NetSuite Inc. at Raymond James Internet/Software Crossover Conference
May 29, 2014 AM EDT
Thomson Reuters StreetEvents Event Transcript
E D I T E D V E R S I O N
N - NetSuite Inc
NetSuite Inc. at Raymond James Internet/Software Crossover Conference
May 29, 2014 / 08:10PM GMT
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Corporate Participants
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* Ron Gill
NetSuite Inc. - CFO
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Conference Call Participants
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* Terry Tillman
Raymond James & Associates - Analyst
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Presentation
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Terry Tillman, Raymond James & Associates - Analyst [1]
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Why don't we get going? Again, I'm Terry Tillman from Raymond -- the Raymond James. I'm the application software analyst. And really pleased to have NetSuite presenting today. This is a household name for cloud computing, for sure. Ron Gill is the Chief Financial Officer.
And for those that don't know the story, but I'm assuming most people have at least heard something about it, these guys are a leading cloud-based ERP provider. Expanded well beyond just accounting software into CRM, order management, eCommerce; more recently they've moved into even HR. So, a lot of exposure and a lot of different workflows related to automating and optimizing the business. Routes started in the midmarket and increasingly have been moving upmarket with their OneWorld product. And that's a key product catalyst.
We're going to do a fireside chat. I've got a series of questions. Leave time for questions from the audience, if you so choose to ask a question. And how does that sound?
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Ron Gill, NetSuite Inc. - CFO [2]
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Sounds great.
Okay. All right. So (multiple speakers) --
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Ron Gill, NetSuite Inc. - CFO [3]
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If you were -- I assume you're asking me. Sounds good to me.
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Terry Tillman, Raymond James & Associates - Analyst [4]
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Yes. No, just anybody over there. Yes. So, in terms of re-platforming as a team, a lot of legacy on-premise software out there running accounting or back office functions. To me, you seem like there's a view on re-platforming in the midmarket, which has been your sweet spot, but also divisions of the larger enterprises.
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Ron Gill, NetSuite Inc. - CFO [5]
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Yes.
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Terry Tillman, Raymond James & Associates - Analyst [6]
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Do you think that the re-platforming, which I don't know if it happens every 5 to 10 years, but there's always a re-platforming. Do you think that this cycle is shortening or compressing? And why would -- and if so, any drivers behind that?
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Ron Gill, NetSuite Inc. - CFO [7]
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Yes. It's interesting. Companies -- and you will hear Zach say this all the time -- companies only change the ERP system when there is some pain; usually some significant pain. Because nobody just volunteers to change an ERP system. Even when you're changing to a wonderful new system like NetSuite, it's still a huge project to take out the old system and put in a new one. So people only do that when there's real pain.
Probably the -- maybe the only time in history where that pain has really converged on almost all companies at the same time was the Y2K problem. Right? So in 1999, everybody sort of had the same problem at the same time. Other than that, those problems come on different companies at different times. There's a kind of -- there's a permanent cycle of people growing to the point that they outgrow a system, or aging a system in place is a common thing that there are releases after release after release of some on-premise software. And companies have the license to that software but they don't put it in. Because the implementation itself is so painful that the upgrades are painful. And they eventually get to a place where they want to completely re-platform the solution.
Also, what we see is that in the enterprise space especially, is -- there's a kind of a generation of subsidiaries that are super-long overdue for that re-platforming. Often because a decade ago, when they were running on some AS/400-based green screen system in the Mexican subsidiary, a decade ago, that was an old system and they needed it replaced. But the parent company said, oh, we're standardizing on Oracle, we're standardizing on SAP, so hang on and we'll be there in a year or two with that standard system. And a decade later, they still haven't reached that point.
And so they are making a decision not just to re-platform that subsidiary, but really go with a different strategy. Right? They had a -- what we like to call -- they've had a one-system strategy for years, but they still have a 40-system reality. And they try to -- they shift strategies to get to a maybe a two-system strategy that can really standardize that layer.
So we see that replacement cycle. And then there's just a permanent group of companies that are at the point in time where they are thinking about re-platforming. I don't think that that -- like I said, other than the Y2K problem, I don't think that that follows any sort of macro trend or any particular pattern or wave. I think it's just happening to a lot of companies all the time.
