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Tuesday, October 9. 2007
Will NetBooks Fly Among Truly Small Businesses?
QuickBooks founder launches SaaS startup
New York (AMI-Partners) -- On September 5, the start-up NetBooks launched its suite of on-demand business management solutions for what it has dubbed "true small businesses," or TSBs (2 to 25 employees). The suite includes sales and customer relationship management, vendor relationship management, inventory and production management, shipping, bookkeeping, and reporting capabilities. NetBooks' offering includes functionality needed by inventory-based businesses, but it can also be used by services firms.
Available as an on-demand or software as a service (SaaS) offering, the vendor provides unlimited 24 x 7 support from staff with small business bookkeeping experience. Pricing starts at $200 per month for five users, with free access for a subscriber company's accountant or bookkeeper. Additional user subscriptions are priced at $20 per user per month. NetBooks is also offering customers a price guarantee, which provides lifetime protection against any subsequent price increases, and no additional charge for future features.
Perspective
Ridgely Evers, Founder and CEO of NetBooks, and one of the original developers of Intuit QuickBooks (the #1 small business accounting package in the U.S.), began developing NetBooks in 2003. NetBooks launched in February of this year.
New York (AMI-Partners) -- On September 5, the start-up NetBooks launched its suite of on-demand business management solutions for what it has dubbed "true small businesses," or TSBs (2 to 25 employees). The suite includes sales and customer relationship management, vendor relationship management, inventory and production management, shipping, bookkeeping, and reporting capabilities. NetBooks' offering includes functionality needed by inventory-based businesses, but it can also be used by services firms.
Available as an on-demand or software as a service (SaaS) offering, the vendor provides unlimited 24 x 7 support from staff with small business bookkeeping experience. Pricing starts at $200 per month for five users, with free access for a subscriber company's accountant or bookkeeper. Additional user subscriptions are priced at $20 per user per month. NetBooks is also offering customers a price guarantee, which provides lifetime protection against any subsequent price increases, and no additional charge for future features.
Source: AMI-Partners
Perspective
Ridgely Evers, Founder and CEO of NetBooks, and one of the original developers of Intuit QuickBooks (the #1 small business accounting package in the U.S.), began developing NetBooks in 2003. NetBooks launched in February of this year.
With 40 employees and $9 million in investor funding, including $2 million earmarked for marketing its newly minted solution, the company has set its sights on what it terms the "true small business" (TSB) market.
Evers has pulled together a team of experienced management, investors and advisors, hailing from a variety of leadership positions in the industry. Many have spent decades starting, running, growing and working with small businesses. NetBooks' stated mission is to revolutionize the way small businesses are managed, with solutions that "are as simple as possible, and as powerful as necessary, to run your whole business." The vendor is targeting small businesses with 2 to about 25 (occasionally 50) employees. NetBooks distinguishes the TSB as one in which the owner manages business; there is no "professional" management layer or capital; and the business is profitable via organic growth (versus external investments).
TSBs, in NetBooks' view, favor ease of use over power, and are typically looking for the simplest way to get a job done. NetBooks contends that it is filling a big gap in the TSB space. For instance, while Intuit QuickBooks provides TSBs with an easy-to-use accounting solution, it doesn't have the front-office capabilities that NetBooks provides. Meanwhile, NetBooks views NetSuite's and SAP's integrated back- and front-office suites as too complex and expensive for the TSB market.
NetBooks is keying in on TSBs' requirements for high-touch support by providing a "concierge" program that helps customers get up and running, and offers immediate access to experienced small business support reps via built-in instant messaging. Since NetBooks is an SaaS solution, support personnel can immediately tap into what the customer is doing, see the same data, and more expeditiously solve any problems.
While NetBooks will provide much of the solution's initial core functionality itself, the vendor is also creating a partner network to add deeper, best-of-breed capabilities to the suite. To date, NetBooks' partners include Authorize.net, UPS, PayCycle and Vertical Response, with other partner deals in the works.
How difficult will it be for NetBooks to get air time and gain market traction in an arena dominated by strong, established competitors? And, will very small businesses readily see the value of migrating from their standalone accounting solutions to complete business management system?
