Partners: Oracle's Acquisition Of NetSuite Expected - Now Come The Questions Of Product Positioning

Mark Rhyman, co-CEO at Big Bang ERP, a NetSuite reseller based in Montreal, was participating in a roundtable discussion Wednesday with some other NetSuite partners, and the conversation turned to the prospect of Oracle acquiring the cloud-based business software vendor.

"We didn't think it would happen the next day," Rhyman told CRN. "Maybe in six months. But none said they would be surprised."

The deal, in which Oracle agreed to pay $9.3 billion for the San Mateo, Calif.-based Software-as-a-Service pioneer, did get announced the very next day.

[Related: Oracle Is Planning To Get Partners To Cloud Nirvana]

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And many partners who spoke to CRN on Thursday, like Rhyman, weren't all too surprised. Apparently rumors had been swirling around the vendor's channel for weeks.

Brenda Brinkley, founder and CEO of Houston, Tex.-based Epiphany, also was having a conversation with another NetSuite reseller Wednesday about whether the Redwood Shores, Calif.-based software giant would pull the trigger on an acquisition.

"I actually always thought it would," Brinkley, who partnered with NetSuite back in 2002, told CRN. "My gut tells me it was always part of the plan. That when they built it, that's exactly what they intended would happen."

Brinkley, like Rhyman, believes Oracle founder Larry Ellison was playing a long game with NetSuite—the tech mogul provided much of the funding to get the company off the ground some 18 years earlier, maintained a hefty stake in the company (more than 47 percent of its stock), and often mentored its leaders.

"I think it was a card well played," Rhyman said of Ellison's gambit. "NetSuite now has the right partners and right technology to play into the perfect market for them."

Where Oracle is a leading software vendor to large enterprises, NetSuite has carved out a strong position with small and mid-market customers. That's a market Oracle has made clear it wants to penetrate with a rapidly developing portfolio of cloud solutions.

There had been a number of unsubstantiated rumors of an acquisition in recent weeks, but "most people seemed to be betting against it happening," said John Hughes, a co-founder of ManageForce, a NetSuite- and Oracle-aligned solution provider based in Chicago.

"Ultimately, I don’t think it’s too surprising as there is such a heated battle in the marketplace by the largest ERP providers," he said, referring to both Oracle and NetSuite, as well as SAP, Workday, Microsoft and others.

"These two organizations maintain a lot of synergies and history," said Hughes, who remembers back when he worked at Oracle that NetSuite, in its early days, temporarily went by the moniker Oracle Small Business Suite.

Jan Liband, vice president of marketing at Celigo, a NetSuite integrations specialist in San Mateo founded by the vendor's former director of technical services, also wasn't shocked by the news.

"We’ve long suspected NetSuite would be acquired either this year or next," Liband told CRN. "Oracle was always the prime acquiring suspect. We just weren’t aware it would happen so soon."

While both companies develop suites of business software for managing the back office, customer relationships, human resources and e-commerce, the clear division between their two target markets means opportunities for both channels, he said.

"Oracle has a large ecosystem of SIs, VARs, service providers, solution consultants, and more. Many could view the addition of NetSuite as a new growth area for their business's portfolio, without damaging prior relationships with Oracle," Liband said.

Oracle could also accelerate international expansion for NetSuite, especially in emerging markets where Oracle already has a much larger direct and channel presence, Liband told CRN.

The merger could also cause disruptions, said Hughes, of ManageForce.

"The acquisition will likely disrupt and challenge many traditional NetSuite partners, especially those focused on business services like accounting and auditing, since Oracle's channel organization is more accustomed to dealing with services partners focused on delivering those services through the cloud," Hughes told CRN.

ManageForce, which only recently added a NetSuite practice, is bullish on the deal, he said.

"We think it substantiates our decision to have partnered with NetSuite, as the main driver for us doing so was because we felt NetSuite offered the most mature, proven, cloud ERP platform in the market," Hughes said. "Obviously, Oracle thought so too."

Rhymer, of Big Bang ERP, said the two product portfolios can naturally coexist up until Oracle decides an integration makes sense, which probably won't be for several years. He rarely sees Oracle in direct competition for a deal, because the company's solutions are geared to much larger enterprise customers.

"Personally, for eight years doing NetSuite services, I never had a feeling that Oracle was competitive," he said.

But Brinkley disagrees that the two software vendors can continue to not intrude on each other's turf, based on insights she gained after her company, Epiphany, which builds integration software and add-on modules for NetSuite, abandoned its NetSuite reseller practice at the start of the year and replaced it with an Oracle one.

Working closely with Oracle convinced her such a deal would happen sooner rather than later, Brinkley told CRN.

Oracle is aggressively attacking the mid-market, NetSuite's traditional stronghold, with the Oracle Fusion suite of business applications, which includes ERP, CRM, and HCM solutions.

That suite has an "elegant simplicity," Brinkley said, that's clearly aiming to win over smaller customers.

"This acquisition just pulls it together," Brinkley said. "Now they're taking NetSuite, with all the midmarket attention, and pushing that all to Oracle Fusion."

Hughes said it's important to consider the public statement from Oracle co-CEO Mark Hurd that the two cloud application suites will be coexisting "in the marketplace forever.’

With its PeopleSoft acquisition more than a decade ago, which also delivered JD Edwards products, Oracle proved it could honor such an arrangement, he said.

"I think that the acquisition will lead to a broadened portfolio for both companies, and for both companies’ respective partners," Hughes told CRN. "It will provide an opportunity for NetSuite and its partners to more easily scale up-market, as well as for Oracle and its partners to go down-market."