Oracle-NetSuite win-win?

After 15 years and countless deals, you would think integrating acquisitions would be an Oracle core competence. It’s inconsistently so if you talk to many “refugees” who have left after an Oracle acquisition.

After listening  (replay here) to Oracle and NetSuite executives (finally after a prolonged stock tender and regulatory review process) present their initial thoughts on integration, I am optimistic about this one. I see several scenarios where the combination will make sense if executed well

Two-tier ERP

Large customers have long tried out two-tier strategies on their own– an Oracle or SAP ERP at HQ and a much simpler solution at global subsidiaries. Oracle and NetSuite could make a formidable bundle if NetSuite is allowed to expand its global footprint – both in functionality and in leveraging Oracle’s reach. As Jim McGeever, who will head the new GBU, joked going from the NetSuite’s presence in 14 mostly English speaking countries to get to Oracle’s significantly greater presence would have taken them till 2020 on their own.  If Oracle can provide a more seamless bundle and price it attractively, many global companies would be willing to consider it as against deciding on the Tier 2 solution on their own and then owing the on-going integration.

Vertical ERP

As I have written before NetSuite has done a good job verticalizing its products. I wrote from the last SuiteWorld “NetSuite’s specific industry strengths were sharply in focus on day two of the event where they had 5 parallel sessions for Software/Internet, Retail/Commerce, Wholesale Distribution and Manufacturing, Services and Nonprofit sectors. I attended the Software track and it was very well done. Product functionality and customer executives showed NetSuite’s appeal across the lifecycle from start-ups to “growth at scale” to public companies.” NetSuite can now aim higher in its existing verticals – the reality today is it is strong with smaller enterprises. 30,000+ organizations today contribute to its $ 750m in revenues.

Oracle’s own cloud applications are much stronger on horizontal lines – financials, HR, CRM (much stronger if you see Steve Miranda’s slides starting around 32.15 in the replay). Oracle has wide vertical reach across its products but it is a mixed bag of legacy, on-premise solutions for many. NetSuite could actually provide a blue print for Oracle to redefine its cloud solutions for other industries.

Test bed for PaaS and IaaS

As I wrote earlier this week while watching AWS re:Invent, we are moving to a new arms race where Amazon, Microsoft, Oracle, Salesforce and many other vendors are trying to recruit ISVs to their cloud platforms and infrastructures. With the NetSuite GBU, Oracle gets a showcase opportunity to show off its own ability to support a decent sized vendor with a large customer base (which as founder Evan Goldberg points out is already used to its SLA of “4 nines”) on its PaaS and IaaS.

Having said all this, listen to the qa starting around 42.15 – lots of details around channels, geographies, product footprints will need fleshing out. No different than other complex acquisitions, so look forward to the pace of execution on this one.



(Cross-posted @ Deal Architect)

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