Analysis
5.8 million SBs in the U.S. are in the 1 to 49 employee range, representing a tremendous addressable market opportunity. According to AMI's 2006-2007 U.S. Small Business Overview and Comprehensive Market Opportunity Assessment, 63% of SBs with 1 - 49 employees currently use an accounting software solution, and Intuit is by far the market leader, with 64% of customers using a QuickBooks or Quicken product. However, only 13% of businesses in this segment have adopted an integrated suite, as shown on Figure 1.
These businesses have different needs and constraints than their larger counterparts. They are less likely to have dedicated IT support, are tend to lag behind larger companies in technology adoption and savvy. Ease of use is priority number one; they want something that is intuitive and won't cause disruption in the day-to-day running of the business.
Consequently, NetBook's value proposition, "simple as possible yet powerful as necessary," should resonate well in this market. However, NetBooks will face skepticism from small businesses, which have heard this before, and have often been disappointed. NetBooks will need to be able to quickly, powerfully and intuitively make its case to appeal to these firms, who are unlikely to invest a lot of time and energy in an evaluation process.
NetBooks will also need to educate much of this market about how an integrated front- and back-office suite can yield added business value. After all, most TSBs don't even use a true CRM solution: according to AMI's 2006-2007 U.S. Small Business Overview and Comprehensive Market Opportunity Assessment, just 16% of SBs with 1-50 employees use a CRM solution, while 40% still go the homegrown route, using a patchwork of personal productivity solutions to handle customer-facing functions. In addition, self-funded small business owners are cost-conscious, and may be reluctant to incur long-term recurring costs. NetBooks' $200 per month subscription fee, which translates into a $2400 annual investment, will cause sticker shock among many TSBs-especially those that are relatively content with their existing solutions.
However, NetBooks' value proposition will appeal to some TSBs-most notably those that AMI characterizes as Tier 1 Enterprise-like Adopters. AMI-Partners' SMB segmentation model provides a framework from which to examine attitudes and behavior of SMB IT and telecom purchase decision making. This framework defines SMB segments in 4 tiers, with Tier 1 being those who view IT solutions similarly to large enterprise counterparts, are ahead of the typical SB technology adoption curve, integrate IT within their corporate and business strategy, drive the lion's share of IT spending and deploy IT solutions to drive growth and optimize costs.
Because these businesses think more strategically about IT investments than their peers, they will more readily grasp the benefits that an integrated, front- and back-office solution can provide. In addition, NetBooks' offer of lifetime protection against price increases, and its pledge not to charge for future features should help assuage pricing and cost concerns. Grandfathered in at their original price, these customers will be able to take advantage of new modules and functionality without incurring additional costs. NetBooks' 24/7 service and support commitment, and 99% guaranteed uptime pledge, should also give NetBooks a boost, since a majority of SBs in the 1 to 25 employee segment lack full-time internal IT staff and resources.
Although, in a broad sense, NetBooks doesn't face a major direct competitor, it must closely watch every move of other players, large and small, that cater to overlapping small business markets and requirements. Most notably, Intuit, which already provides QuickBooks Online Edition, could formulate an integrated suite of its own via the right acquisitions-or organically.
While NetBooks is clearly determined and extremely confident in its mission, only time will tell if NetBooks will emerge as a "true small business" star. Aside from the above analysis of NetBooks' relative strengths and limitations, changing small business dynamics and trends, coupled with the moves that other, larger players make, will have the most dramatic impact on how NetBooks will ultimately fare in this market.
Evers has pulled together a team of experienced management, investors and advisors, hailing from a variety of leadership positions in the industry. Many have spent decades starting, running, growing and working with small businesses. NetBooks' stated mission is to revolutionize the way small businesses are managed, with solutions that "are as simple as possible, and as powerful as necessary, to run your whole business." The vendor is targeting small businesses with 2 to about 25 (occasionally 50) employees. NetBooks distinguishes the TSB as one in which the owner manages business; there is no "professional" management layer or capital; and the business is profitable via organic growth (versus external investments).
TSBs, in NetBooks' view, favor ease of use over power, and are typically looking for the simplest way to get a job done. NetBooks contends that it is filling a big gap in the TSB space. For instance, while Intuit QuickBooks provides TSBs with an easy-to-use accounting solution, it doesn't have the front-office capabilities that NetBooks provides. Meanwhile, NetBooks views NetSuite's and SAP's integrated back- and front-office suites as too complex and expensive for the TSB market.
