NetSuite, a hosted ERP company that got its start selling to the SMB market, has stopped selling to small businesses. Bob Scott quotes NetSuite CFO Ron Gill: "We simply stopped signing new business in that business. The small customers represent about 6% of revenue and 40% of customers."
According to Dennis Howlett, NetSuite stopped selling to sub-$10,000 a year customers "a while ago." The reason, according to Howlett, is that NetSuite wasn't doing a good job of supporting these smaller customers.
"About two years ago the company stopped talking about acquisition numbers because - quite frankly - it had become an embarrassing millstone. As quickly as NetSuite was growing and adding revenue, smaller customers were leaving by the back door. Net-net, it was not growing the customer base in absolute new signings but it was scaling up the deals.
"In short, NetSuite had outgrown its customers and could not find a good way to solve the problem."
I've been hearing about customer churn at NetSuite for a while, and Howlett attributes it to poor customer service - but only for small customers. Larger customers, Howlett writes, have been far more pleased with NetSuite's support. He quotes the proprietor of Jelinek Cork Group as saying he couldn't be happier with NetSuite's support.
And, as Gill noted, larger companies account for far more revenue for NetSuite any way.
Howlett applauds NetSuite for not taking on any more customers that the company won't be able to support well. If these customers are better suited elsewhere, they should be going elsewhere. The upside for NetSuite is that hopefully it will experience less churn and develop a better reputation for customer support.
There's a lesson in there somewhere.