Oracle to Buy NetSuite for $9.3 Billion in Cloud Push

By Jeffrey Burt  |  Posted 2016-07-28 Print this article Print
Oracle cloud

The midmarket play will benefit Oracle, Moorhead wrote, but added that "it's important Oracle doesn't muck too much with NetSuite, unlike Sun Microsystems, which they essentially pulled apart and therefore lost their edge."

Charles King, principal analyst with Pund-IT, told eWEEK that another advantage for Oracle is that it will be able to add $740 million or so in annual revenue to its own bottom line, enabling it to boost the financial numbers around its cloud business.

However, the company continues to sit in the middle of the pack of cloud providers, behind the likes of IBM, Amazon, Google and Microsoft, King said. A key difference between Oracle and the other vendors is that the company is building its cloud business off its database and enterprise apps that are used by enterprises, while the others tend to be more software-agnostic in their efforts, he said.

That said, the NetSuite acquisition will be a good one for Oracle, King said.

"The deal immediately brings Oracle greater exposure into midmarket-size companies," he said. "They are really the meat and potatoes of NetSuite's customer base."

ISG's Guptill said Oracle and NetSuite have been working together for years helping customers that are pursuing what he called two-tier strategies. A large enterprise may embrace Oracle software for itself, but for smaller subsidiaries they won, Oracle's products may be more than they need or be too expensive, so they opt for NetSuite's portfolio.

"It's the way the world is going, and it's a big reason why we're seeing this deal happening," he said.

SAP has a similar strategy of offering high-end products for larger customers, and simpler, less-expensive solutions for the smaller companies the customers own. However, the difference is that both product offerings are developed in-house, and SAP's lower-end portfolios don't come with the same level of engineering or marketing skills as NetSuite's. A combined Oracle and NetSuite could pose significant problems for SAP, Guptill said.

The tight relationship between the two also will lessen any disruptions to the vendors or customers that traditionally come with such acquisitions, he said.



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