Oracle recently completed their acquisition of NetSuite, a premier cloud ERP provider. With this acquisition, Oracle hopes to fulfill midsize and large businesses’ demands for SaaS applications more easily.
Owing to Larry Ellison’s significant stake in NetSuite, its purchase agreement was negotiated through an independent committee to prevent any appearance of conflict of interest.
What is NetSuite?
NetSuite offers cloud-based software solutions for ERP, CRM and ecommerce businesses of any size, as well as SaaS technology pioneering capabilities. Recognized as an industry leader for small to midsized enterprises as well as global enterprises alike.
NetSuite boasts an expansive partner network to assist with sales and implementation, so having access to Oracle’s will enable NetSuite resources to focus on improving their product rather than on recruitment of partners.
Oracle is known to make successful acquisitions. Unfortunately, their track record with hostile takeovers can sometimes fall short; PeopleSoft/JDEdwards acquisition was an especially thorny one where even the Department of Justice got involved. Oracle should take extra care with regards to NetSuite customers to avoid this being another PeopleSoft-esque situation.
Why did Oracle buy NetSuite?
As soon as Oracle first announced their plans to acquire NetSuite in 2016, there was widespread agreement that the acquisition made sense. NetSuite’s early commitment to cloud delivery of software, focus on mid-sized businesses and global reach all fit well into Oracle’s plans for expanding their own application software presence in the cloud.
NetSuite was also able to give Oracle access to companies sized a bit smaller than their traditional clientele and could give them an additional competitive edge against primary rival Salesforce. Unfortunately, past acquisitions had led to forced migration of all customers onto new product roadmaps without any increase in functionality or service – something NetSuite wasn’t subject to at this time.
Plus, this acquisition fits well with Oracle’s commitment to using cloud services as a delivery mechanism for its business applications, and should add significant revenue growth for Oracle overall and Larry Ellison personally (for now).
How will the acquisition impact NetSuite’s customers?
Oracle has pledged that NetSuite customers won’t experience any noticeable differences following its acquisition by them, with the NetSuite team being allowed to operate independently while continuing its growth strategy in the fast-emerging SMB market.
NetSuite has already taken steps toward reaching its global objectives. For instance, its penetration of China – where only token presence existed prior to the deal – has seen remarkable gains over the last several months, similar to what has occurred with Mexico and Brazil markets.
NetSuite typically releases several major products every year and its innovation should remain on pace under Oracle, although bureaucracy could impede this pace if Oracle gets in the way. And Oracle has had mixed success when it comes to hostile takeovers; see PeopleSoft/JDEdwards deal for example which took 18 months before completion.
What will the future hold for NetSuite?
NetSuite will now complete its $9.3 billion acquisition after enough NetSuite shares were tendered in favor of Oracle’s offer. NetSuite founder Evan Goldberg and chief executive Zach Nelson both hold significant shares, being former lieutenants of Larry Ellison at Oracle (ORCL). The offer should close soon.
Oracle’s interest in NetSuite was evident as its products and strategies aligned closely. By purchasing NetSuite, Oracle can build a protective moat around its fastest growing product lines while decreasing the risk of losing traditional ERP and CRM customers to competitors.
Oracle once frowned upon SaaS solutions, but has recently demonstrated its enthusiasm for cloud ERP applications by investing heavily in their suite. Therefore, NetSuite will likely remain independent in 2018 by continuing its vertical market specialization for professional services, wholesale/distribution and retail.