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Terry Tillman, Raymond James & Associates - Analyst [8]
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Yes. That's a good example of like a -- the Mexican subsidiary of large companies; they stated years ago that they would standardize and never got there. Would you actually say those examples kind of reflect even longer of the two dynamics, even greater pain then? And is that one of the key drivers of OneWorld, would you think?
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Ron Gill, NetSuite Inc. - CFO [9]
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It's certainly one of the key drivers of our enterprise sale. So maybe let me make a little bit of a distinction. So, OneWorld is a product, we introduced it in 2008, and it was the first version of NetSuite that could handle multiple currencies and multiple subsidiaries. And you might think that we were being very clever in designing for the enterprise space at the time and working on moving that market. What we were really doing is making a suite to run a midmarket midsize company. And a lot of those midsize companies had this as a need. They had -- even though they're a midsize company, they have maybe production overseas, maybe a sales office in Europe -- they need to handle multiple currencies, they need to roll out multiple subsidiaries.
So we made that product for that purpose for the midmarket. And what happened is it started to find its way into some enterprises. And initially, it really was exactly that kind of a Mexican subsidiary, the Singapore subsidiary. And at the time, not -- it wasn't that we were intentionally had a go-to-market plan of trying to reach those edges; we were still very focused on the midmarket. But those opportunities kind of started to find our sales force. And not as a headquarters decision, but as a subsidiary decision.
So you would have the head of the Mexican subsidiary saying, you know, I'm running on this ancient system; I've got to get something to get me better visibility into the business now. Headquarters says they'll be here in 2017 with a new system; I need something now.
And we would make a sale just into that subsidiary, you know. And initially, the initial enterprise sales went that way. And then what you would see is then you would see a standardization start to spread a little bit from there; if it was a Singapore subsidiary, then next thing you know they would have a standard South Asia on NetSuite.
And then it was probably 2000 -- 2011 before we really started to realize that as an opportunity and start to intentionally go after it. And that became the beginnings of our two-tier enterprise strategy. But in the beginning, they were just sort of one-off sales into subsidiaries.
They are still -- OneWorld still has a strong place in the midmarket. We still have to do -- a lot of OneWorld sales are sold to just midsize businesses, but increasingly, we have those opportunities in the enterprise. And now we are structured a little more intentionally to go after those opportunities as well.
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Terry Tillman, Raymond James & Associates - Analyst [10]
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Got it. In terms of the organizational changes recently, what instigated that? And when there's an org change, sometimes people worry that there can be some disruption or some realignment that maybe creates some distractions. So maybe walk through the organizational changes and what instigated that?
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Ron Gill, NetSuite Inc. - CFO [11]
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Sure. You're talking about the new head of --?
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Terry Tillman, Raymond James & Associates - Analyst [12]
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Taking North America and now being responsible for all of (multiple speakers) sales.
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Ron Gill, NetSuite Inc. - CFO [13]
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Yes. So, the change that you're talking about is -- are, we named a new head of the Global Sales organization. I say new; he's a guy who's been with NetSuite for some years, and had been in charge of North American sales really until the beginning of 2013. And maybe to give a little org structure, and it's -- because it points to the stability is -- so the sales organization rolled up to Jim McKeever, who is our Chief Operating Officer, and has been in place, and is still in place throughout all of this.
At the beginning of 2013, the guy who is now the head of Global Sales -- so we just ended it at Global Sales -- we took him from being the head of North American sales to really put him on a year-long project to help us with some key factors in scaling the organization. For a Company like us, we have -- a lot of things are going well, the Company is growing dramatically -- some of the biggest challenges we face are scaling the organization. How do we hire people? How do we onboard people? How do we build processes that scale as we get bigger and bigger?
And one of the thing that Marc Huffman took on in the last year was really to go into the sales organization, step out of his day-to-day role as Head of North America, and really focus on the enablement organization. How do we bring sales reps into the organization? How do we ramp them up and get them productive? And on the hiring engine.
You know, if you're -- it's one thing, if you're growing 10% a year and you need to hire 10% new reps a year, you might be able to just sort of sprinkle them out throughout the organization, and have them organically ride along and learn the business. When your growth is accelerated like ours has, and you're adding 30% new reps a year, you might need to build a little bit more of an engine to do that.
