruce Lee

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Cloud ERP Is Kicking Like Bruce Lee

While we’ve seen the leading cloud CRM application, Salesforce.com, spread like wildfire in enterprises across the U.S., the adoption rate of SaaS ERP applications has been slower. Many have doubted the potential of SaaS ERP ever since NetSuite, cloud ERP software leader, went public in 2007 and everyone could see its slower growth compared to that of Salesforce.com. However, times are changing.  SaaS skeptics may want to re-evaluate their beliefs after looking at new financial stats and research.

After Salesforce.com reported their first quarter earnings for its 2011 fiscal year, Software Advice put together a roundup of financial results for ten publically traded SaaS app companies.

Many of their findings show the growth and prosperity of the SaaS industry giant, Salesforce.com. No surprises there. They found that Salesforce.com had 35% year-over-year growth rate and currently accounts for 57% of total SaaS revenue. ERP only accounts for 16% of the total SaaS revenue.

While cloud ERP software like NetSuite isn’t currently cashing in as much as Salesforce.com, investors are recognizing the growth potential of the cloud ERP industry – and that gets us very excited. When Software Advice calculated the market capitalization relative to revenue run rate (latest quarter revenue x 4) of the various SaaS app companies, they found that NetSuite was in the lead with a multiple of 11x revenue.  Salesforce.com trailed behind with an impressive, but notably smaller, multiple of 8.5x.

Software Advice also found that NetSuite’s share price appreciation has increased 126.62 percent in the past year, while Salesforce’s went up 52.6 percent. As a NetSuite stockholder, I dig that kind of growth.

These stats indicate that there’s much truth to Zach Nelson’s (NetSuite CEO) recent claim that we are at the tipping point with cloud-based ERP.

Forrester Research findings certainly support this idea. They predict that the ERP software share of the SaaS market will increase 21% annually, through 2015.

Those aiming to benefit from SaaS ERP growth are wise to invest in NetSuite. They have substantial barriers to entry in the cloud ERP market and they are determined to continue dominating the space. They’ve increased the headcount of their sales team by 30% over the past year and have expanded third-party channel partners, which have been a key source of new business.  vConstruct is a NetSuite partner – so I know full well the impact partners have on a company’s success.

While NetSuite previously targeted small to mid-size businesses, their new strategy involves going after bigger fish. Their recent deals with Qualcomm and Groupon have greatly contributed to their growth and popularity. Groupon’s impressively quick rollout of NetSuite in five countries in six weeks generated a lot of buzz at SuiteWorld and garnered a significant amount of media attention; a PR move that will surely result in more companies buying NetSuite and even more people investing in the stock.

The recent research findings and NetSuite’s successes signify the promise cloud ERP growth. At vConstruct, we’ve known that it was only a matter of time before cloud ERP software would take off like it has with CRM, and we’re glad that we’ve finally reached that point. We know that it means consulting services and tools that help companies adopt cloud apps like NetSuite will be more important than ever before.  And that, my friends, puts us in a very good place to execute on our vision.

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About the Author

I like winning. From baseball and Uno to Trivial Pursuit and working with clients - it doesn't matter. I founded vConstruct to help companies better compete because I like seeing others win too. A big Red Sox fan living in Austin, Texas, I'm also the proud recipient of multiple consecutive presidential fitness awards from grades 3 through 8.

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