IS NETSUITE SHIFTING UP A GEAR?

After spending much time in the shadows of some of the more well know on-premise ERP vendors such as Sage, SAP and Microsoft, NetSuite at last appears to be emerging as a distinguishable player in the ERP market sector.  The momentum shift seems to be coming from a number of different sources. While the likes of Sage can undoubtedly still claim to have a significant edge in terms of market reach and customer install base it’s fast becoming evident that NetSuite is gaining ground and on their once dominant positions.

Take for example last week, where NetSuite, without much notice edged past Sage in terms of overall stock market valuation. What does this mean in real terms? Well not much right now in terms of market penetration, however it does appear to indicate is that technology wise investors are now seeing greater value in what NetSuite has to offer for the future than they are seeing from some of the more traditional players like Sage.

While one could argue that market capitalisation on its own is not really a relevant measure of a company’s size or dominance in any sector, it does undeniably reveal what investors are thinking in terms of a company’s ability to outperform its peers over the coming years. Given the current valuation put on NetSuite these investors can only believe it will outperform its peers.

Another source of this anticipated momentum shift is Gartner’s recently published Financial Management Software (FMS) report showing the relative annual growth rates of the top financial management software vendors for 2012. NetSuite’s global growth rate came in at a healthy 49 percent, significantly higher than all other vendors listed in the report. Take this into consideration together with its relative growth in its overall market valuation then one can easily be forgiven for thinking that a momentum shift is in progress and that NetSuite’s true Cloud-based offering is seemingly about to disrupt the once dominant positions held by Sage and the other major on-premise vendors.

For now however Sage investors will remain relatively satisfied with the last 5 years return on their investment, but the question remains, can they expect to remain satisfied with their returns over the coming years? Only time will tell but I know where my money is for now.