In July 2016, Oracle announced its intent to acquire Cloud based ERP provider NetSuite for an estimated $9.3 billion. One of the more important aspects of NetSuite’s technology was its appeal to mid-market companies that can little afford expensive and elongated ERP implementations and ongoing support. After closing on the NetSuite acquisition in November, Oracle began to brief analysts on its integration strategies in early December and again last week as part of the Oracle Cloud World event held in New York City. We now know that NetSuite will continue to exist as a business subsidiary of Oracle, but with the ability to now leverage Oracle’s broader Cloud-based infrastructure product offerings.
This analyst is more inclined in the view that Oracle may have a significant opportunity to broaden support for end-to-end, multi-tier supply chain focused product and supply chain information and decision-making processes through leveraged deployment of NetSuite and Oracle’s Cloud infrastructure capabilities.
In our initial Supply Chain Matters commentary regarding the NetSuite acquisition, it was this analyst’s viewpoint that the acquisition was a pure play in seizing market share opportunity, particularly in the mid-market segment beyond current efforts centered on Oracle’s existing JD Edwards suite. NetSuite’s attraction and market uptake included some existing SAP customers who elected to augment their corporate backbone IT applications needs with more flexible Cloud ERP in either a two-tier subsidiary ERP or specific augmented business process support option such as CRM. NetSuite’s Suite App extensions further allowed for add-on capabilities such as inventory management, basic procurement, or E-business support capability.
The acquisition had an interesting twist in that Oracle founder and now CTO Larry Ellison was already a prominent investor in NetSuite, and the firm’s CEO, Zach Nelson managed Oracle’s marketing efforts in the 1990’s. Thus, NetSuite’s Cloud based architecture is very like that of Oracle’s, particularly the emphasis on a multi-tenant data and information architecture.
From a supply chain and product management perspective, there are other appealing possibilities that we believed could come from the combination of NetSuite and Oracle’s existing applications. NetSuite’s product strategy is highly industry-centric, focused on addressing industry-specific business process support needs. This industry focus includes presence in mid-market retail, wholesale distribution, and manufacturing industry segments. Regarding the latter, for instance, there is a strong presence in the apparel industry.
What NetSuite lacked was global scale for areas such as global data center and multi-language and multi-currency support along with global partner support. In our initial impressions in July, we pointed to the potential for NetSuite customers to have access to Oracle’s total Cloud-centric SCM Cloud applications product suite. Other opportunities now outlined by Oracle management are the ability for NetSuite’s customers to leverage Oracle’s PaaS (Platform-as-Service), IaaS (Infrastructure-as-a-Service) and other SaaS (Software-as-a-Service) product offerings.
At last week’s Oracle Cloud World event, CEO Mark Hurd shared his belief that companies will not be able to effectively and cost-efficiently support a multitude of Cloud based software providers. We concur in that observation.
More importantly, and more to the current challenge for many businesses, there is a need to be able to integrate and tap the data and information flows stemming from many of these Cloud platforms in a more streaming data and information focused approach that avoids expensive point-to-point integration approaches. Such point-to-point integration approaches are expensive to maintain and provide added challenges when product and business processes invariably change or when an application is modified or retired.
Thomas Kurian, President, Product Development for Oracle provided the Cloud World audience detailed highlights of the tech provider’s PaaS offerings including the Hybrid and Multi-Cloud Services application. Oracle’s intent with this service is to support the needs of data movement, data transformation, data quality and applications integration among multiple Cloud based systems. We highlight this capability since today, there exists multiple product and supply chain management focused applications supporting either planning, product sourcing, procurement, collaboration, logistics or customer fulfillment. Integrating information and decision-making of the multi-tiered end-to-end supply chain may well imply integrating multiple existing Cloud-based applications. With the combination of Oracle and NetSuite platforms having the capability to each leverage Oracle’s Hybrid and Multi-Cloud Services, the opportunities for integrating multi-tier ERP, SCM, or even existing other third-party Cloud-based best-of-breed platforms is from our lens, a real opportunity. Once more, Oracle is allowing customers the option to deploy Hybrid and Multi-Cloud Services either in a Public or Private Cloud environment that addresses any management concerns for mission critical business information security.
A further option for mid-market businesses is to allow NetSuite to support highly industry-specific, multi-tier supply chain management focused business processes, including either in-house or outsourced manufacturing. Such deployments could soon have the option for deploying certain elements of Oracle SCM Cloud, as well as the use of existing or augmented third-party best of breed technology directed at advanced planning or Omni-channel customer fulfillment. For line-of-business and functional supply chain management teams, such a strategy provides more flexible options in supporting business growth or product diversification without more expensive IT infrastructure or point-to-point information integration costs. Once more, any of Oracle’s or NetSuite’s business intelligence or predictive analytics applications can be layered into decision-support needs.
Oracle has an appealing opportunity to deepen its multi-tier supply chain and enterprise information decision-making support capabilities by exercising an industry or entity specific support strategy that can leverage combinations of Oracle, NetSuite and other best-of-breed capability needs. The question is timing and pricing.
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