NetSuite, a provider of hosted applications for mid-size companies, plans to go public and establish operations in China before the end of this year, according to the company's President and Chief Executive Officer Zach Nelson.
NetSuite is hoping to emulate the "ten times revenue valuation" its rival Salesforce.com achieved when it filed for an initial public offering (IPO) in June 2004, Nelson said in an interview Wednesday. "Going IPO is more of a marketing event for us to increase our visibility and credibility," he said.
NetSuite had previously looked at going public towards the end of 2005, but decided waiting until later this year would give the company more of a chance of matching Salesforce.com's IPO performance which valued Salesforce.com at over $1 billion, Nelson said. NetSuite recorded around $70 million in revenue in 2005 and hopes to double that amount this year, he added.
As its first step towards going public, NetSuite is planning a major announcement around new products, functionality and partners for April 5 due to take place in Oakland, California, he added.
Having set up a wholly owned subsidiary in Japan earlier this month, NetSuite now has its sights set on China. The company hopes to set up operations in China later this year via local partners, Nelson said.
NetSuite positions its software as covering the area between "QuickBooks and SAP," in other words the midmarket not served by Intuit Inc.'s entry-level accounting software or SAP AG's enterprise applications, Nelson said. NetSuite offers a combination of hosted enterprise resource planning (ERP), customer relationship management (CRM) and electronic commerce applications for companies employing under 500 staff, he added. The company currently has around 7,000 customers, 50 percent of whom employ less than 100 workers.
NetSuite's primary competitor is Salesforce.com but the company is likely to also face off more frequently against SAP, Oracle Corp. and Microsoft Corp. as those firms venture further into hosted applications.
Competing against Oracle could prove particularly interesting, given that Oracle CEO Larry Ellison is one of the founders and the lead investor in NetSuite. Through his Tako Ventures LLC investment company, Ellison owns between 50 and 60 percent of NetSuite, according to Nelson. Total investment in NetSuite from Ellison and venture capital firms is in the order of $100 million.
NetSuite runs its hosted software on two server farms of hundreds of Hewlett-Packard Co. ProLiant servers running Red Hat Inc.'s Linux distribution and Oracle's database, Nelson said. The farms, administered by NetSuite staff, are in Sunnyvale, California and Sydney, Australia.
NetSuite is planning to add a third server farm located in either the U.K. or North America later this year, he added. By using server farms and a phased rollout of upgrades to its software over a three-month period, NetSuite hopes to limit the impact of any potential system outages to a small number of customers, according to Nelson.
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