SaaS-only providers are still powering ahead as far as top line growth is concerned but at the bottom line they continue to post losses.
NetSuite’s Q4 revenue (period ending December 31 2011) was impressive, coming in 23% up on the previous year at $64.1m and beating estimates of $63.4m. That shows the provider has momentum and that confidence in the cloud continues to grow for complex core business applications such as ERP. The level of growth is a positive sign because ERP has limped way behind CRM in terms of adoption. However, that growth has come at a cost because the company also made a net loss of $7.6m, which was higher than the year ago loss of $6.4m. Looking at the financial detail, it does not look like any particular area of cost has risen disproportionality.
For the full year NetSuite made a loss of $32m vs. a loss of $27.5m the previous year, on revenue that grew 22% to $236m. The results indicate that NetSuite experienced consistent growth over the year, avoiding peaks and troughs, which is testament to the recurring revenue model and NetSuite’s ability to execute in a market that is now readily accepting cloud-based applications.
Elsewhere in SaaS-land, SuccessFactors released Q4 prelims indicating revenue of $97m and an operating loss of $8.3m. Q4 will probably be the last set of SuccessFactors results – we say probably because its $3.4bn acquisition by SAP is being held up because it is waiting on approval from the US Committee on Foreign Investment. There are no adverse signs that we are aware of and SAP is still hopeful of a Q1 close. SAP’s Business Objects acquisition was similarly held up but went through.
Both providers have adopted market and revenue growth strategies but we continue to question the sustainability of this approach and the SaaS-only commercial model. Salesforce.com’s results are due later this month and we can’t see the high cost of growth trend being broken.