Unlocking Your Software Company’s Full Potential: From Startup to Global Enterprise
For these companies at any stage of growth, NetSuite is the first and last business system they will ever need. NetSuite has already been through each phase of the software life cycle, from startup to IPO to global enterprise. As NetSuite founder and chairman Evan Goldberg says, “We get software companies.”
As the leading global cloud ERP, NetSuite enables companies to grow and scale, and most importantly, its platform enables businesses to transform themselves through each stage of that growth. In fact, NetSuite has tremendous software industry expertise. Over 1,500 software companies, from startup to enterprise, use NetSuite, making it the leading cloud ERP for the software industry. NetSuite has more than 300 pre-built reports and dashboards targeted specifically for software and internet-based companies, with 15 pre-defined roles.
The Software Company Life Cycle
Software companies follow a predictable life cycle, with different challenges at each stage. The life cycle stages can be defined as startup, midmarket, up-market and enterprise.
Stages and challenges include:
- Startup: Startups have an idea and vision (a “North Star”), a focus on bringing a solution to market, and a need to attract and satisfy early customers. They need initial capital, must pivot based on early experiences and grow rapidly to ensure success.
- Midmarket: These companies have demonstrated proof of concept and are focused on growth, scaling and globalizing, and may need additional funding.
- Up-market: These companies have successfully scaled and are becoming mature businesses. They are engaging in M&A, may have a liquidity event and need to continue innovating while putting systems and processes in place to operate as a large global company.
- Enterprise: Companies at this stage face the challenge of continuing to be entrepreneurial and innovative while complying with regulations, demonstrating good governance and satisfying a large number of external stakeholders.
“Our visions is to help you transform your business vision by being able to transform your systems in real-time.”
Evan Goldberg, Founder, CTO, Chairman, NetSuite
NetSuite: The First and Last Business System a Tech Company Will Ever Need
NetSuite’s North Star has always been building an internet-based system that enables a company to run its business. It started with accounting and has expanded to build an entire suite. NetSuite is:
- Purpose-built with specific capabilities for internet companies.Software companies have always been a core focus.
- A global cloud ERP.Every software company wants the opportunity to reach a global customer base. NetSuite makes this possible with multi-language, multi-currency, multi-subsidiary capabilities and built-in compliance for local tax and regulatory requirements.
- A solution that scales with each customer’s growth. As a company, NetSuite uses its own solutions and has more than 5,000 employees logging in to the system each day.
- An extensive platform.This platform allows companies to future-proof their business, with a single system that meets the needs of today and will adapt to meet the needs of tomorrow.
The life cycle begins as a startup. After establishing a vision and a North Star, successful startups develop a foundation to enable growth. The first steps typically include funding and securing the capital needed for initial growth. Proving the model is also a key first step as many startups are pulled in different directions. Once the model is proven and the first round of funding is spent, the second round of funding is not far behind as the business prepares to scale. Even early on, companies need to think about how they will continue to scale not only their business but also their infrastructure. An integral part of moving from one stage to the next is the visibility the business is able to provide to investors. Having dashboards and prebuilt reports that can quickly and easily convey critical business data is extremely important. Finally, once a company has secured funding, proven the business model, begun to scale, and can give visibility to investors, it must establish a system of record. Companies should plan early to adopt systems that enable growth.
Even at a company’s earliest stages, company leaders want to track performance and give visibility to others. The metrics software companies rely on are both monthly and annual and span recurring revenue, year-to-date revenue, average selling price, cost to acquire a customer, churn rate, lifetime customer value and more.
NetSuite provides dashboards that are easily customizable to provide company leaders and investors visibility into company performance.
The data on dashboards needs to be actionable. Dashboards are reference points for evaluating performance and taking action.
Successful Midmarket Companies
Midmarket companies have advanced beyond the startup stage because they have figured out their basic product and business model, and have proven their concept. As a startup, the focus was innovation. Now, it is putting in place repeatable processes and controls to be able to scale. As these companies begin to expand globally, legal and jurisdictional challenges, as well as reporting and tax issues are main points of focus. When NetSuite expanded globally, it was able to leverage the OneWorld platform.
With global expansion, companies are often looking for additional funding and drawing more scrutiny from investors and auditors who want more visibility into financials and operations, which requires more mature financial processes and controls. In order to provide that visibility, there must be deliberate, thoughtful processes and controls put in place that are scalable, but don’t hinder agility. Companies must balance the need for innovation and with the need for strong controls.