So that's what he was focused on for the year. And then with that year done -- and it also gave him a chance to get out of being just North America but to see the world a little bit, see our sales organization in Europe, the way Asia works, the way some of the channels work around the world. Now he takes over as Head of the Global organization.
So, it's a fairly mild change internally, because he's very much a known quantity. He was recently the head of our sales organization and the very top of that structure. Jim stays in place. So that's the background on the change.
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Terry Tillman, Raymond James & Associates - Analyst [14]
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With Marc over that last year working on different techniques to maybe more rapidly onboard and sort of continue to be able to scale the business, hiring sales reps, has there been any early returns on that, in terms of maybe time to productivity for an average sales rep increasing or improving? Or anything related to some of his work?
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Ron Gill, NetSuite Inc. - CFO [15]
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Yes. It's interesting. I keep expecting this -- we'll eventually have a quarter where this is not true -- but even in the first quarter of this year, we still have average sales rep productivity, which is a simple bookings divided by sales reps. That number is still up year-over-year, which is pretty remarkable, given the kind of increasing saturation of brand-new people in the sales organization.
Certainly some of that, you'd expect to dilute that to a point, at some point, if you're growing fast enough, that you might get a year-over-year productivity per head actually down. So far, that's still up. Certainly, some of that is because the install base reps are selling bigger and bigger deals. And they are being more and more productive. But definitely part of that is because of our increasing ability to get new reps productive, and have them not be as dilutive in the overall productivity as they would be. I think we're -- I think we've gotten better at it; I think there's a way to go we can continue to get a bit better at it, so.
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Terry Tillman, Raymond James & Associates - Analyst [16]
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Because you've added a lot of sales capacity. How do you avoid some sales reps that have been around a little while start to get disenchanted with -- you know, their territories are cut up, or -- how are you dealing with that in terms of the coverage model? Is that actually way out in the offing in terms of (multiple speakers) --?
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Ron Gill, NetSuite Inc. - CFO [17]
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No, I mean, that's -- this is a -- the challenge that's always present. Right? I mean, in a business that's doing well, quotas go up and territories get split every year. It's a fact of life. So, I think the fortunate thing for us is that we have been sort of hitting or exceeding our targets every year for the past several years. And that's a great happy environment to be in if you're a salesperson. And so I think that's what offsets that.
And we've set fairly challenging goals each year. And part of that is that territories get split and quotas go up. And then we -- then the sales team does an amazing job of actually hitting those challenging goals. And so, working so far, I would say, yes.
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Terry Tillman, Raymond James & Associates - Analyst [18]
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I cover a lot of companies involved in the HCM space, so when you all made that move, I thought it was intriguing. And I think it telegraphed that you were interested in that space a lot earlier on when you announced some partnerships. So it does seem like a more direct move. Could you talk about some of the reception you are seeing within your install base and/or around new opportunities where that's being pitched as part of the overall (multiple speakers) --?
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Ron Gill, NetSuite Inc. - CFO [19]
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Yes. Sure. Let me outline a little bit what we did there, and maybe to give everybody a little bit of understanding. So, I mean, NetSuite is an ERP system. Right? So the ERP system is a system of record for most things, for customer records for items and partner records for all the transactions. And of course, also for employee records. So NetSuite has the employee records in it.
NetSuite does payroll, and NetSuite also does -- even if you weren't using NetSuite for payroll, NetSuite does a lot of other things that it needs to have an employee record for. It does workflows and approval levels, and it needs -- the system needs to know who everybody is and who their boss is and that type of thing.
So, NetSuite has an employee record. But NetSuite is certainly not a point solution HCM system. And there's some things in NetSuite on the HCM side that aren't on par with the point system. So, Board management in NetSuite is not point solution quality for the management. There's not beautiful ways to display an org chart, and drag-and-drop reorg and this type of thing. NetSuite doesn't have performance-manage, SuccessFactors type stuff; that's not only NetSuite, not exactly.
And so, what we did at the end of last year was we made this acquisition, TribeHR. And to -- just to profile them a little bit, they are a very cool solution with a great -- really great user experience around exactly these things -- the employee record itself; the org management around that, and the HCM around the performance management around that. Their target was very, very small companies, mostly sub-100 employee companies.
