Oracle buys NetSuite: What does this mean?

Question 1: What does Oracle’s acquisition of NetSuite mean for companies that are looking to move their finance function into the cloud?

Overall, this is not a great development for companies that are in the market for new finance and accounting systems. It leaves organizations with less choice. NetSuite traditionally played in the midmarket space and competed with companies like Intacct, Infor, Epicor and other vendors of traditional on-premises systems. As Oracle began to develop its Oracle Cloud Finance applications (based on the Fusion product line), it originally thought that it would be selling to large enterprises. However, Oracle’s success to date with this product has been largely in the midmarket space. This puts Oracle Cloud head to head with NetSuite. As companies look for “choices,” they can no longer pit the vendors and products against each other. Less competition means less choice and less negotiating leverage. Fortunately, there are other competitive cloud-based systems that will provide options beyond sourcing applications from just one company.

Question 2: What does it mean for current NetSuite users?

The devil will be in the details. There are many unanswered questions, but undoubtedly Oracle will fold NetSuite’s product development, product support and professional services teams into its existing organizational structure and its corresponding processes. This may be a good thing, because NetSuite could benefit from the sheer bandwidth and horsepower of the Oracle machine. However, it is certain that there will be significant changes over the next several years that NetSuite customers will need to adjust to. For example, will NetSuite’s core culture change to match Oracle’s? Will NetSuite lose its startup feel in the way it approaches the market and works with its customers and products? Will the pace of innovation change for NetSuite R&D, which historically issues several major product releases a year? Will NetSuite’s pricing strategies and its approach to contract renegotiations stay the same, or will they mirror Oracle’s strategy? What about NetSuite’s strategic partners, such as Adaptive Planning, that now have products that compete with other Oracle products?

These are all key questions that NetSuite customers will need to answer — fortunately history is an excellent teacher, as past is prologue. Oracle acquired PeopleSoft in the mid-2000s. NetSuite customers should seek out their PeopleSoft brethren to see what their experience was a decade ago.

Question 3: How will Oracle position its now five competing products?

Oracle now has five competing products: Oracle EBS, JD Edwards, PeopleSoft, Oracle Cloud and NetSuite (not to mention Open Air, a professional services solution that NetSuite acquired five years ago). Where will the R&D dollars be invested? Will the company have individual product teams to sell the various systems, or will one sales representative be able to sell all of the products? Will Oracle position NetSuite as its solution for midmarket customers and Oracle Cloud for large enterprises? How will Oracle position these products vis-a-vis those of competitors such as SAP, Workday, Intacct, Epicor and Infor in the small, midsize and large enterprise markets?

These are all excellent questions. Again, if history is a telling sign, Oracle is still investing in its legacy products, such as EBS, JD Edwards, and PeopleSoft, but most of its R&D dollars are in the cloud space. There will be winners and losers in Oracle’s corporate structure, and it will be interesting to see how this acquisition plays out — and which products become favorite sons in terms of R&D and market positioning.

Conclusion:

Overall, I do not believe this acquisition benefits consumers. NetSuite was not a small startup but a thriving publicly traded company that had a track record for innovation. Users can still evaluate NetSuite as a product, but no longer as a company.