Four Lessons From Oracle’s Acquisition of NetSuite

Earlier today, Oracle announced that it is acquiring NetSuite for $9.3 billion. While this may not be surprising news since Larry Ellison has always been a large shareholder of the SaaS ERP vendor, the acquisition does reveal a few important things about the state of the ERP market:

1. The cloud ERP movement is for real. Panorama Consulting’s 2016 ERP Report reveals that cloud and SaaS deployment models have been gaining traction in recent years, but this investment shows that Oracle and other vendors are doubling down on the cloud movement. Traditional ERP solutions may not be going away anytime soon – they are still leveraged by a majority of organizations, according to Panorama Consulting’s 2016 ERP Report – but it is clear that Oracle sees cloud as a higher area of growth opportunity than the more mature on-premise ERP market.

2. Oracle is playing catch-up in the cloud market. Oracle has been investing heavily in cloud products in recent years, but it is clear that they are not as far along as Salesforce, Workday, and many other ERP vendors. This acquisition is a sign that Oracle is playing catch-up with these other established cloud vendors, and this acquisition helps Oracle take a big step toward closing that gap.

3. The SMB market is where the “real” market growth is. Oracle, with its investments on eBusiness Suite and JD Edwards, has traditionally been more focused on larger enterprises, while NetSuite typically appeals to smaller, less complex organizations. With this acquisition, Oracle is making a foray into the small and midsize (SMB) market. There are only so many Fortune 1000 companies and other larger organizations to sell to, so the NetSuite acquisition is a bet that Oracle’s growth will largely come from the SMB market in the future.

4. For better or for worse, NetSuite customers are now Oracle customers. It’s interesting to see how many of our current and prospective clients are allergic to working with Oracle, whether because of their complex pricing models or the “Larry Ellison” culture. Now, those that are currently using or planning to purchase NetSuite will need to determine whether or not the benefits outweigh the risks and concerns.

The bottom line is that Oracle is betting heavily on the cloud and growth in the small and mid-size market. It sounds like a smart play, especially since there is already a strong tie between the two companies. Time will tell how things will work out for customers and how Oracle’s R&D investments might help the NetSuite product get to the next level.

The maze of ERP vendors and potential enterprise solutions in the market just got even more complex, so a proper enterprise IT strategy is more important than ever. Learn how by attending our upcoming webinar: How to Define the Best Enterprise Strategy Roadmap for Your Organization.