Lars Dalgaard and his Success Factors (Part 11)

SM: You don’t face as much competition in small business either. LD: No, you don’t. There is no competition. That was Eric Dunn’s decision point on the Board. “That alone,” he said, “is an argument for me. We struggled so much in Intuit when we went up market to make the product scale.”

We brought in Emergence Capital who focuses on on-demand and SMB. They put in $10M, and we really built a small business “company” inside the company. We hired the VP of Sales from SalesForce.com, Shelly Davenport, to run it. That is now our fastest growing business. We have 50 reps there and it is going really, really well.

SM: What is the revenue split between small, medium and large businesses? LD: Out of new business, US Enterprise is 60%. The other key areas are small, medium and Europe are all close to 10% each. The rest is split between Asia Pacific and Channels. We will do deals with IBM and EDS. We just did a fantastic deal with Marriott.

SM: What is the structure of the deal with Hewlett or EDS? Is it that they have BPO operations and they use your systems to power it? LD: What happened since 2001 is that the BPOs all gave up having their own products. They had enough problems making money on their BPO structures. They literally take our stuff, put it in their brochures, and we do everything from there on out. They are pretty nice deals.

SM: You are basically outsourced BPO for them. LD: You could say that. They are 10 year deals.

SM: So they are channel deals? LD: Yes they are. That’s it. It is a pretty basic story. We are now 3 million users in 156 countries. We went up from 1.5M in 16 months. We are growing and we announced that we are the fastest growing on-demand company in the world; 95% year on year.

SM: Talk about the highlights of your earnings that you just announced. LD: That is one highlight right there; we grew 95%. We grew faster than Omniture and SalesForce.com going into the IPO and coming out of it we just announced this 95% growth.

The other key elements are that we felt very strongly that we have no negative indicators. All of the deals are up, our seat prices are up, our products are all selling, so we are blessed. It has been a lot of hard work for a long time. We are investing a lot of money. The positive is we have $46M in bookings in Q4, which actually only translates to $19M in revenue, just so you can see how conservative we are. Bookings are money we collect immediately, so it is not like it is not real. It is first year value. We cannot recognize the revenue because we are very conservative on that. Unlike NetSuite, we decided not to stop doing long-term deals. They decided to stop doing long-term deals so they can recognize everything immediately.

SM: You have the advantage of backlogs. LD: Exactly! We love it. So what if Wall Street cannot understand it in the short term, it does not matter, we are in it for the long term. We are trying to build a long-term company, and they will see.

This segment is part 11 in the series : Lars Dalgaard and his Success Factors
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