And that acquisition is really -- it's kind of a certain flavor of acquisitions that we have done, which is great to have a point solution. It's interesting what they're doing in this space. But what we really want is to enhance our core product. So, we're -- at the end of the day, we are going to be always more interested in having a really robust C-wall platform solution. So the main area that that acquisition helps us is in really getting that domain knowledge and design sensibility to put on the NetSuite platform, to really make NetSuite a better product.
And ultimately -- whereas today, people may buy NetSuite, and then bolt on a solution like Tribe because they want those Board management tools you don't have at NetSuite. At the end of the day, and it's probably some years down the road, NetSuite should be able to absorb that and have that functionality inside. But that will help us to that. And at the same time, we've got -- now we have a solution in-market for -- and I would say it's really the very low end of SMB for a point solution HCM. It's certainly not a -- we are not that interested in becoming a big point solution player in HCM as we are in having a robust complete system in ERP.
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Terry Tillman, Raymond James & Associates - Analyst [20]
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Okay. Okay. Because I was going to -- I mean, because that signals something. You know, you're buying that company. But you're saying this is as much around the design and some of the technology dynamics of that company as opposed to this is a whole new assault and a whole new TAM around HCM?
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Ron Gill, NetSuite Inc. - CFO [21]
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Yes. I would say that. Even if we are taking that point solution to market, keep in mind that that point solution -- like I said, most of our customers are sub-100. Like everything at NetSuite, we will now invest in it, it will become more robust over time. I'm sure it will move upmarket a little bit, but it's not -- we are not aggressively out in the market in the HCM market now as another player in the HCM point solution market.
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Terry Tillman, Raymond James & Associates - Analyst [22]
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Okay. And what about digital marketing? You know, I -- you kind of are saying HCM is not going to be an area all of a sudden, you're buying a bunch of things and become a Workday? But digital marketing, I mean, that's where dollars allegedly pointing to Gartner, Gartner and others are going to be falling to a CMO. You have a lot of midmarket companies. Maybe it's a different dynamic than an enterprise for digital marketing. But what is your thoughts on digital marketing? Have you analyzed that market and you thought about that (multiple speakers) --?
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Ron Gill, NetSuite Inc. - CFO [23]
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Yes. It's an interesting area. It becomes -- so NetSuite today, as a platform, has a lot of marketing tools available. So we have lots of customers doing email campaigns out of NetSuite, and doing a lot of lead generation, lead tracking out of NetSuite. NetSuite has traditionally had some very good tools for that.
Where it starts to get really interesting is on the eCommerce side, because there -- in eCommerce, with people who sell things B2B, and probably more important, B2C over the Web, they have a whole additional set of stuff they would like to do in terms of the way they do campaigns, the way they track, buy in-store versus buy on the Web, keeping a customer record. And there I think there's a lot of -- there are a lot of interesting things to be done.
NetSuite enables a whole lot of really cool stuff. So the new Suite Commerce application allows for -- for example, if you want to do an email campaign against your customer -- your install base customers on your website, because it's a single platform solution, we have all the customer records and we have all the transaction records, and they're all in a single solution. You can do this really powerful stuff where you define a profile -- and show me all the customers who have -- whose lifetime purchases are more than $1000, but who haven't visited the website in more than six months, and whose last product rating was three stars or lower, whatever.
And you can define that. And you can say when they land on a website, let's give them a promotion of 50% off any item that we have in inventory, and on which our gross margin is at least 50%. In traditional email marketing or Web marketing, you would do that by defining a static search to get that list of customers.
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Terry Tillman, Raymond James & Associates - Analyst [24]
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You mean like a segmentation or --?
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Ron Gill, NetSuite Inc. - CFO [25]
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You would segment them. You'd do a one-time search, you'd get a list of customers. Now I've got 1735 customers that meet that profile, I'll put that over here. And then you would do another search -- let me define products that meet these categories, gross margin in inventory -- I would do that search. I would get this list of products and put it over here. And I would combine them into a campaign or an email campaign to them, or maybe a campaign that when they land on the Web, this is what they get. Right?
