Oracle and NetSuite announced a strategic alliance focused on plans to deliver integrated HCM and ERP Cloud Services for mid-size customers.
Deloitte plans to work with Oracle and NetSuite to develop a practice with highly skilled practitioners specializing in tools and implementation services to help customers adopt the soon to be integrated SaaS technologies faster and more seamlessly.
Additionally, Oracle plans to develop a product integration and go-to-market strategy with NetSuite for Oracle HCM Cloud and NetSuite Cloud ERP to deliver a single, integrated solution that seamlessly connects HR and finance systems for mid-size customers.
Once again we are talking futures but the fact remains that NetSuite recently renewed its database licensing arrangements with Oracle, so setting the scene for a close alliance.
Customers who have been watching the week's events unfold would be forgiven for feeling punch drunk at the slew of announcements from Oracle. And it isn't over yet. We kicked off the week with the Microsoft/Oracle alliance. Next followed the Oracle/Salesforce.com alliance. Now we have the Oracle/NetSuite alliance.
On its face it sounds like a week of brilliant moves by Oracle that kick start the round of cloud player rollup that's reminiscent of past rollups but with the clear interim marketing message: we dominate the cloud. But it isn't over yet.
Tomorrow, Oracle and Salesforce.com will be hosting a media/analyst call. You can bet that most of the diginomica team will be attending. Whether Oracle (which is leading the call) choose to answer any of our questions remains to be seen, However, I notice that AllthingsD surface some very interesting questions about the Salesforce announcement:
Salesforce, a Workday customer since 2007, isn’t giving up on using Workday internally, Furby said, nor does this amount to a reselling agreement, as some people, including me, concluded. “Although the press release was somewhat vague, our conversations with Salesforce suggest that there is not a referral agreement in place between these two parties to sell [Oracle's] Fusion, and thus Oracle does not add distribution capacity as part of the arrangement,” Furby wrote in the note.
That was echoed today in an email I received from Salesforce spokesman Andrew Schmitt, who said, “Salesforce has no plans to resell any Oracle applications.”
That fits precisely with what I learned from Aneel Bhusri, co-CEO Workday. There will be more to add on the customer acquisition front but detail on that point has to wait until we hear the next Workday earnings announcement.
It is also interesting to note that contrary to what might have been expected, Workday's stock climbed on consideration of the impact this deal has on Workday's go to market ability. Taking that point, almost everyone who says that Workday is 'isolated' are wrong. For the moment. Back to NetSuite.
The NetSuite effect
This is the clearest signal yet that NetSuite wants to accelerate its Tier 2 surround strategy with Oracle at the center. If they can pull this one off then it is a win-win for Oracle and Netsuite. Oracle consolidates its position at the center of large organizations, NetSuite provides the solutions needed in mid-tier subsidiaries, effectively shutting out all competition including Microsoft, Agresso and SAP. But...it can only likely work in NetSuite's defined vertical markets. Expect to see more vertical market forays.
In recent months, I have received an increasing flow of inquiries concerning NetSuite's increased pricing. This goes against the grain of SaaS price thinking but makes sense when you're trying to move up market. Customers should push back against price increases unless they see clear benefit.
At SuiteWorld, Zach Nelson made clear that he's not minded to leave money on the table when it is there to be earned. On the other hand, smaller customers will not be happy to find they get caught in the wash. NetSuite needs to manage this transition very carefully. It has already been through a hiatus during which it needed to dump customers spending less than $10,000 a year. With current average deal sizes in the $50,000 range, can it afford another cull without attracting more bad press?
The good news is that by including a marketing arrangement that embraces Oracle HCM, NetSuite gets to fill a hole in its armory that has been difficult for it to explain away. Some will argue there was no problem since Netsuite had arrangements with the likes of TribeHR but that's not the same as being able to position with Oracle. Fast track integration will be the key to customer acceptance.
It's been an exciting week so far with more drama to come. I agree with most colleagues who see this as net good for customers and a validation of cloud by a mega vendor trying to find its place in the new world. Where things get murky is in the large enterprise arena.
I maintain my position that Workday will not skip a beat. I am scratching my head on the Salesforce.com gig until I hear that Salesforce finally acknowledges that its architecture cannot survive another nine years. From soundings elsewhere, the ones who are sitting quietly on the side are SAP. Any time market shift occurs is an opportunity for 'stability' plays. SAP is that play.
If you are a customer considering a cloud play then you should wait and see how these moves shake out over the next few months. If you are an enterprise buyer then you should consider what this means for licensing, maintenance and support costs in any pending decision. If you are a mid range customer then poke around at the Oracle HCM solution. Discover whether it can be implemented in NetSuite's much vaunted 90 days. (Hint: very unlikely.)