As software and internet companies scale, they need the flexibility to bill and invoice however they want and take advantage of new business models. NetSuite SuiteBilling provides the framework for companies to experience that growth while maintaining billing accounts and charges. Because SuiteBilling is integrated with other systems, it automatically receives data about orders and usage. It is a simple, elegant billing solution, producing user-friendly invoices that use advanced PDFs.
DocuSign is transitioning from a startup to a midsized company, and is experiencing hyper-growth. Currently 235,000 companies have adopted DocuSign, with 85 million unique users and 85,000 new users each day. DocuSign has a quantifiable value proposition that boosts companies’ top lines and decreases expenses. It delivers an improved customer experience, reduces risk, and improves security and compliance.
DocuSign CEO Keith Krach sees four keys in going from a startup to a midsized company:
- A strong leadership team
- Systems like NetSuite
Since 2013, DocuSign has used NetSuite, and NetSuite uses DocuSign.
Successful Up-Market Companies
As software companies mature beyond midmarket status, they become “up-market” and must deal with additional challenges and complexities. At this point, maturity is necessary to again focus on innovation. Up-market companies are scaling in multiple locations and need a model for doing so. Key focuses are consistent operational processes and controls, opening new subsidiaries and broad visibility. Companies at this stage will also use M&A to access innovation and/or drive growth and will hope to do so without hurting operations or visibility.
Companies at this stage usually run on a public company stewardship model, with sophisticated reporting and control requirements. They must balance the need for flexibility, agility and innovation with increasingly rigid demands for controls, reporting and auditing. The functionality and processes in NetSuite provide controls, but the flexibility of the platform allows for innovation and growth.
Revenue Management System
While midmarket companies need a flexible billing system to help drive growth, up-market companies also need a bulletproof revenue management system to ensure compliance. NetSuite’s Revenue Management System allows merging multiple activities (like two subscriptions) into one revenue arrangement. NetSuite enables revenue to be allocated, using fair value. Also, the associated revenue for each element is going to be amortized over the appropriate service period. Other tasks the system performs include determining how much of the revenue is deferred.
Successful Global Enterprises
As companies become global enterprises, they face an entirely new set of challenges they must address. First, they must preserve the culture of innovation that made the company great, while preserving the energy, retaining key employees and attracting talent. Once they are able to preserve that culture, they need to manage and unlock subsidiary growth. During the period of growth, M&A is also key in attacking new markets and is important in acquiring expertise.
At this stage, enterprises are focused on risk and want solutions to help identify and manage those risks. External stakeholders are also continuing to diversify. They include auditors, new types of investors and the board. These stakeholders all demand visibility into the business.
Large companies segregate duties using roles and permissions. In NetSuite, levels include people, roles and permissions. There is also the concept of “permissible components”. This is determining what permission a person or role is given access to—what records, actions, pages, reports and etc.
The next generation of roles and permissions adds two levels, shown below:
- Permission groups
- Permissible components.
Permission groups make it easier to manage roles and permissions by assigning people to a group. In the future, permissible components will allow customization which will make permissions much more granular.
OneWorld is being reimagined to enhance the ability to conduct intercompany transactions. Today, to conduct an intercompany transaction involves creating a customer on one side and a vendor on the other. Going forward, NetSuite will automatically enable all subsidiaries to be trading partners with each other, meaning time saved and accurate data being seen throughout the entire system.
The intercompany framework can also be used to bill and settle intercompany charges, with the capability to roll all charges up into one vendor bill and one customer invoice per month, if desired. The intent is to make the process of settling and reconciling intercompany charges much easier.
Software companies at every stage of the software life cycle face unique challenges. NetSuite understands these challenges because NetSuite has gone through the entire software life cycle, from startup to midmarket to up-market to its current state as a global enterprise. NetSuite is the world’s leading cloud-based ERP, is purpose-built for software companies, is a solution that scales with a company’s growth, and most importantly, is a platform to transform and future-proof your business.
At Withum, we take a business first approach and strive to clearly understand your current state, collaborate on the future state in order to drive the correct technology roadmap that is based on your overall strategic plan. Withum is a NetSuite Solution Provider able to assist you with your ERP questions and solutions.
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Please contact a member of Withum’s Cloud Solutions and Management Consulting Services team at firstname.lastname@example.org for further questions or assistance.
|Walter Merkas, Cloud Technologies Leader
T (646) 604 4193
The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals for your individual facts and circumstances.
Disclaimer: NetSuite and the NetSuite logo are service marks of NetSuite Inc. Third-party trademarks mentioned are the property of their respective owners. The use of the word partner does not imply a partnership relationship between NetSuite and any other company.