At NetSuite, because it's all in a single thing, you can just define these as categories. And if you want to do that as a -- when they land on the Web, give them this promotion, you can define both of those; the customer segment and the product segment has live searches. And because it is the system of record for the orders for the gross margin, what eCommerce system knows gross margin? None. But NetSuite is the system of record for inventory and selling and order processing. It knows gross margin.
So you can have both of those working as live searches, and being constantly refreshed. If the gross margin on an item changes and falls below that threshold, it falls out of what's being promoted. If a customer visits and their profile changes, they will no longer be in the result in that search. So a lot of powerful things in eCommerce especially that allows for human marketing.
At the same time, though, there are -- NetSuite is not a point solution, marketing automation solution. Right? So there are some cool -- in fact, Bronto is here. (multiple speakers)
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Terry Tillman, Raymond James & Associates - Analyst [26]
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That's a partner.
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Ron Gill, NetSuite Inc. - CFO [27]
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(multiple speakers) That's a great solution. They're a partner. And they do a lot of great stuff on Plugged Into NetSuite and doing marketing. So there's always an infinite number of places we can invest further in the Suite. And right now, that's one that -- NetSuite is empowering some really cool stuff. And where customers really want stronger point solution stuff, it's a partner strategy for the time being.
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Terry Tillman, Raymond James & Associates - Analyst [28]
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Yes. I also cover demandware.
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Ron Gill, NetSuite Inc. - CFO [29]
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Yes.
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Terry Tillman, Raymond James & Associates - Analyst [30]
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So, the Suite Commerce comes up sometimes in relationship with demandware. Demandware presented yesterday, and they seem to be talking about -- it's not just a secular growth dynamic of eCommerce around the channel, but there's this clear -- clearly a move to the cloud for bigger enterprises selling online. And so, they talked about a number of large deals in the first quarter. And they're just seeing a real kind of almost watershed event there.
With your Suite Commerce business, are you seeing large eTailers or retailers that are doing $100 million-plus annual GMB? I mean, are you getting traction with those types? Or -- because I ask that, because I don't -- I still don't hear a lot about you all in some of the bigger opportunities. It's like a Worldwide TG or it's a SAP hybrid? (multiple speakers) Yes.
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Ron Gill, NetSuite Inc. - CFO [31]
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(multiple speakers) Hybrids, right. Yes. So, our new Suite Commerce product, which went general availability in Q4 last year, so give it a little time yet. But I will say that what we see right now -- because people ask us that all the time -- who do you (multiple speakers) -- demandware?
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Terry Tillman, Raymond James & Associates - Analyst [32]
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Yes. Sorry I asked that question, but I'm (multiple speakers) --
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Ron Gill, NetSuite Inc. - CFO [33]
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Yes. No, it's a good question. Do you -- and certainly it's not true that we see like a demandware in every deal we do. It's what we see -- and customers may be somewhat self-selecting at this point -- the customers that we are seeing right now are really valuing this single platform nature. So when we go into a compete, it's almost always that the prospect is looking at having an eCommerce system, a backend system, and a point-of-sale system, as three different systems and they're going to do integration work to do them together.
And where our story is strongest is when we are coming in and saying we can do all that single platform, single implementation, single system of record, one copy of the customer record across all those. That's where we are having the most powerful story to tell. And at this point, I would say it's still almost never that anybody sets out looking for that. Because we are the first ones doing that. Right?
So certainly if you look at Williams-Sonoma, the company that we talk about because they are sort of the big initial flagship on the product, and they certainly didn't start out that way. Their plan was, oh, we've got good org headquarters, we will expand that from back-end; we need something for the website and we're going to need something else in-store. And so then we came in and win with. And so we were certainly competing against a set of website tools or eCommerce tools on the website, a POS system, and then an incumbent on the back-end. And we were able to win the whole thing with a consolidated store.
So today, it's customers that value that, that we are winning. And where customer is going and they've still got what we think of as a little bit archaic mindset, which is, we have a website, and the website is its own thing and it stands alone, and it's a different business than the rest of the business, and so we need a website technology. We may not win that deal. Right? Because that's not really the way we see the world moving.
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Terry Tillman, Raymond James & Associates - Analyst [34]
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Yes. And it's interesting how you said that in terms of it's not like the customer, the prospect has that vision day one, so you kind of hit them over the head with it -- but not in that way, but (multiple speakers) kind of in a small way. Yes.
