Private Equity & the Cloud: Making it Rain

Private Equity & the Cloud:
Making it Rain

Webinar Notes

• Please mute your phones
• Please submit all questions through chat
• Questions will be addressed at the end

© 2012 Hein & Associates, LLP. All rights reserved.

About the Speaker

• Jeremy King
– National NetSuite Practice Leader
– CFO and COO
– Corporate Development Executive
– Investment Banker


Agenda

• Background
• Benefits of Cloud Computing
• The Case for NetSuite
• Benefits to Portfolio Companies
• Benefits to PEGs
• An Example
• Summary


Section 1: Background


About Hein & Associates
• Full service audit, tax and consulting firm
• Expertise and knowledge of a large firm
• Personalized attention
• Customized solutions
• Top 25 firm based on number of SEC clients
• Named “Best of the Best” by Inside Public
Accounting in 2009, 2011 and 2012


About the Partnership with NetSuite

• Hein was NetSuite’s original Systems Integrator
Partner
• Also a Solution Provider
• Recognized the cloud migration movement early and
positioned the firm to capitalize by partnering with the
best
• Exclusive to NetSuite


Section 2: Benefits of the Cloud


IT is Necessary Evil
• IT is not a core competency
• Most companies are not proficient in:
– Firewalls
– Security
– Scalability
– Backup
– Data Replication
– Redundancy
– Uptime
– Maintenance
– Upgrades
– Deployment


The Cloud Fills the Void
• What is cloud computing?
– Web-based applications delivered over the internet
– Vendor handles all of the following:
• Advanced security
• Automated backups
• Real-time redundancy
• Guaranteed uptime
• Seamless maintenance and upgrades
• Always on the current version
• Access from any device at any time
• Scalable, pay as you go model
• Extendible
• No hardware required


On-Premise IT

Functionality & Innovation 9%
Resources
Middleware software
Database software

91%
Server operating system
Server hardware

Rebuild Integrations Resources
Data Migration
Rebuild Customizations
Re-test
Re-train 11
© NetSuite 2010

The Cloud Model

Functionality
& Innovation
100%
Resources

0%
No infrastructure
upgrades

Customizations Resources
migrate
automatically

© NetSuite 2010 12

Cloud Lowers Total Cost of Ownership
On-Premise Software Cloud Computing

Software Licenses 68% Subscription Fee
9% T
C
Customization O
Customization and 43%
T 32% Implementation
Implementation
C and Training
O Hardware 26% Source: Yankee Group DecisionNote
Technology Analysis
IT Personnel 14%
Maintenance 7% 77% less than
Training 1%
On-Premise
“Customers can spend up to four times the cost of their “Cloud computing yields substantial economies of scale and skill,
software license per year to own and manage their and lowers total cost of ownership (TCO).”
applications.”
– Gartner – The Hurwitz Group
“The End of Software” “The Compelling TCO Case for Cloud Computing”


Section 3: The Case for NetSuite


NetSuite: World’s #1 Cloud ERP
Background Performance
Founded 1998 World’s most deployed cloud ERP
Publicly traded on NYSE: “N” Used by 12,000+ organizations
Offices in 10 countries Fastest growing top 10 ERP
1200+ employees Used across 100+ countries
$236M+ revenue FY11

#1 Cloud ERP Suite Industry Recognition
Fastest Growing
Top 10 FMS Vendor
Best Financial Management
3rd Year Running

Best Relationship Mgt. Top 10 Cloud Companies
Best Business Software
to Watch
Best Cloud Platform


North America’s Top 10 Accounting Packages
80.00%

70.00%
Top 10 Financial Management System
60.00%
Market Share Growth 2008-2011
North America
50.00%

40.00%

30.00%

20.00%

10.00%

0.00%

-10.00%

-20.00%
Source: Gartner


The #1 Cloud ERP for Every Business
#1 for #1 for #1 for #1 for #1 for #1 for
Software WD Manufacturing Services Etail/Retail Enterprises


Hundreds of Public Companies Run on NetSuite


Typical Environment


Global Challenges Even Greater
Worldwide HQ
GLOBAL

AMERICAS EMEA APAC
REGION
COUNTRY

Canada USA Brazil France UK Germany Japan Australia China


One System for Running a Business
Customers

CEO CFO

PSA

SINGLE DATA
ECOMMERCE SOURCE CRM+
Shipping Sales Rep/
Manager Manager

FINANCIALS

Support
Ecommerce
Manager
Manager

Vendors Partners

Multi – National / Company / Currency
GLOBAL

Worldwide HQ
REGION

AMERICAS EMEA APAC
COUNTRY


Complete Customization
• Graphical
customization
• Workflow
management
• Web services
• Java scripting
• SuiteApps


