Suite Somethings for Larry Ellison

If you're looking for evidence that tech is back, look no further. On Monday, NetSuite , a potential Baby Breaker and a peer of on-demand software providers Salesforce.com (NYSE: CRM) and RightNow Technologies (Nasdaq: RNOW), filed for a $75 million IPO.

What is on-demand software? Good question. Sometimes known as "software as a service," or SaaS, it's business software made available to you via a browser. Think of Salesforce.com. Users willingly commit private details of negotiations with current and prospective clients to the Web, trusting that the company's servers will safeguard the data as needed.

Chief information officers say that trust is well placed. According to a 2006 survey by researchers THINKstrategies and Cutter Consortium, more than 80% of the organizations that are currently using SaaS are satisfied with it, are planning to expand their use of SaaS, and are willing to recommend SaaS.

That's sweet music to the ears of investors. So is this: Analysts predict that the market for on-demand software will grow by 20% to 25% a year through 2012, compared with just 9% to 12% for enterprise software from the likes of SAP (NYSE: SAP) and Oracle (Nasdaq: ORCL).

Or, in simpler terms: NetSuite good, Oracle bad, right?

Not exactly. NetSuite is in many ways a lightweight version of everything that Oracle and SAP offer -- from customer records management to accounting software to e-commerce.

Then there's Larry Ellison, Oracle's CEO, who controls 74% of NetSuite's common stock. He was also an early investor in Salesforce.com, which is run by Marc Benioff, a former Oracle executive and Ellison protege.

Ellison isn't stupid. He's seen the numbers. He knows that even if NetSuite reported a $23.4 million net loss in 2006, free cash flow is where SaaS shines. NetSuite, for its part, booked roughly $400,000 in free cash flow last year. With revenue rising fast -- up 86% in its last fiscal year -- that number is sure to grow. And Ellison's fortune will grow right along with it.

So, welcome to the tech-stock party, NetSuite. Your timing, like Ellison's, is impeccable.