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Summary

On July 28, Oracle announced that it will acquire NetSuite, one of the earliest pure-SaaS companies, in a blockbuster $9.3bn deal, one of the largest in Oracle's history. The deal is expected to close this year, and until then the companies will continue to run independently. Oracle is assuring customers and partners that the two companies' portfolios are complementary, and that the deal will open up new opportunities for customers to take advantage of the entire Oracle Cloud portfolio.

An inevitable deal resulting in more cloud market consolidation

There's more than a hint of inevitability surrounding this deal (one that's been rumored for years), given Oracle's and NetSuite's history in the cloud market. After years of halfhearted support of cloud as a viable model for enterprises, Oracle is clearly now all in, spending the last 36 months putting the Oracle Cloud at the center of its strategy and almost everything it does. NetSuite, meanwhile, was founded in 1998 at the very start of cloud's history, building up a business so successful that Oracle founder Larry Ellison eventually became a believer and a majority investor. It certainly helped that NetSuite CEO Zach Nelson previously worked for Oracle as head of worldwide marketing under Ellison.

In a press release, Nelson said NetSuite's customers would benefit from Oracle's "global scale and reach" into more industries and more countries. Oracle CEO Mark Hurd said NetSuite's offerings are complementary "and will coexist in the marketplace forever. We intend to invest heavily in both products – engineering and distribution."

With these major market acquisitions, customer confusion and corporate inertia are the enemies, while effective integration and transparency are your friends. Luckily for customers, Oracle has an acquisition culture and a long history of effectively integrating product development roadmaps, sales organizations, and support functions to keep disruption to a minimum. SI and services partners can also play an important transitionary role as they attempt to capitalize on new cloud opportunities among their customers. Both Oracle and NetSuite share many major alliance services partners, including Accenture, Capgemini, EY, Deloitte, Infosys, Wipro, and Tech Mahindra.

The industry is clearly going through a major consolidation wave, as this deal is the latest in a string of high-profile acquisitions spurred on by an accelerated pace of change. Every blockbuster deal – whether Oracle/NetSuite, NTT Data/Dell Services, HPE Enterprise Services/CSC, Dell/EMC, etc. – means the level of customer choice among major IT providers takes a hit. For those customers looking to consolidate their strategic suppliers, deals like these fit into their long-term plans and are good news. Others prefer to leverage a broad competitive field of providers in order to secure the best contract terms, prices, and capabilities. Nonetheless, in this case, Oracle's and NetSuite's complementary portfolios, which could bring new dimensions to the Oracle Cloud strategy and new potential for customers and partners, put this deal on positive footing from the start.

Appendix

Further reading

"Oracle's Accelerated Buying Experience: A critical step in its journey to become a digital service provider," IT0018-001497 (June 2016)

"Changes are coming for SI and IT services partners selling Oracle Cloud," IT0019-003532 (January 2016)

Author

John Madden, Practice Leader, IT Services

john.madden@ovum.com

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