NetSuite's Net Customer Loss

I have recently discovered some disturbing information from NetSuite which really questions the company's business growth and casts new light on the often presumed sky high customer churn rate. As first reported by Jason Carter in an article titled Customers are running away from NetSuite, over the prior five year period, NetSuite has lost more customers than it has acquired. Exceeding 100 percent client turnover during this period is not exactly a hallmark credential for a company selling a business software product which claims to improve customer relations.

While NetSuite refuses to report customer churn rates, information available from the company can be deductively reasoned to provide a strong glimpse of a big problem. On March 27, 2003, NetSuite issued a Press Release announcing top management changes and stating "... the company has reached the unprecedented 6,000-customer milestone ...". However, in the recently filed 2007 NetSuite S1 statement the company indicated that it retained "over 5,400" customers. Similarly, in the February financial results, the company indicated it added 432 customers, however, instead of a total of about 592 (5,400 + 432), the total was instead "over 5,600", suggesting to me that the excessive customer churn of the last five years is continuing as of the most recent quarter. How a CRM software company can have fewer users now than five years prior is a mystery of Tom Clancy proportion.

While not necessarily indicative of the total customer population, there are more web-based posted NetSuite customer complaints than I have ever witnessed for an ERP (Enterprise Resource Planning) system (or any business software system) - The BusinessWeek site shows pages and years of passionate and frustrated Netsuite customers posts, ZDNet's Dennis Howlett moderates a few user forums such as NetSuite Nightmares and NetSuite Nightmares: part deux, which largely bash NetSuite, CRM Landmark's user forum site shows similar negative reviews, a self proclaimed Frustrated NetSuite User setup his own blog (www.netsuiteuserblog.com) and has received dozens of follow-on blog posts, another upset NetSuite user chronicles his horror story when trying to leave NetSuite, and one very frustrated user setup a site to organize a customer class action lawsuit NetSuite. It's a very clear indication when this number of users go to this extreme to voice their displeasure.

Posted by: Jeffrey on 02.15.2008
Posted in: Oracle
Comments (7) | Jeffrey[at]erpblogger.com
Trackback | http://www.erpblogger.com/netsuite-customerloss.htm

READER COMMENTS:

NetSuite Churns Business Partners

As a NetSuite Solution Provider business partner I can attest to the sales games, annual price hikes, product instability issues and poor customer support. As an on-site NetSuite implementation resource, my colleagues and I are the recipients of customer anger and disgust. While we have no influence on the NetSuite ERP product or company policies, our clients don't want to hear that "its not our fault". Several of our clients are tired of product instability, fed up with the predictable month-end sales games and at a loss for customer support. The NetSuite business partner channel is not taken seriously by NetSuite senior executives and is in every day conflict with NetSuite's inside (telemarketing) sales force. I don't know, but I highly suspect, that the NetSuite business partner channel churn is as high as the customer churn. In full disclosure we will probably be leaving NetSuite's business partner program for another ERP software solution in the very near term.

Posted by: Anonyms, Ohio 09.18.2008

Your Comments Echoed

I've received a few comments claiming to be from NetSuite business partners. The comments were not published as they were rants directed at NetSuite with no constructive purpose. Nonetheless, they did clearly echo your frustrations. One published post from Scott Jenkins, CEO of NetSuite business partner The EBS Group, seems to represent a common theme. According to Scott,

"We are driven as value-added resellers to go find net new business, because if it's not net new business [NetSuite] will take it direct. So we go find it and we win it and take it to NetSuite, [then ...], only to find out a year later that the vendor claims it to be their account. Vendor direct sales reps are relentless in opening up talks with clients. They communicate directly and pretty soon the reseller is pushed out of the way with comments such as - Wouldn't you really rather work with the vendor?"

I also find it a tell-tale when the most successful NetSuite business partner splits with NetSuite. Phil Wainewright posted an entry titled NetSuite Parts Ways with Largest Reseller and describes how Skyytek, the NetSuite partner of the year for the last three years, and the partner who allegedly does more NetSuite revenue than the next 20 partners combined, has left the NetSuite Solution Provider program. I suspect this type of dramatic result has to be culmination of long-standing frustrations and irreconcilable differences. Generally, when the top and most successful business partner leaves, many others are certain to follow.

Posted by Jeffrey on 09.18.2008

Jim Cramer Recommends "Say Nay to NetSuite"

I'm an investor and I follow Jim Cramer in his evaluations on TheStreet.com. Today, he reviewed NetSuite and his recommendation was "I don't like this enterprise suite software. It's just too hard. Just go buy Salesforce.com." The 'hard to use' comment seems to be a consistent theme with other reviews I've read. However, I'm looking at more of a wall street perspective. Are you aware of any other analysts that cover NetSuite?

Posted by: Eric B from Solon, Ohio 04.24.2008

Bernstein Research Covers NetSuite

The only analyst I'm aware of that covers NetSuite is Charles DiBona of Bernstein Research. His current forecast for the company isn't so rosy (e.g. his most recent NetSuite title is "Sees No Upside"), however, I suspect he's looking far more at the corporate performance and macro picture.

Posted by Jeffrey on 04.24.2008

Additional NetSuite Analyst Coverage

Jeffrey - FYI, analyst Mark Murphy of Piper Jaffray just began providing coverage of NetSuite. Mark is known to be a very smart guy and his NetSuite customer analysis seems to support an industry recognized theme. He writes, “We believe the market has yet to include the potential financial consequences of what we believe to be lower customer satisfaction levels than the broader On Demand industry." He claims that his due diligence with NetSuite customers uncovered a “higher-than-average mix of unsatisfied customers.” I think he's sugar-coating the magnitude of the issue but his points are clearly made. He does recognize that the product gets some good technical reviews but that “deployment frustrates many customers due to the over-arching nature of the project.” He also indicates that his checks with the Better Business Bureau find a 13x higher complaint rate for NetSuite than for Salesforce.com. His end result is to downgrade the stock to a Sell rating at a $14 target.

Posted by Maria Lisboa from Santa Monica, CA on 06.01.2008

Why so Much NetSuite Negativity?

We're in a software selection for a hosted accounting software product. After 3 months of looking for qualified SaaS vendors who offer both on-demand ERP and CRM software, we're down to NetSuite and Aplicor. We really liked the Aplicor ERP solution and have found nothing negative about the company (in fact just the opposite). The NetSuite demo was good, however, their pricing, customer turnover and customer reputation are alarming. Any advice? Also, I've found a number of other websites which spew Netsuite negativity. I can send them to you if would you find them interesting.

Posted by: Jason from Herndon, VA on 03.10.2008

No Advice and No More Rant Sites Please

Without knowing far more about your project it would be inappropriate to provide any advice or recommendation. I suggest you reach out to a consultant if you believe third party experience and insight can resolve your dilemma. I've already seen many unflattering NetSuite reviews and have no need to see any more. I'm also not interested in keeping a website tabulation. Thanks anyway.

Posted by Jeffrey on 03.11.2008