Following the acquisition of NetSuite, Oracle unveiled a number of strategies to spur its Cloud ERP growth across different verticals, market segments and geographies.
At a kickoff event in Redwood Shores, Oracle executives disclosed the new structure of NetSuite as well as its go-to-market strategies now that the former Cloud Enterprise Resource Planning(ERP) vendor is being positioned as the growth engine for the database giant.
James McGeever, formerly president and COO of NetSuite, has been named head of the NetSuite Global Business Unit at Oracle, reporting to CEO Mark Hurd. Evan Goldberg, former CTO and co-founder of NetSuite, will remain as the product chief of the NetSuite GBU, while Zach Nelson, former CEO of NetSuite, will become an advisor and evangelist at Oracle.
While the event was designed to showcase the synergy between NetSuite and Oracle and their product lines, the unmistakable message centered around the value of NetSuite in boosting Oracle’s Cloud applications business, especially in ERP.
Though Oracle has made significant inroads into the Cloud ERP/EPM and SCM markets by picking up about 3,500 customers, the addition of NetSuite will add another 30,000, a substantial increase in terms of the Cloud traffic they bring. By supporting these NetSuite users in the Cloud, Oracle will be able to optimize and amortize the huge Cloud infrastructure(covering 19 data centers globally) that it has built over the years to better compete with Amazon Web Services, Microsoft Azure and IBM SoftLayer.
According to its last 10K filed in February 2016, NetSuite continues to rely on different Cloud infrastructure providers including CenturyLink, Amazon Web Services and VM Farms under a number of hosting, backup and co-location agreements. Unwinding them could take some time. In 2015, NetSuite also announced a partnership with Microsoft to better support Office365, Windows and Azure.
Goldberg said the combination of the two will boost NetSuite’s uptime availability and performance by turning to an enlarged global Cloud operation.
Another recurring theme has to do with the increased capability of NetSuite to sell different Oracle products from Cloud HR applications for talent management and EPM apps for Cloud planning to databases and other tools.
While the rationale of such cross-selling sounds reasonable, the truth is that most NetSuite customers have been pretty satisfied with their enterprise applications environment based on our continuous survey of more than 10,000 NetSuite customers because of the vendor’s robust product lines and incremental benefits from its many acquisitions.
The all-encompassing product portfolio at NetSuite from its acquisitions for professional services automation(OpenAir and QuickArrow), HR(TribeHR), eCommerce(Venda), manufacturing(IQity), warehouse management(eBizNET), point of sale(Retail Anywhere), content management(Element Fusion), billing(Monexa) and email marketing(Bronto) has almost turned NetSuite into a mini-Oracle with the added distinction that some of these acquired products have been natively built for SuiteCoud under long-standing development partnerships.
Leapfrogging Salesforce and SAP
The addition of more than $700 million in annual Cloud subscription revenues from NetSuite to Oracle’s current run rate of $3.2 billion in SaaS and PaaS products is good but not enough to keep up with competitors like SAP and Salesforce. The latter for example now projects reaching $10 billion in annual sales by January 2018.
In order to leapfrog them, Oracle must do a few things. All the talks about broadening the global and vertical appeal of NetSuite are secondary to Oracle’s stated goal of scaling out its sales operations to go down market.
The NetSuite addition could help Oracle achieve that at scale, while pursuing such down-market opportunities at lower costs primarily using the Oracle Direct, an 8000-strong+ inside sales operation that has been expanding rapidly by selling a full range of Cloud applications around the world. Combining the box-mover approach of Oracle Direct and NetSuite’s low-cost delivery of Cloud apps for ERP, e-Commerce and Marketing Automation(formerly Bronto) will be the growth driver Oracle desperately needs after seeing its top line stuck at the $37-billion level since 2012 because of slumping hardware shipments and erosion of software license sales.
During Oracle Open World in September 2016, CEO Safra Catz told financial analysts that NetSuite would be instrumental in helping Oracle “go down market economically at scale and globally’’ once it’s fully integrated into the new highly-automated selling methodology that has been perfected by Oracle Direct.
If Catz’s strategy prevails, NetSuite will not be marketed as Oracle’s Cloud ERP apps for midsized or large enterprises, but rather a large contingent of fast-growing companies and startups that would want to leverage a set of prebuilt Cloud applications that are easy to use and implement. The question is whether NetSuite is the right fit for them over an equally compelling set of offerings from the likes of Intuit, Sage and Xero.
For NetSuite’s current customers, Hurd reiterates that pricing is not going to change, except the fact that more Oracle salespeople will be calling on them. It’s even plausible that Oracle would lower prices and offer steep discounts on certain NetSuite offerings in order to gain market shares at the low end. That pretty sums up the future of NetSuite and its products, helping Oracle expand across verticals from manufacturing to professional services, regions and market segments from ERP to HCM.
Simply put, what Oracle has in mind for NetSuite is to sell this gigantic network of Cloud apps as if there were no tomorrow.