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Ron Gill, NetSuite Inc. - CFO [35]
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(multiple speakers) Right. Yes, yes. In a nice way, yes.
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Terry Tillman, Raymond James & Associates - Analyst [36]
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But, hey, well, you should think about this one system of record. And maybe that positions you better and actually elevates the conversation and differentiates versus these others, but does that actually then make the sales cycle become a little bit longer, because we are actually talking about really transforming an entire business? Or (multiple speakers) --
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Ron Gill, NetSuite Inc. - CFO [37]
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Yes.
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Terry Tillman, Raymond James & Associates - Analyst [38]
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-- what does it do to a sales cycle? (multiple speakers)
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Ron Gill, NetSuite Inc. - CFO [39]
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Well, I would say -- and again, I would say it's very early days for this product line for us, but it's not -- the sales cycle I guess is one thing. But it's certainly true that, in some cases, companies don't go looking to replace everything at the same time. Maybe they didn't want to replace all of that stuff. So some of the initial strong wins that we are having are in kind of expansion opportunities. Right?
So where a company is saying like, we are going into a new market, and in the new market, I need a back-end, a front-end, and -- back-ends in eCommerce and POS. So for that part of their business, it's completely greenfield. And there, it makes sense to single-platform it. And if they were in their existing business and just doing one of those pieces, then we might not win it.
So, I mean, our product offering has gotten much more robust there; I think we've got a lot still coming out, and we'll get more robust. And we'll get more and more competitive point solution by point solution, but we are going to do it in a single-platformed way, because we really think the omni-channel part of omni-channel commerce is very important.
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Terry Tillman, Raymond James & Associates - Analyst [40]
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Yes. You give specifics and talk about big deals, so just (multiple speakers) -- and it generates quarter in terms of what kind of metrics you provide, that deals over $200,000. But this last quarter you had this really big deal. So, again, it's not going to be a unique question, but what kind of more details can you provide in terms of just -- like your biggest transaction, what are we talking dollar value? And also in that specific case, who are you actually replacing? Because I don't remember you actually identifying who you replaced.
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Ron Gill, NetSuite Inc. - CFO [41]
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I don't know that we did. Yes. So a big -- that transaction was notable just because it was the first in excess of $10 million transaction that we had done. So (multiple speakers) --
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Terry Tillman, Raymond James & Associates - Analyst [42]
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ARR?
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Ron Gill, NetSuite Inc. - CFO [43]
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No, no, no. Multi-year deal. (multiple speakers) Multi-year deal. So large ARR for us these days is between $1 million and $2 million, would be a large ARR. I mean, you're talking about -- and that being out on the end of the bell curve. Although we will sign up a handful of customers like that every quarter now. This one was unusual because it was larger. And it's -- I don't get -- honestly, I don't get that excited about deals that are big because of contract terms. I mean, it's our retention rates are fantastic and I figure I have year two of the customer whether they signed a one-year or a two-year contract.
So I don't get that excited because it's even bigger because the contract is longer. It's not. It doesn't make much of a difference. We get a certain amount of recurring revenue. We don't -- and in the case -- in that case didn't bill more than a year upfront, so it's not actually impacting billings. As I always say, I'm not stupid and I intend to be here next year, and so I would rather not (multiple speakers).
So it's really not having much of an impact. And with our retention rate, we don't -- nobody is incentivized to do multiyear deals. Customers request them sometimes and so we'll do them. So that was -- it was a very big deal and it would've been -- I don't know if it would've been the biggest deal that we have in terms of ARR; it would've been at the high end certainly. But a big deal for us, let's say, between $1 million and $2 million ARR, those are fairly common but a handful of them, maybe in a quarter.
And the core of deals, average deal size now is probably more in the $70,000 -- $80,000 ARR, and with a big range. A bigger range -- you've got the channel doing a higher volume of smaller ARR deals, and you've got -- three sales forces, a midmarket, a corporate and an enterprise sales force doing sort of three different size deals.
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Terry Tillman, Raymond James & Associates - Analyst [44]
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And on that segmentation of your sales force, how are you prioritizing new sales capacity amongst those three sales forces since 2014?
