NetSuite: Bad News, Good News for Software as a Service

NetSuite, one of the software as a service (SaaS) industry's key players, remains stuck in a financial paradox: Even as the company's revenues rise dramatically, NetSuite's stock remains depressed. What does that say about the SaaS market as a whole?

First, the details: NetSuite on November 3 announced record Q3 results, including revenues that jumped 44 percent to $40.4 million. If this was the dot-com boom, NetSuite's stock would have skyrocketed.

But these days, investors are focused on net income and earnings per share, rather than top-line revenue growth. And in the case of net income, NetSuite missed analysts expectations by about a penny per share. As a result, NetSuite's stock remains depressed. (So does MSPmentor's SaaS 20 Stock Index, which is down more than 40% in 2008.)

This balanced blog post from Yahoo Finance Tech Ticker describes NetSuite's market opportunities and challenges.

For managed service providers, NetSuite provides a healthy and timely SaaS reality check. Plenty of folks continue to hype SaaS -- especially as corporate IT organizations try to cut costs by outsourcing applications to hosting services.

There's a growing place in the IT world for SaaS. And MSPs will need to evaluate a range of SaaS and cloud services in order to remain a key voice in the applications market.

SaaS will continue to suffer its share of short-term setbacks. NetSuite's growing revenue proves the business model is here to stay.

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