Cloud Innovators: Salesforce, Workday & Netsuite
There is something of a land-grab afoot where the younger, more nimble cloud-based firms like Salesforce, Workday, and Netsuite are aiming to gain share from the giant ERP generalists including Oracle and SAP.
The three newer companies have an aggregate enterprise value of about $43 billion, even though they have combined revenues of only $3.5 billion and a collective net loss of $417 million.
What’s going on here?
Oracle and SAP have a combined enterprise value of about $270 billion, and it looks like the new firms may eat some of their lunches. Clearly, those valuations are saying that Wall Street sees some up-and-coming newbies that aren’t likely noobs.
Instead they look like disruptive innovators that will create new markets by applying a different set of values, which ultimately overtake the existing ERP market; at least in their respective verticals.
In addition, subscription businesses are forward-looking, not backward-looking. The companies' valuations are more likely to reflect contracted future annual expectations; not only what is shown by last period's GAAP accounting statements. Subscription companies operate on recurring revenue and recurring expenses, and therefore focus more on recurring profit - more than static operating profit.
There is a sense that there is a ‘land grab’ in each vertical: Salesforce has snatched CRM, Workday has taken HRM, and Netsuite has grabbed accounting/finance+. And, other innovators are coming to the remaining important enterprise verticals. Soon each vertical in the cloud will be occupied.
If the entire ERP solution set is eventually cloud-based and each vertical solution collaborates with the others, the grand valuations might look paltry in retrospect.
Program and Campaign Manager
11 年Salesforce is a great solution for larger companies, but there are also cloud based solutions for SMBs. One Cloud based CRM for SMB is provided Really Simple Systems who were recently nominated as the most innovative Product for SMB by the UK Cloud Awards. Here is a Interview with a SMB Hello Scotland use Really Simple Systems (RSS) Cloud Based Software https://www.youtube.com/watch?v=_4etH7rRCf4 #ukcloudawards
Ragioniere presso Tecnovis - Tecnologias Ovinas
11 年dallo.caro.mio.caro.mio.acciaio.e.oro
Managing Director, Mindswarm Solutions Pvt ltd & Bumblebee Leadership Academy
11 年No doubt, cloud based business model is a disruptive innovation. At this point, the super valuations enjoyed by these companies is more due to hype and not supported by current or projected business growth. Also, as the model matures, this will also follow the typical business and tech lifecycle.
B2B Content Development, Marketing Consulting, Planning, Social Media
11 年The young nimble companies recognize the gold mine out there for cloud services, but they're only going to unearth nuggets until they can integrate with big data, which is the global driving force . And to protect the growing perabytes of sensitive, proprietary, and intellectual data, companies will need serious investments in cyber security to avoid being target practice. When they can package all of this, then they're ready for the big leagues.
Group CTO at Embassy Group
11 年I reckon, these young organizations are nimbler enough to embrace the trend much ahead of the biggies in this space... More than the possibility of collaboration among these smart companies, I see a possibility of acquisitions from these biggies to protect their share & margins..