Oracle acquired NetSuite, a provider of software-as-a-service for businesses to manage financial and customer data, to compete more directly against Salesforce which has long been one of the dominant forces in cloud business.
Oracle co-founder and Executive Chairman Larry Ellison owns the largest stake in NetSuite; entities owned by him and his family own nearly half the shares in this company, though this deal will likely add little value to his net worth.
Cloud Computing
Oracle’s acquisition of NetSuite fits with their stated strategy to reinvent themselves for the cloud era and broaden Oracle’s presence in the SMB market, where NetSuite holds an extensive customer base.
NetSuite business management software was initially introduced as one of the first cloud-based applications in 1998 and can be utilized by multiple users at once on an subscription basis. Furthermore, integration can take place seamlessly with other business apps.
This year, Oracle plans on closing their purchase of NetSuite using cash financing and owning approximately one fourth of the company. Larry Ellison will own about one fourth but won’t personally profit as it is structured as an earn-out, meaning payouts depend on NetSuite’s performance – similar to their last large acquisition, PeopleSoft/JDEdwards which wasn’t an ideal fit but did expand Oracle’s presence in the market.
Software-as-a-Service (SaaS)
NetSuite is a comprehensive cloud business software suite that enables organizations to effectively manage finances, track inventory, and host e-commerce stores. Going beyond spreadsheets or point solutions to streamline processes while decreasing operating costs and increasing productivity. NetSuite is widely utilized by retail, manufacturing, and services industries alike.
Oracle acquired NetSuite to expand their cloud computing portfolio and offer customers access to a complete suite of cloud-based enterprise resource planning (ERP) and customer relationship management (CRM) applications.
Oracle also sells hardware products, but their cloud business line, including NetSuite software suite, has experienced strong growth. Therefore, it’s imperative that NetSuite maintains significant market share within its areas of strength. Otherwise, this could damage Oracle’s customer base and slow its own cloud business’ growth rate.
Integrations
NetSuite customers will undoubtedly benefit from Oracle Marketing Cloud integration. In addition, this acquisition gives NetSuite access to more capital to expand its presence in the SMB market.
Oracle also made an important move this year with several cloud acquisitions that help address some gaps that remain for them, like manufacturing, retail and commerce, and professional services markets. They were keen on making acquisitions for these sectors which fill any holes they might have left with existing solutions like their current on-premise solutions. This acquisition represents yet another move into cloud solutions by Oracle – something they had been actively looking at this year as part of their acquisition spree.
NetSuite’s product roadmap will be reviewed and communicated to customers by Oracle according to standard product communication policies. Any future features or products could change and may not arrive on schedule due to various risks and uncertainties; these may include, for example, closing or completing on expected terms; being unable to successfully integrate an acquired company within an expected timeline; as well as general business and economic factors.
Pricing
Oracle NetSuite pricing can be tailored based on product configuration, add-on modules desired and user counts. Oracle offers flexible subscription plans which can be managed either annually or over longer periods, and offers added bonuses when customers buy additional licenses.
Oracle is making significant investments in cloud-based software. They currently own Bluekai – a data management platform; Responsys – an email marketing solution; and Eloqua – a marketing automation tool. Furthermore, Crosswise was recently acquired as well as Maxymizer which offers conversion optimization.
The company’s stock will trade on a “regular-reporting” basis, meaning it will be subject to SEC reporting requirements and disclosure rules. In this communication there may be forward-looking statements made based on management beliefs, assumptions and current expectations which could cause actual results or events to differ materially from what was predicted or projected.