Oracle Could Buy NetSuite, But Salesforce is More to the Point (aka SaaS strategy for BIG ISV’s)
Posted by Bob Warfield on September 21, 2007
Larry Dignan has an interesting post about Larry Ellison’s recent remarks on SaaS. Ellison was responding to SAP’s ByDesign announcement, of course, and he was able to do so from a position of strength since Oracle’s most recent quarterly numbers were good. He has essentially said that SaaS didn’t fit Oracle’s strategy (they’re adding value for big customers and SaaS is for smaller businesses) and that moreover it didn’t seem a very profitable business. Dignan observes quite rightly that Larry owns a big piece of NetSuite, the SaaS vendor that’s working towards a near term IPO. If Larry doesn’t think SaaS is a good business, why does he own a piece of it?
Dignan goes on to suggest that Larry is crazy like a fox and knows full well that SaaS can be a good business. His long-term plan is simply to buy NetSuite if he needs a SaaS offering, and to stay with his core business and not face the pain of SaaS cannibalization otherwise. Meanwhile, he has covered his bet, and if SAP stumbles, he can rub their noses in it.
It’s actually a pretty good plan, but Dignan isn’t thinking big enough. When you’re Larry Ellison striving for world domination, NetSuite is a pretty minor statement. If SaaS is working out and needs to imminently join Oracle’s arsenal, Larry should just buy Salesforce.com. That’s the SaaS put-away shot, it makes a heck of a statement, and it further cements Oracle’s hegemony over CRM (they already bought Siebel). NetSuite can come along for the ride too, but the Oracle shark has to find acquisition prey relentlessly, and it muts be of a certain scale to satisfy their appetites.
What’s that you say? Marc Benioff won’t go for it? That’s what Duffield said at PeopleSoft. When Don Larry comes calling, you better kiss the ring and take the silver, lest you get the lead instead.
I like the idea of major acquisition as a way for a really big ISV to get into SaaS. If nothing else, it gives them significant recurring revenue before the cannibalization gets underway. It also provides a bit of a protected game preserve because you’ve got a different product. If you prefer Salesforce, go SaaS. If you prefer Siebel, go On-premises. It’s also classic Oracle vs SAP: SAP must build it themselves, Oracle just buys it and gets a free move in the bargain.