In a move that has been expected for industry watchers for quite some time, Oracle has announced their intention to acquire NetSuite. The deal will close earlier this year.
The news has generated a surge of interest in NetSuite across global technology sites, including in China, and is seen by many tech industry observers as a major turning point in the development of the cloud market, especially the enterprise management software sector. Not only is the acquisition one of Oracle’s business acquisitions to date (ranking only below PeopleSoft’s 10.3 billion acquisition in 2004), it also represents one of the most emphatic endorsements of applications based on cloud architecture by the market to date, and an acknowledgement by one of the sector’s largest players that companies have no other choice other than to embrace the cloud, or risk falling behind.
The acquisition comes at a time when the tech sector is experiencing a slew of large profile cloud acquisitions and examples of the aggressive market growth of the cloud sector. In a bold move, Microsoft acquired LinkedIn, the online social media company for business professionals for 26 billion USD, and Amazon announced in Q2 2016 that its cloud services division achieved 58% growth year on year.
Business Insider discusses how this acquisition serves Oracle’s existing strategy to move beyond its traditional target market of Fortune 1000 companies and embrace the small-to-medium customer market. The lower cost of cloud ERP offerings like NetSuite compared to their heavier on-premise counterparts will help Oracle to make significant progress in opening up this market, as lower cost cloud-based, “Software as a Service” solution have increasingly become the first choice of SMEs across the world. By acquiring NetSuite, Oracle will gain 30 000 cloud customers in one fell swoop, compared to just over 1000 cloud customers for the group as a whole prior to the announcement of the acquisition.
Integrating NetSuite into Oracle’s brand portfolio will not come without challenges. Technology aside, there is significant function overlap between Oracle and NetSuite’s enterprise management offerings that Oracle will have to manage carefully. Holger Mueller, the principle analyst at constellation research has shared an excellent infographic highlighting the opportunities and open questions about NetSuite’s acquisition by Oracle, and he points out the importance of Oracle defining a clear product roadmap to marry NetSuite’s cloud architecture with Oracle’s solutions that are based on years of industry expertise.
Source Holger Mueller on LinkedIn
Despite the prospective challenges of this merger however, some analysts say there is reason for considerable optimism about the benefits of this deal to both Oracle and NetSuite, as well as their existing and future customers. Meaghan McGrath at Infotechlead points out that Oracle has so far been quite successful at managing the integration of large scale acquisitions into their existing operations, and that NetSuite and Oracle have developed similar business cultures, which should facilitate collaborative efforts between the newly merged companies.
NetSuite has also emphasized the continuity and benefits that customers and partners will enjoy after the acquisition is completed this year, releasing an FAQ on their website to accompany the press release announcing the merger.
Stay tuned for Trigger Networks’ own take on this acquisition, including how it may affect the development of NetSuite in China, and the likely impact of this news on attitudes towards cloud technology among Chinese business owners.
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