This week the world of enterprise software featured yet another blockbuster acquisition headline, that being Oracle’s planned $9.3 billion acquisition of Cloud ERP provider NetSuite, Oracle’s most expensive acquisition to-date.
This acquisition has 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. According to business media reports and an Oracle statement, the proposed deal will close only if holders of a majority of NetSuite’s shares not held by Ellison and his family actually approve this deal. One other possibility is that another enterprise tech provider provides a counter-offer but that seems unlikely.
NetSuite’s primary marketing messaging centers on the claim to be the top dog in Cloud ERP, providing one unified business management suite, encompassing ERP/Financials, CRM and Ecommerce for more than 30,000 organizations. This enterprise technology provider has indeed been on a roll and many of my fellow industry analyst and technology market influencers have been impressed with the firm’s market prowess and management style. One of the more important aspects of the company’s technology is its appeal to mid-market companies that can little afford expensive and elongated ERP implementations and ongoing support.
Since the window for final approval of this acquisition may well extend itself, we will frame our Supply Chain Matters commentary to initial impressions pending further briefings and information.
First, the financial scope of this acquisition once again reinforces that Cloud computing momentum is a real attraction for both the overall market and for technology providers themselves. We all collectively anticipated additional, larger and more expensive acquisition moves among the enterprise software players and Oracle was no exception.
Upon scanning other viewpoints, some are indicating that Oracle needed to shore-up its Cloud platform offerings. That is not how this analyst views it. By my view, it’s 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 includes 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 allow for add-on capabilities such as inventory management, basic procurement or Ebusiness support capability.
From a supply chain and product management perspective, there are other interesting possibilities that can come from the combination of NetSuite and Oracle’s existing applications. Oracle currently provides broad SCM and PLM full suite support applications for both traditional license and Cloud based deployments. We have previously expressed our view that Oracle SCM Cloud provides one of the only broader based supply chain management suites available in a public Cloud deployment option. Here again, the opportunities for augmenting NetSuite with such capabilities opens new opportunities for existing or prospective customers.
An open question in our mind will be how Oracle ultimately positions its current application offerings as well as NetSuite from an overall pricing strategy perspective. There could be some interesting options for added market or industry penetration.
At this point, the dust needs to settle and the approval process needs to complete. However, the opportunities are rather interesting.
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