I’ve been doing a bit of “research” about this entire SaaS accounting thing and thought I’d share a few developments with y’all.

In June 2005, MYOB became the Australasian distributor for NetSuite. NetSuite, of course, is the SaaS accounting company primarily owned by none other then Larry Ellison of Oracle fame. A few things to note here – NetSuite is aimed at US sized SME’s which in effect means it’s pitched at medium players in our scale of things. The complexity and no doubt cost of their offering puts it our of reach of our average business. Arguably they could reverse engineer but that doesn’t make sense and big software companies just aren’t geared up to be lean and nimble like that.

The second thing to note is that MYOB and Netsuite hooked up over two years ago. This is the 21st century and we’re talking about a software offering in a space with a rapidly shortening product development time and life cycle. Two years without gaining significant traction in the marketplace is criminal. Last year a rebranding occurred with MYOB (part owner of the company distributing NetSuite in Australasia) setting up NetReturn Limited as the front to schlep the NetSuite product.

Interestingly enough Jim Donovan comments about the terrible service that NetReturn provided Fronde (well I assume Fronde anyway);

I couldn’t use Xero in my business, but I could use Netsuite – that is, I might have if their Australasian sales partner had not taken over a month to respond to my enquiry.

this again is criminal – B2B in this space has to be fast, attentive, flexible and responsive.

There is also no obvious sign of a pricing structure for NetSuite on the NetReturn website – not so much of a big deal if they’re pitching at larger businesses but bad if they’re serious about small entities. The only thing I could find was this;

What is the cost for NetSuite and NetSuite CRM products?
NetSuite product pricing can vary depending on the number of users, training and implementation services, and ongoing support plans that you choose – you simply pay for what you use. In general, the overall total cost of ownership when compared to other solutions can be up to 90 percent less over the first few years.

Which doesn’t actually say squat.

So…….

How does this relate to Xero and my previous comments about the competition? Well it certainly explains why Rod is strongly targeting the Xero offering to smaller SME’s – they’ve obviously identified that the hole exists in that space and they don’t want to go head to head with the providers of solutions for medium sized operations. It also nicely explains their intention to target Australia and the UK as opposed to the US. Partly because the threats in the US are bigger but also because the opportunities (read potential number of businesses of the right size to suit their product) is bigger. It’s SWOT analysis 101 and undoubtedly something Rod understands backwards, in his sleep and in Cantonese.

So…. (again) two very valid questions for Xero investors or industry watchers…

1) If this is the MYOB SaaS experience that they’ve sunk time and money into only to have it flop, will they be interested in turning on the heel and creating a new product, a reverse engineered NetSuite or a SaaS MYOB to compete with Xero?

2) What has Xero got up their sleeve?

Obviously they’ve got some serious hooks in terms of having the banks and accountants in their camp. There’s some nice trickery getting bank accounts into the package and reconciled – but that’s nice and all but isn’t a killer ap.

The aura of smug emanating from the team at Xero (and I mean that in the nicest possible way) would indicate that they do in fact beleieve that they’ve developed the killer ap – that they have something to roll out that is so ground breaking that it will build the business and overcome the threats. I have no idea what it is – I’ve kind of thought in the past about some accounting software features that would aid in business development – automated industry averaging, benchmarking, comparative analysis and that sort of thing but I don’t think thats what Xero is hanging it’s hat on.

I guess it’s a case of watch this space for developments.

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

6 Comments
  • Netsuite announced their IPO today, 10% of equity listing for $75m, revenues under $70m, Larry controls just over 74%.

    Being independence day and just after our 8th birthday, we thought we’d also soft launch our lite international version to 57 countries (including NZ). Hope you like it (free for very small businesses) – http://www.saasu.com – our local distribution partners in NZ seems to like it too.

    Cheers, Peter.

  • That’s very interesting news Ben – I wasn’t aware of the MYOB/Netsuite connection, and, as you say, there has been a criminal lack of progress since the deal.

  • Hi Ben,

    Paul Goldsmith from NetReturn here.

    Just wanted to clarify and respond to a few of the points you raised with your article.

    Firstly, we were certainly remiss with Jim Donovan from Fronde.

    Whilst it didn’t actually take us a month to respond, the time it did take was too long.

    It is an unfortunate fact of business life that sometimes things don’t go as planned, and sales calls can slip through the cracks.

    And that was certainly the case with Fronde. We’ve had a look at why this happened, tightened some processes and definitely hope we don’t have this sort of issue again. It is also a fact that the ones that get way make the most noise.

    In some ways I need to thank you; because we read of Fronde’s problems we have slightly changed our systems. A better result all round should be the result.

    Nobody wants to lose sales through inactivity, particularly when as Jim Donovan himself states, “Comparing Xero to NetSuite is like comparing a small utility truck to a 20-wheeler. NetSuite is aimed at much more sophisticated and complex businesses.”

    On his blog, NZ Internet, Media and Business, Lance Wigs calls the Xero and BurgerFuel offerings “pathetic” in comparison to NetSuite.

    We certainly don’t actively compete with Xero. Nor MYOB.

    We believe that NetSuite is by far the best, most advanced, and most functional mid market application on the market. Note I said mid-market.

    NetSuite is not aimed at very small businesses, meaning that pricing can be very difficult to simply list out. At a very basic level, the more seats you need, the cheaper it becomes.

    NetSuite is also not just an accounting application; our CRM module is at least the measure of salesforce.com, and our eCommerce module has consistently won accolades. Most business license the full NetSuite application allowing them to run all of their major business functions from the one application. There is no one set price for every business.

    For smaller businesses we do have a product called NetSuite Small Business, which is to all extents and purposes a baby NetSuite, available for less than $2000.00 Aus per annum.

    However we haven’t pushed NetSuite Small Business, we felt it was wiser to make inroads into the mid-market, build our service and implementation teams, and establish NetReturn first.

    Contrary to your view, we believe NetReturn has made significant inroads into the Australian and New Zealand markets. We are not salesforce.com with a massive marketing budget. We are a small Australian company, bringing innovative, and, frankly – if you are into this sort of thing – exciting software to Australia and New Zealand.

    Our growth rates are more than 100% year on year; we have been listed in the BRW Fast 100 and have a stream of new and happy customers coming on board each year.

    As a service based business, renewals are our lifeblood, and we have been working very hard to make sure that all of our present customers, stay customers. Our results in this area have been exceptional. We want our customers to be successful, to use our products well, and grow, with us.

    However we are not owned by MYOB, and nor do MYOB have any great input into the company. MYOB are an investor in NetReturn, as are Commander Communications, Saltbush Annuity Growth Management, the David Shein consortium and a number of other institutional investors.

    We believe all of our investors have made a wise decision.

  • Thanks for the reply Paul – no argument that you and xero are aiming for different ends of the spectrum although I must disagree when you say that MYOB has no real input into the business – they invested for a reason after all!

    Anyway it’s going to be an interesting time for accounting SaaS in the next year or so

    Ben

  • MYOB invested in NetReturn because they understand that SaaS is the way of the future, of that there is little doubt. Craig Winkler is no fool.

    NetSuite also give MYOB a natural upgrade path for their larger and growing customers who may otherwise end up heading towards Navision, SAP etc.

    MYOB didn’t invest in us to run NetReturn. We are very different animals, but yes, the coming years will be a very interesting for SaaS. Very interesting indeed.

  • Thanks Paul – it’d be good to hear Xero’s thoughts on this although, given that they are pre-release, I can imagine they’re all heads down bums up working on the product itself

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