Oracle Buys NetSuite with a $9.3 Billion Dip into Pocket


Oracle is acquiring NetSuite in a $9.3B all-cash purchase. After its very shaky start in cloud computing—Ellison famously stated that the computer industry and its approach to cloud computing are highly fashion driven—the purchase of NetSuite makes a statement. Oracle is now front and center where cloud is concerned, though it is true that it is playing catch-up with the likes of AWS, Google, and Azure, and possibly, with regard to this acquisition, Salesforce. However, unlike VMware, Oracle has not yet appeared to have made any serious missteps in its journey. Oracle’s only choices were to build—and build big and quickly—or to buy its entry point, although Oracle has been building out its cloud infrastructures with data centers in all the major regions of the world. It also recognized that it is very hard to play catch-up. So, unlike VMware, it decided that this was not to be its only route to market.

Oracle loved NetSuite so much that it bought the company

The acquisition of NetSuite is the next step in Oracle’s evolution from a bricks-and-mortar legacy software and hardware seller to a fully functional cloud provider. NetSuite formed in 1998 to provide applications over the internet, and it can arguably be called one of the first cloud providers—although the term then was ASP (Application Service Provider—yes, nothing is truly new in IT). Having survived the millennium bubble burst, NetSuite morphed. It now provides a suite of cloud-based financials, enterprise resource planning products, and “omnichannel” commerce software that runs the business of over thirty-thousand companies and organizations in more than one hundred countries.

What is interesting about this deal is that it may finally put to bed those rumors about Oracle buying Salesforce. Yes, it is true that Ellison has a significant number of personal shares in Salesforce, helped seed-fund Marc Benioff, and sat on the board. Then again, maybe not—see Benioff’s interview with Mercury News on the future of web-based services, conducted back in 2000 during the DotCom bubble burst. However, this is not an article about Ellison’s designs or desires regarding Salesforce. It is about the purchase of NetSuite, another of his children. Yes, that’s right. Both companies’ ideas were spawned in Oracle; both Benioff and NetSuite founder Evan Goldberg were chiseled in Oracle’s corporate halls. Both are disciples of Ellison.

Prior to the outright purchase of NetSuite, Ellison physically owned 41% of NetSuite as a personal investor. This deal brings the company back into the Oracle fold. Although it might actually reduce Ellison’s personal net worth, it makes very good corporate sense for Oracle as a company. NetSuite’s CRM SaaS application is one of the leaders in the market. Once the deal is complete, it will remain a separate product, but revenues will be heading northward into Oracle’s coffers.

It is a sound acquisition for Oracle, supporting its dominant position as a provider of enterprise-level software to drive business value. It ticks another checkbox in the SaaS portfolio, but allows poorly performing Oracle offerings to be deprecated in favor of NetSuite’s more fulfilling offering.

The NetSuite and Salesforce products are complementary. NetSuite concentrates on the financial side of the business, while Saleforce focuses on customer acquisition and retention. No, the purchase of NetSuite does not put talk of a Salesforce acquisition to bed. It arguably increases its likelihood.

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Tom Howarth
Tom Howarth is an IT Veteran of over 20 years experience and is the owner of PlanetVM.Net Ltd, Tom is a moderator of the VMware Communities forum. He is a contributing author on VMware vSphere(TM) and Virtual Infrastructure Security: Securing ESX and the Virtual Environment, and the forthcoming vSphere a Quick Guide. He regularly does huge virtualization projects for enterprises in the U.K. and elsewhere in EMEA. Tom was Elected vExpert for 2009 and each subsequent year thereafter.
Tom Howarth

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