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Summary

Oracle announced on July 28, 2016, that it has entered an agreement to acquire NetSuite for $9.3bn. NetSuite, which became a cloud company back in 1998, has more than 30,000 customers, predominantly midmarket enterprises and subsidiaries of larger companies. This should be a positive development for NetSuite’s existing customers and will greatly expand Oracle’s midmarket cloud footprint.

This is a win all round, particularly for midmarket enterprises

NetSuite, under the visionary leadership of Zach Nelson, has always aimed to provide a complete and integrated platform to support midmarket organizations and far-flung subsidiaries of large companies in running the entire business. Covering ERP, CRM, and omnichannel commerce with a single database at the core makes it easier for those businesses to act as coherent and joined-up enterprises, better able to serve their customers and grow. A coherent and connected enterprise is an essential foundation for delivering omnichannel customer engagement and a positive customer experience.

Customers stand to gain

NetSuite CRM was named as a challenger in our Ovum Decision Matrix: Selecting a Customer Relationship Management Solution, 2016–17. We also highlighted two weaknesses that Oracle will need to address:

  • A cluttered user experience

  • Shortfalls in predictive analytics

Oracle has the wherewithal to fix both weaknesses. Oracle’s Alta UI provides a modern consumer-grade user interface that will appeal to NetSuite’s existing customers. It also has a powerful set of predictive and prescriptive analytics that will help NetSuite customers derive even greater value from their existing investments.

NetSuite employees stand to gain

Being acquired is an unsettling experience for employees of the company being acquired. Concerns about culture clash or redundancy are never far from mind. If Oracle accelerates product improvement and extends the market reach of NetSuite, that will create new opportunities for employees of both companies.

In a single stroke, Oracle gains critical midmarket mass

At $9.3bn, this may well look like a bargain. While Oracle CX Cloud is increasingly seen as a viable midmarket option, the acquisition brings with it 30,000 customers, which, in a single stroke, gives Oracle critical mass in the midmarket. The biggest issue will be cultural, and Oracle must move quickly to dispel concerns some of those customers may have about becoming smaller fish in a much larger sea.

Appendix

Further reading

Ovum Decision Matrix: Selecting a Customer Relationship Management Solution, 2016–17, IT0020-000184 (March 2016)

How to Develop an Omnichannel Customer Engagement Capability, IT0020-000108 (April 2015)

Author

Jeremy Cox, Principal Analyst, Customer Engagement Practice

jeremy.cox@ovum.com

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