Section 4: Benefit to Portfolio Companies


Benefits of the Suite
• Customer Relationship Management (CRM)
– Enterprise level CRM with 360°
view of all data points related to
customers, prospects and leads
– Complete sales force automation
– Tracking of opportunities to estimates
to orders
– Sales pipeline reporting
– Support ticket and customer service issue tracking
– Complete financial history
– Automated marketing engine and tracking system
– Anywhere, anytime access


• Enterprise Resource Planning (ERP)
– Robust dashboards
– Custom KPI tracking
– Financial and non-financial
scorecards
– Real-time reporting
– Seamless transition from front office to back office
– Inventory and warehouse management
– Demand planning and available to promise
– Revenue recognition, subscription management,
commissions, budgeting, scenario analyses, etc.


• Professional Services Automation (PSA)
– Project and task management
– Project budgeting and profitability
reporting
– Budget vs. actual
– Variance analysis
– Time and expense tracking
– Employee utilization and realization reporting
– Job costing
– Resource scheduling and management
– Advanced billing methods (% completion, milestone, etc.)


• eCommerce
– Website and content management
– Item management
– Shopping cart and checkout
– Cart abandonment
– Payment processing
– Seamless transition from eCommerce
system to order fulfillment processing
– Self-service portals for customers,
vendors and partners
– Online leads flow directly into CRM


Other Benefits

• One system = one version of the truth
• Automated consolidation and reporting
• Elimination of external spreadsheets
• Faster closing times
• Better information = better decisions = faster growth
• One system increases efficiency


Section 5: Benefit to PEGs


Manage All Internal Operations

• CRM + ERP + eCommerce
– Fundraising, referral and contact database
– Marketing activities and reporting
– Internal and fund accounting system
– Virtual data rooms
– Real-time visibility into portfolio companies on NetSuite
– Allows PEGs to act more strategically
– Automated deal management system


One System for Entire Deal Cycle
Deal
Submitted

Deal
Sell-Side
Screening
Closing
Process

Due Due
Diligence Diligence

Exit Buy-Side
Marketing Closing

Growth and
Reporting


Section 6: An Example


A Simple Example

• Private Equity Group
– 10 portfolio companies
– Average of $50MM in revenue
– Average of 25 full user licenses per company
– Average of 50 other employee users per company
• 2 scenarios
– Scenario 1: All 11 entities running separate on-premise
systems
– Scenario 2: All 11 entities on one instance of NetSuite


Estimated 5 Year Total Cost of Ownership

On-Premise Systems Cloud-Based Systems
License: $ 922k Subscription $2,300k
Implementation Implementation
& Customization: $4,409k & Customization $1,083k
Hardware: $2,665k Hardware: $ 0
IT Personnel: $1,435k IT Personnel: $ 0
Maintenance: $ 717k Maintenance: $ 0
Training: $ 106k Training: $ 0

TOTAL: $10.3M TOTAL: $3.4M

Savings of $6.9M

Section 7: Summary


Huge Advantages
• Dramatically lower IT costs
• Rapid deployment
• Enterprise level system to meet all exit strategies
(sale or IPO)
• Real-time visibility into portfolio companies
• Dashboards, KPIs and scorecards
• Anywhere, anytime access
• Better information for strategic decision-making
• Drive ROI


Some Disadvantages

• Not a good fit for all companies
• Resistance to change
• Cannot replace competitive advantage systems
• No process manufacturing support
• No heavy manufacturing support


Takeaway

• Cloud migration is driving returns in private equity
backed companies
• NetSuite is the natural choice for most industries
• Last system most companies will ever need
• Every PEG should have NetSuite on their short list
for both themselves and their portfolio companies


Questions


For more information, please contact:
Jeremy King
National NetSuite Practice Leader

(303) 298-9600
jking@heincpa.com
heincpa.com/netsuite

Thank You


Suite + Cloud = Efficiency and Savings
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The Reality of On-Premise IT
EXPENSIVE TO MAINTAIN VERSION LOCKED

UP TO 5X
LICENSE
DRAINS INNOVATION FRAGMENTED

The Undisputed Cloud ERP Leader

NetSuite is the most
successful ERP suite
SaaS provider operating in
terms of active customers,
international presence and
functionality offered across
the product.
June 2011


One System for All
PEG

Private Equity Group
FUNDS

Fund A Fund B Fund C
COMPANIES
PORTFOLIO

Mexico USA Brazil France UK Germany Japan Australia China


Private Equity & the Cloud: Making it Rain

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