5 Questions with NetSuite’s CFO

You don’t often hear about high-tech vendor CFOs who go out on sales calls with the sales guys. But when you’re selling and using your own Web-based accounting, ERP and e-commerce software in-house—as NetSuite does—then there’s no better person to have in the room than your own CFO when a potential customer asks: How does this functionality work? Or, What about SaaS security?

That’s not Jim McGeever’s main job description, but it’s what he occasionally does for NetSuite—as well as, of course, being in charge of the 11-year-old SaaS software vendor’s finances. “I’ve been on three calls this week,” McGeever says in late October.

CIO.com Senior Editor Thomas Wailgum spoke with McGeever about the changing nature of business applications, Larry Ellison’s effect on NetSuite and how he deals with on-premise software vendor’s FUD. (Here’s an edited version of their conversation.)

1. So because you’re a CFO, just how effective are you selling Web-based ERP software?

Jim McGeever: I’m very effective when it comes to selling to software companies. I don’t work the entire sales cycle, but I often do a demo early on and then maybe get involved toward end. It’s very effective because when I’m having a conversation with them, they’ll say: “We need to amortize our commissions over the contract period.” And I say, “OK, this is how we do it at NetSuite.” Or, with some cases, I’ll tell them: “We used to do it this way, and stopped and tried it this way. Now we do it this way.” With a software company, that’s incredibly effective because you build the credibility that you understand their problems and you understand how to fix them.

2. Is the notion of what constitutes a “business application” changing among your customers?

McGeever: It used to be that every [department] had a separate application, and those workers sat at their desks and used them all day. And then BI tools were layered across all of these applications to give information to people who didn’t sit at their desks all day long using an app. They were the “users” of all this data that would come. Someone would have to consolidate that data, and a whole new industry came out of that. With the new generation of apps, where NetSuite is a good example of that, we combine all of that together. And everything is in real time. In the old world, you had the “closing process,” [which could take weeks]. Now, it’s about what’s going on today. I don’t look at my cash-collected numbers for last month. I look at what they were yesterday or this morning.

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3. Are SaaS customers’ buying habits different than, say, what typically happens in traditional software engagements?

McGeever: We actually get more incremental revenue from selling to our installed base than we do from new business. And no SAP or Oracle [engagements] are going to be anything like that. It’s because a customer will go in and maybe they’ll start using us for back-office accounting. Then add shipping. And then they’ll add sales people and support people, and start using our commissions module. What happens with the product, especially if you start with ERP, is that you’ve got all accounting data in there already—employees, customers, vendors, and then if you add, say, the salesforce-automation piece, well, it’s a lot easier to add that because you’ve got half the data already in there. It becomes a very easy implementation, very quick.

We generally start small and expand in an organization. Three of the last four tech IPOs have all been running on NetSuite. And I just heard that seven of the last 10 tech acquisitions have all been running on NetSuite. Someone asked me: Are you going to lose all of those customers? Four years ago, I would have said yes. But what’s happening now is that we’re creating beach heads into larger companies.

4. Does the presence of Oracle CEO Larry Ellison at NetSuite (Ellison is its majority owner) hurt the future of the company?

McGeever: No. Larry has been an enormous positive on NetSuite. In the early days, if you walked around the sales floor and listened to the salespeople’s calls, every other word out of their mouth was “Larry Ellison.” It established credibility for us that we weren’t just some no-name company. Today, as a general rule, we don’t lead with it any more. We’ve built up enough of our own name and own brand where we don’t need to do that.

5. In an August 2008 interview, Lawson’s CEO said that the SaaS industry will collapse in two years. So I suppose you’ve got just a little under a year left. What do you make of big vendor FUD like that?

McGeever: In many ways it shows just a fundamental lack of understanding of where the world is going. I do a presentation to CFOs [about debunking the myths of SaaS], and I use both his and SAP’s quotes about on-demand in the presentation. It makes them look ridiculous. I don’t think there’s a single person who read that and said: I agree with that! It’s been nothing but helpful for us. It’s like [they’re] fiddling while the Titanic is going down.

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