Partners See Enormous Risk For Oracle In Pursuing Accenture, With A Massive Upside To Boot

If Oracle were to buy IT consulting powerhouse Accenture the deal could carry financial and business risks, even aggravating existing partners and Accenture customers, Oracle partners told CRN.

The Register, a British IT industry website, earlier this week reported Oracle had hired consultants to conduct research on possible synergies of a combined company. Partners told CRN that buying its largest implementation partner after a 25-year relationship could give Oracle a unique services play that would vault it into a much stronger position in the cloud market.

"If Oracle is effectively going to become what is a services technology company over time, it makes sense," Ronald Zapar, CEO of Naperville, Ill.-based Oracle partner Re-Quest, told CRN.

[Related: Oracle Illuminates Plan To Compete In Public Cloud With New Data Centers, Bare Metal Servers]

Enterprise customers find the greatest impediment to cloud adoption is identifying the strategic resources needed to transform their IT infrastructure. Buying a systems integrator would be a significant commitment to Oracle's oft-stated vision of joining the ranks of cloud superpowers and shifting away from its on-premises business, Zapar said.

While Oracle's traditional business still delivers big revenue and profits, enterprises are increasingly embracing the cloud, where Oracle is not a major player, said Alexander Gorbachev, chief digital officer at Pythian, an Ottawa, Ontario-based solution provider and Oracle channel partner.

"Oracle talks about how great it is in the cloud," Gorbachev said. But he notes that most of the spending on Oracle-related products have "little to do with the cloud," Gorbachev said.

The risks of a potential deal go beyond the sum that Accenture shareholders would demand – likely a premium on a $78 billion market capitalization.

For starters, it's hard to predict how Oracle partners—especially other global systems integrators – will react to seeing a traditional competitor under the vendor's roof.

Re-Quest focuses mostly on the SMB and mid-market, so wouldn't find threat from an Oracle services division bolstered by the systems integration powerhouse, said Zapar, who previously worked in Oracle's in-house consulting division.

But if he was a partner, like so many others, focused on the enterprise space, "I would definitely see it as competitive," Zapar told CRN.

Existing Accenture customers that use competing technologies might not be thrilled, either. They chose different vendors over Oracle, Zapar said, and might find Accenture no longer a suitable implementation consultant for those rival products. Accenture works with SAP, IBM, Microsoft, and Salesforce.com.

The potential for alienating existing partners and customers is a concern. Other concerns, partners said, would include Accenture's independence and the difficulty Oracle might have in absorbing a wholly different business model.

Oracle's desire to profit from the cloud could be a driving force the reported acquisition exploration. One rationale is that, since Oracle can't buy itself directly into the public cloud space given the high valuations of companies like Microsoft, Amazon, or Google, it could be looking to acquire share indirectly via Accenture, where over 45 percent of revenue comes from digital, cloud, and security services.

The fact that Accenture works with several of Oracle's rivals could be handled by carving out the non-Oracle part of the Accenture business, Gorbachev said.

"Oracle may feel it will gain more than it would lose," he said. "But given Accenture's most recent quarterly revenue of over $8 billion, Oracle would have to be careful in making the right decision about how to handle the company."

Gorbachev said that bringing in at least part of Accenture's business would make Oracle a more formidable direct competitor to its channel. But Accenture is already a strong competitor to many of those solution providers, and the deal could benefit them by creating an opening into Accenture's current accounts.

"Accenture would not be an independent technology services provider if Oracle buys it," he said. "For customers who require technology independent of what Oracle provides, they will need independent channel partners," Gorbachev said. An acquisition by Oracle would definitely impact how customers leverage Accenture."

Accenture, because it's not a product company, would pose new business integration challenges, Zapar told CRN. Accenture gets engaged for individual projects, so it would be hard even to estimate how much of its run rate would immediately be convertible to Oracle's business, Zapar said.

"I don’t know how many would be renewed if they were bought by Oracle," he said.

Other large technology vendors have had a mixed record in acquiring enterprise consultants and systems integrators.

Hewlett-Packard, from which Hewlett Packard Enterprise was spun out, in 2008 acquired EDS, and a year later renamed the system integrator as HP Enterprise Services. HPE is in the process of spinning out Enterprise Services into a separate joint venture with CSC.

Dell in 2009 acquired Perot Systems in a $3.9-billion deal, and last year sold that business to NTT Data for about $3.1 billion.

IBM in 2002 acquired the consulting business of PricewaterhouseCoopers, or PwC, in the wake of the break-up of the "Big Four" auditing companies after the Enron and other big financial scandals. For fiscal year 2016, IBM Global Business Services, which includes the old PwC business, reported revenue of $16.7 billion, down 3 percent over fiscal 2015.