NetBooks is keying in on TSBs' requirements for high-touch support by providing a "concierge" program that helps customers get up and running, and offers immediate access to experienced small business support reps via built-in instant messaging. Since NetBooks is an SaaS solution, support personnel can immediately tap into what the customer is doing, see the same data, and more expeditiously solve any problems.
While NetBooks will provide much of the solution's initial core functionality itself, the vendor is also creating a partner network to add deeper, best-of-breed capabilities to the suite. To date, NetBooks' partners include Authorize.net, UPS, PayCycle and Vertical Response, with other partner deals in the works.
How difficult will it be for NetBooks to get air time and gain market traction in an arena dominated by strong, established competitors? And, will very small businesses readily see the value of migrating from their standalone accounting solutions to complete business management system?
Analysis
5.8 million SBs in the U.S. are in the 1 to 49 employee range, representing a tremendous addressable market opportunity. According to AMI's 2006-2007 U.S. Small Business Overview and Comprehensive Market Opportunity Assessment, 63% of SBs with 1 - 49 employees currently use an accounting software solution, and Intuit is by far the market leader, with 64% of customers using a QuickBooks or Quicken product. However, only 13% of businesses in this segment have adopted an integrated suite, as shown on Figure 1.
These businesses have different needs and constraints than their larger counterparts. They are less likely to have dedicated IT support, are tend to lag behind larger companies in technology adoption and savvy. Ease of use is priority number one; they want something that is intuitive and won't cause disruption in the day-to-day running of the business.
Consequently, NetBook's value proposition, "simple as possible yet powerful as necessary," should resonate well in this market. However, NetBooks will face skepticism from small businesses, which have heard this before, and have often been disappointed. NetBooks will need to be able to quickly, powerfully and intuitively make its case to appeal to these firms, who are unlikely to invest a lot of time and energy in an evaluation process.
NetBooks will also need to educate much of this market about how an integrated front- and back-office suite can yield added business value. After all, most TSBs don't even use a true CRM solution: according to AMI's 2006-2007 U.S. Small Business Overview and Comprehensive Market Opportunity Assessment, just 16% of SBs with 1-50 employees use a CRM solution, while 40% still go the homegrown route, using a patchwork of personal productivity solutions to handle customer-facing functions. In addition, self-funded small business owners are cost-conscious, and may be reluctant to incur long-term recurring costs. NetBooks' $200 per month subscription fee, which translates into a $2400 annual investment, will cause sticker shock among many TSBs-especially those that are relatively content with their existing solutions.
However, NetBooks' value proposition will appeal to some TSBs-most notably those that AMI characterizes as Tier 1 Enterprise-like Adopters. AMI-Partners' SMB segmentation model provides a framework from which to examine attitudes and behavior of SMB IT and telecom purchase decision making. This framework defines SMB segments in 4 tiers, with Tier 1 being those who view IT solutions similarly to large enterprise counterparts, are ahead of the typical SB technology adoption curve, integrate IT within their corporate and business strategy, drive the lion's share of IT spending and deploy IT solutions to drive growth and optimize costs.
Because these businesses think more strategically about IT investments than their peers, they will more readily grasp the benefits that an integrated, front- and back-office solution can provide. In addition, NetBooks' offer of lifetime protection against price increases, and its pledge not to charge for future features should help assuage pricing and cost concerns. Grandfathered in at their original price, these customers will be able to take advantage of new modules and functionality without incurring additional costs. NetBooks' 24/7 service and support commitment, and 99% guaranteed uptime pledge, should also give NetBooks a boost, since a majority of SBs in the 1 to 25 employee segment lack full-time internal IT staff and resources.
Although, in a broad sense, NetBooks doesn't face a major direct competitor, it must closely watch every move of other players, large and small, that cater to overlapping small business markets and requirements. Most notably, Intuit, which already provides QuickBooks Online Edition, could formulate an integrated suite of its own via the right acquisitions-or organically.
While NetBooks is clearly determined and extremely confident in its mission, only time will tell if NetBooks will emerge as a "true small business" star. Aside from the above analysis of NetBooks' relative strengths and limitations, changing small business dynamics and trends, coupled with the moves that other, larger players make, will have the most dramatic impact on how NetBooks will ultimately fare in this market.
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