Can you acquire cloud DNA?

zach nelson

zach nelsonZach Nelson, CEO of NetSuite tells Diginomica

And so I actually believe Oracle’s going to behave more like NetSuite in the future than NetSuite’s going to behave like Oracle. Every company wants cloud DNA. It’s the only DNA we have. I think we’re going to have enormous influence on the Oracle side of the house.

So it had me thinking, how easy is it “acquire” such cloud DNA? I think Oracle was well on its way with a decade of Fusion development, with acquisitions like Taleo and with growing investments in its infrastructure as a service (so Larry Ellison felt bold enough at OpenWorld to challenge the market leader, Amazon). And yet, at times even they still act like they long to stay in the on-premise world

SAP’s acquisitions of SuccessFactors, Ariba and others and its own experience with Business ByDesign do not appear to have instilled the cloud DNA yet. Jon Reed reports they are just ramping up their S/4HANA public cloud. The new head of that division seems almost casual about a core tenet of cloud computing.

Today, the fact that we’re not multi-tenant in the application level has zero impact on my ability to envision the product, zero impact on the security of my product, zero impact on the cost of my product – at the scale that I’m at today. But: I want to fix it, because when I hit a billion euros annually, it’s going to make a difference.

IBM’s acquisition of SoftLayer does not appear to have instilled a cloud DNA either. The bulk of their revenues – outsourcing, software and hardware revenues still persist with older hosting and on-premise models. With the Watson Developer cloud that may change somewhat in coming years. But then again I already have waited for 5 years since IBM started pitching Watson and it’s still not even 5% of its revenues.

Took Microsoft for a while to grow its cloud DNA and there it was more organic. I wrote in The New Polymath in 2010 about their Azure data centers. Even though billions of dollars had been poured in them it took a few more years before Office 365 started to take off and for Microsoft to actively push its platform to developers and ISVs.

I recently wrote about a spate of cloud acquisitions by large outsourcers. It will be a decade this month when I expected them to start bringing in cloud principles like Software as a Customized Service. And still, the vast majority of their revenues come from support of on-prem solutions.

If you were not born in the cloud like NetSuite or Workday or Appirio, it is very difficult to change your spots – leopard like.

Oracle may just be an exception to that, now with NetSuite’s help. Other large vendors will need to do a lot more than just acquire “born in the cloud” entities.

(Cross-posted @ Deal Architect)

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