Oracle buys NetSuite for $9.3bn to further strengthen its cloud story

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Updated 1758 BST Oracle has announced the acquisition of cloud ERP software provider NetSuite for $9.3 billion (£7.07bn).

The move had been rumoured strongly for the past couple of weeks – and certainly in the back of people’s minds for a significantly longer period of time – yet the agreement was confirmed today, and is expected to close later this year subject to usual regulatory approvals.

“Oracle and NetSuite cloud applications are complementary, and will co-exist in the marketplace forever,” said Mark Hurd, Oracle CEO. “We intend to invest heavily in both products – engineering and distribution.” Evan Goldberg, founder and CTO of NetSuite, said: “NetSuite has been working for 18 years to develop a single system for running a business in the cloud. This combination is a winner for NetSuite’s customers, employees and partners.”

The deal represents the latest move by Oracle to beef up its cloud operations. “This acquisition is all about strengthening Oracle’s cloud story,” John Dinsdale, chief analyst at Synergy Research told CloudTech. “It will push Oracle a couple of places higher in the enterprise SaaS market share rankings and will strengthen its position as one of the two leading ERP SaaS vendors, alongside SAP.

“It will also help to boost Oracle’s position in the CRM segment of SaaS, though it will remain a long way behind the segment leaders, Salesforce and Microsoft,” he added.

So how far have we come? Cast your minds back to mid-2012; Larry Ellison, then CEO and now CTO, is on stage announcing the general availability of the Oracle Cloud platform as a service. At the time Ellison argued that it was not the technology he objected to, but the nomenclature.

Since then, it almost feels that the database and software giant has been racing against time to catch up. In March 2014, Madan Sheina, lead analyst for software and information management at Ovum, argued Oracle had made“significant incremental advances across both its public and private cloud portfolio offerings” as part of its “aggressive” overall cloud strategy. Later that year, Oracle hired both Peter Magnusson, former mastermind of Google App Engine, and Shawn Price, formerly of SAP.

Not everything has worked out, of course. Despite, or perhaps because of, a partnership with Salesforce in 2013 which analyst firm Ovum argued offered “less than meets the eye”, the two companies seem much more comfortable nowadays in their traditional roles of backbiting one another than cosying up. The partnership with Verizon in 2014, while still available, looks a little less glossy after the telco shut down part of its public cloud offering earlier this year.

Ian Moyse, sales director at Axios Systems and a board member on both Eurocloud and the Cloud Industry Forum, argued the deal could be a ‘choker’ for Salesforce, as well as noting what this means for the channel market. “Another day, another cloud acquisition,” he told CloudTech. “This will prove interesting as Oracle pushes further to cement itself as a heavy cloud player."

While the official FAQs (PDF) have reassured customers of both sides that it will be business as usual, Moyse was less sure. “A bigger challenge may be the route to market, as NetSuite has long championed its European growth success as down to its channel partnerships, and there will be a lot of nervous customers and partners out there today,” he said, adding: “We can expect more cloud rationalisation and acquisitions as the cloud market continues to mature and the big traditional vendors stamp their mark on reforming to be cloud-focused to survive and stay relevant.”

The key now, however, is for Oracle to maintain and build upon any momentum it has in the cloud. Around the time Dell announced its intent to buy EMC for $67bn in October last year, Wired published a scathing piece on the ‘living dead’ in enterprise tech. Oracle was named alongside Dell, EMC, HP, Cisco, and IBM.

As this publication has frequently observed, moving a huge legacy software and hardware revenue base over to the cloud, whether you are SAP, Oracle, or anyone else, is not easy. According to the latest figures, cloud accounted for 8% of Oracle’s total revenues over the last quarter – although Synergy disputes those numbers and argues it is a little less.

Dinsdale added that while NetSuite won’t ‘directly’ help in the PaaS and IaaS markets, Oracle remains a top 10 player in the former and top 20 player in the latter.

Read more: Marketing cloud giants join forces as Oracle snaps up NetSuite

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