On the heels of Oracle’s announcement of intent to buy NetSuite for $9.3 billion, analysts are weighing in with varying opinions on what this means to Oracle and the ERP market. At the end of the day, this acquisition is about buying market share, adding NetSuite’s recurring cloud revenue, and jockeying for position in the well-publicized race to be the first $10 billion cloud company. Here are four things to keep in mind as a result of this acquisition:
1. Oracle Couldn’t Crack the SMB Market
Oracle needed an entry into the SMB market, but this acquisition may end up damaging NetSuite’s reputation among smaller companies. There is no indication that Oracle has the culture, products, or pricing to serve SMB buyers. Smaller companies may be better off looking elsewhere for their cloud ERP.
2. Bigger Isn’t Always Better
Creating a bigger, broader company isn’t about better serving customers, it’s about bigger ERP market share. What happens when these giant legacy software companies buy companies is that they slow them down, destroy their agility, and cripple their innovation. The parent doesn’t become more cloud-like—the acquired business simply gets absorbed into the status quo, now having to compete for limited R&D dollars with myriad other products.
3. On-Premises Is Not the Cloud
Even post-acquisition, the vast majority of Oracle’s customers and revenue will be tied to old, on-premises software. The process for converting legacy ERP customers to the cloud has not yielded the results Oracle (and other legacy ERP vendors) had hoped for. Buying yet another cloud solution does not make Oracle any more attractive or a cloud leader, and spending nearly $10 billion to plug a product gap shows just how difficult it is to develop and understand how to run a successful cloud business.
4. Assimilation Is Complex
Adding a fifth ERP product will certainly create another set of positioning headaches for Oracle, which has struggled for years to explain the role of Oracle ERP Cloud (aka Fusion) to both existing customers and prospects. Oracle co-CEO Mark Hurd claims that NetSuite’s products are “complementary,” but, in fact, they represent extreme overlap in functionality and targeted verticals with Oracle’s existing ERP offerings.
This isn’t all bad news though. The announcement stands as one of the software industry’s strongest validations that cloud ERP is the way forward. Savvy organizations will continue to choose both products and vendors that are completely committed to the cloud, because native cloud solutions continue to outpace legacy offerings in delivering customer-focused innovation.
Not all cloud ERP solutions are the same. Learn more by downloading the whitepaper, Debunking Common Myths and Misconceptions About Cloud ERP.