Oracle announced on July 28th its intention to purchase NetSuite for $9.3 billion subject to regulatory approval. NetSuite is a leading cloud based ERP/CRM/eCommerce software business suite that was founded in 1998 by Evan Goldberg and has been to the forefront of financial cloud technology since its inception. But what does the future hold for both organizations and why did Oracle feel the need to purchase NetSuite?
Oracle has been strongly showing its commitment to the cloud over the past couple of years as its more traditional desktop based solutions have begun to decline in popularity. NetSuite as a pure bred cloud company will help Oracle establish a substantial share of the cloud driven marketplace, plus gain a very lucrative recurring revenue stream.
NetSuite will help Oracle strengthen its position in the ever growing small to medium marketplace, a sector that Oracle has largely ignored up to now. It hopes the NetSuite acquisition will help Oracle to reach smaller companies that can’t afford Oracle’s traditional high-cost, high-maintenance product.
In NetSuite, Oracle saw a cloud company whose sales of e-commerce and manufacturing software to smaller businesses were stalling as it tried to move into international markets. Oracle will use its branding and international knowledge to help NetSuite overcome international obstacles.
If Oracle had not purchased NetSuite, chances are that a rival such as Microsoft, SAP, Salesforce or Sage may have done so.
Investment in R&D
NetSuite should benefit greatly from both a cash and knowledge injection in the areas of R&D, thus keeping NetSuite to the forefront as the world’s number 1 cloud based ERP system.
NetSuite Two-Tier Strategy
Oracle’s powerful databases will help NetSuite’s Two Tier Strategy of going to market, i.e. where multi-national corporations use cloud solutions such as NetSuite for their subsidiaries and international markets, but feed all the data back to the head office main ERP system such as SAP.
Will NetSuite remain as a separate entity?
Oracle’s Mark Hurd has stated that they will continue to run NetSuite as a separate company, but if the previous PeopleSoft acquisition is anything to go by, it may not be long before Oracle turns NetSuite into a complete Oracle offering which may mean price increases for existing NetSuite clients.
B2BGateway, a ‘Built for NetSuite’ solution, has been NetSuite’s EDI partner since 2001, back when they were known as NetLedger, and we wish them the very best for the future. If you would like to know more about B2BGateway’s cloud based, fully integrated EDI solutions for NetSuite users please email Sales@B2BGateway.Net or visit our EDI for NetSuite page.