Just as it did 13 years ago with PeopleSoft, Oracle appears set to get its way today and complete a complex acquisition. And just as was the case with that earlier purchase, the capture of NetSuite is set to muddy the waters of business management systems.
Regulatory interest and pushback from PeopleSoft leadership and shareholders led to a protracted process in the 2003 hostile takeover while this time a key shareholder delayed the NetSuite buy by arguing that at $9.3bn NetSuite was undervalued. But on Saturday Oracle issued a statement saying it had won over sufficient shareholders for the deal to go ahead. Confirmation of NetSuite becoming part of Oracle should follow today; NetSuite did not comment.
When Oracle bought PeopleSoft it helped the former develop its hand in business applications, the big software systems that handle manufacturing, HR, accounting, CRM, supply chain management and other critical infrastructure organisations rely on to conduct business. PeopleSoft – plus other deals such as those to buy JD Edwards and smaller, specialist players such as Retek in retail – made Oracle the number-two to German giant in business applications, sometimes known as enterprise resource planning (ERP).
If PeopleSoft and JD Edwards could be seen as attacking the challenge from the top and some of the vertical deals as coming from the side, then NetSuite might be seen as attacking the problem from the underside. NetSuite, a pioneering provider of applications served from the cloud, has become the go-to provider of e-commerce, accounting and other ERP tools for small and midsized companies even as it has picked up increasingly significant enterprise wins along the way. With NetSuite, Oracle has a full set of ways to win the keys to the operations of companies of all sizes and it appears unworried about any crossover in its product offerings that that approach might engender.
For NetSuite the deal represents a curious completion of the circle. Oracle co-founder Larry Ellison held a majority share in NetSuite until the latter company’s 2007 IPO forced him to dilute his holding. Oracle also once resold an early iteration of the NetSuite product. Pundits had long predicted that Oracle, a big spender in mergers and acquisitions, would one day add NetSuite to its family.
Will it work? Always well financed and a scrappy competitor that has invested heavily in media relationships and aggressive marketing, NetSuite now gains access to the mighty reach of its Californian neighbour and the historical ties between the companies should help create a fit between the pair. But it remains to be seen whether NetSuite can retain its quirkiness and customer focus under Oracle, one of the world’s largest technology companies.
The deal already has rivals reaching for their cudgels.
“Oracle's acquisition of NetSuite brings further complications and disarray for both sets of customers, prospects and employees with an ever-growing 'FrankenCloud', as it gains more bolt-on appendages including another cloud technology stack and another set of ERP and CRM apps,” Jeremy Roche, CEO of FinancialForce, a fast-growing provider of financial management services on the Salesforce.com cloud wrote in an email.
“FrankenClouds are one of the biggest issues plaguing organisations today with multiple databases and managing complex interfaces creating a huge monster which can slow business growth. NetSuite customers are at risk of being drawn even more deeply into the nightmare of the FrankenCloud. Oracle’s ERP and CRM acquisition track record and string of casualties including of PeopleSoft, JD Edwards, and Siebel applications will only add to customer uncertainty.”
NetSuite has made its name in part by attacking the slow-moving, “stone age” software approaches of companies like SAP and Sage that are slowed down by their complex legacies. Now it will need to combat the notion that by joining forces with Oracle it has attached itself to a company with similar complications.
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