Oracle's $9.3 billion deal to buy NetSuite made headlines last week, with many observers seeing it as part of Oracle's desire to grow top-line cloud revenue as quickly as possible, as well as an effort to court the midsized companies that make up the bulk of NetSuite's customer base.
It also doesn't hurt that Oracle executive chairman Larry Ellison already owns a big piece of NetSuite; that many NetSuite executives, including CEO Zach Nelson, have worked for Oracle; and that NetSuite's software is built on the Oracle stack. Given all these factors, the acquisition may seem more obvious than earth-shattering.
But at a macro level, I see the deal as having a significant influence on the cloud ERP market by sparking a wave of additional consolidation.
For example, Salesforce has dipped a toe or two in the ERP waters over time through moves such as its joint venture with Unit4 on FinancialForce. A number of ERP vendors, such as Kenandy and Rootstock, have built their applications on the Salesforce development platform.
Deals as pricey as Oracle-NetSuite usually prompt competitive answers. It wouldn't be unthinkable for Salesforce to acquire one or more of those natively developed ERP applications, or as is more CEO Marc Benioff's wont, to make a major splash. That would certainly be attainable by a purchase of Workday, which already has a close partnership with Salesforce. Workday's functional footprint is centered on HCM and financials, but would be a good place for Salesforce to start.
Then there is the question of where the industry's remaining large but still mostly on-premises ERP vendors end up. Epicor recently changed hands from one private equity company to another, and officials say the plan is to hunker down, focus on innovation and work on moving its installed base to modern cloud ERP. The company could become an enticing target in a couple of years to vendors that historically have focused on ERP consulting, not owning the application itself.
The same goes for Infor, is the industry's third-largest ERP vendor after SAP and Oracle, with about $3 billion in revenue. Under CEO Charles Phillips, Infor has been focusing as well on moving customers to the cloud, while broadening its functional footprint, adding granular vertical capabilities and modernizing its user experience.
Then there's an alternative possibility. Rather than be acquired, it's more likely that remaining ERP vendors will make acquisitions of their own, particularly in the big data analytics space, pointing to Workday's purchase of Platfora, or in collaboration. (NetSuite itself had built and acquired to offer companies ERP, CRM and e-commerce in a single suite.)
However the coming months and years play out, I believe we'll look back on the Oracle-NetSuite deal as a watershed moment for the ERP landscape.
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