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Ron Gill, NetSuite Inc. - CFO [45]
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It is a good question, and a constant topic inside the Company. So, in terms of sales capacity, 2014 is done and was done a quarter ago. Right? So we were fortunate to come into the year with the kind of sales capacity we needed for the year, which we try to have be the case every year; we don't always achieve it. But this year, I think we had the sales capacity we need, so the constraint is really what's the capacity we need for the 15 bookings target? And how do we build towards that?
In the past year or two, a lot of the investment has been in the enterprise sales team. The great thing about the enterprise sales team is when an enterprise sales rep gets up and productive, they are much more productive than a midmarket sales rep in terms of the dollar volume of bookings they'll do in a year. The bad news is the time to yield is just much longer. But the enterprise sales rep is going to take a long time because they have a very complex product to learn; take a long time to ramp. And then the sales cycle in the enterprise is considerably longer.
So that the thing we want to make sure we are doing is sort of managing a portfolio of reps who are ramping up to productivity that's got some of the long-yielding expensive high-yielding reps, and some of the near-yielding, cheaper reps who do a volume of smaller deals. So that's -- it's -- so I didn't answer your question except to say that it's something we have to look at all the time. We look at the portfolio of hiring and across.
The challenges -- the environment we have been in now for a couple of years, but the challenge is we've got this kind of capacity constraint. Sometimes one of the ways that manifests itself is in a high ASP growth. So we -- you mentioned that we did this very large deal, but even when we factored out the largest deals we did last quarter (multiple speakers) -- 50% ASP growth. Which is wonderful, and when you've got a finite number of sales reps you certainly want them all to do the largest possible deal.
But it does make you say, like, gee, if I had a whole bunch more reps just downmarket from that, I could sell that too. And I know because it's been very recently that we've been selling downmarket. A year ago, 50% deals that were [50%] smaller. So that's a challenge. It's always a challenge to have enough sales capacity. Falls in the category of good problems to have, but something that we spend a lot of time thinking about.
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Terry Tillman, Raymond James & Associates - Analyst [46]
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Yes. We covered that. We're done? Really, we're done?
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Ron Gill, NetSuite Inc. - CFO [47]
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Gosh, it just flew by.
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Terry Tillman, Raymond James & Associates - Analyst [48]
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We're done? I didn't ask any hard questions yet.
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Ron Gill, NetSuite Inc. - CFO [49]
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Oh, you've got harder? Harder questions? (multiple speakers)
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Terry Tillman, Raymond James & Associates - Analyst [50]
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(multiple speakers) Yes. No, they're on page 2. (laughter)
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Ron Gill, NetSuite Inc. - CFO [51]
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The page 2 questions.
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Terry Tillman, Raymond James & Associates - Analyst [52]
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Nobody's come in yet, so sales and marketing is an area of investment. But this product development, you have the core accounting functionality, but incremental dollars for R&D -- Suite Commerce maybe rise to the top in terms of maybe one of the bigger -- the biggest spending areas? Or is it (multiple speakers) some of the other product areas? (multiple speakers)
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Ron Gill, NetSuite Inc. - CFO [53]
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It does. But Suite Commerce has been a multi-year investment already. If you go back the last three years and we have done -- we've probably done a half a dozen small acquisitions, very small acquisitions, little pieces of functionality or a team that specializes in something, to build out that Suite Commerce.
We've established a new Professional Services group in Uruguay; we've established new development teams in the Czech Republic. Now we've got some type design and content management solution design development in Oklahoma City. We've put a lot new development teams in place that work on Suite Commerce.
So, it continues to be a significant factor. But we've probably done the biggest pieces of -- like acquiring towards it and building on the functionality. The Broad Suite is the biggest area of investment, because there's just -- there's so much in the Suite. You can imagine a product that's got manufacturing and eCommerce and billing and revenue, and in all these areas of the Suite. And it's investing in all of that. (multiple speakers)
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Terry Tillman, Raymond James & Associates - Analyst [54]
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Thank you very much, Ron.
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Ron Gill, NetSuite Inc. - CFO [55]
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Yes. So, thanks a lot. Yes.
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Terry Tillman, Raymond James & Associates - Analyst [56]
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Thank you.
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