NetSuite CEO Zach Nelson didn’t sleep at all on Tuesday night. Like millions of others around the world, he stayed awake to watch the US election results come in, not from his Bay Area home, but in the unfamiliar surroundings of a Sheraton hotel room in Lisbon, Portugal.
But sleepless nights are probably something Nelson's had a few of in recent weeks as Oracle's $9.3 billion takeover offer for NetSuite drew to a close. The deal was only consummated on Monday after what were some perilous moments en route.
Yesterday at Web Summit in Lisbon, I got the chance to talk to Nelson who offered his first public comments about the takeover and a few hints at the future. It's clear that it was a bumpy ride to the conclusion of the deal:
The complexities of the transaction - I’m glad those are behind us. It was much harder than it should have been. But for those of you who run businesses, everything is much harder than it should be. And now we’re on, really, to the next stage. It was a pretty contentious takeover, but we got the shares tendered.
Contentious indeed. NetSuite's second largest institutional investor T Rowe Price had threatened to scupper the deal, insisting that Oracle needed to pay a higher price. Oracle CEO Mark Hurd in turn played hardball and said that he would walk away if enough NetSuite shareholders didn't tender their shares at the original asking price.
NetSuite's prospects as a takeover candidate have been widely discussed for several years - most recently, the firm was on Salesforce's recent leaked list of potential acquisition targets - but the substantial shareholding of Oracle CEO Larry Ellison and his family has been seen as a deterrent by many. Certainly many analysts and commentators saw few other suitors lining up had the Oracle deal fallen through.
For Nelson, it seems that his view is that the timing is right now for NetSuite:
A couple of years ago, I said the cloud was entering ‘the end of the beginning’ - and that’s sort of I think where we are. We’re at the ‘end of the beginning’ of NetSuite and the next phase will be as part of Oracle.
We were the first cloud company founded back in 1998. t’s been an amazing ride to this point. It’s amazing we’ve been able to stay standalone as long as we have, because if you look at many of the cloud companies that came after us, from that first generation, early 2000s, they’re long gone, they’ve long been acquired, so we were fortunate to be able to build a company of size.
That ride has gone from start-up status as NetLedger, run from premises above a Silicon Valley liquor store, to today with multi-billion dollar customers running NetSuite. Kitchenware company Williams Sonoma uses it for its global e-commerce operations, for example, while American Express Travel uses NetSuite for its financials, noted Nelson:
It’s been amazing to watch the vision go from supporting the needs of very small enterprises to now some of the world’s largest enterprises as well. But the cool thing for me of what we’ve achieved here with this software is to ‘help small companies act big’ - and that was sort of the intention from the start.
The more recent pressures of digital disruption and transformation, he explained, have increasingly brought a new class of customers to NetSuite’s door. It’s mostly in the last four or five years, said Nelson, that the company has gained significant traction among much larger businesses:
Large companies want to behave like smaller, more entrepreneurial companies. So the [next] thing that happened in our history was us helping ‘big companies to act small’. We give them a platform for agility, they can change the platform as their business model changes. And that’s what happening in large companies. Their business is being eaten from below by next-generation ideas, next-generation companies and they need a platform that allows them to respond to those threats and challenges quickly.
So where does NetSuite go next? The answer is maybe less obvious now, I suggested, than it has been in previous conversations that he’s had with diginomica. Forty-eight hours after the deal closed, there's a limit to what can be said in public as yet, but 'more of the same on a bigger scale' seems to be one message coming out. Nelson said:
I think our vision will be the same [with us] as part of Oracle. One of the things that excited me about joining Oracle is that we really want this to be a platform for every business, in every part of the world.
Right now, only around 25% of NetSuite revenues come from outside of North America - and international expansion is expensive. That’s why NetSuite has found it hard to make significant investments in non-English speaking countries, admitted Nelson. That's now changed:
Of course, as part of Oracle, we have the globe at our fingertips and that’s going to be a big part of it. Suddenly, we’re going to be able to reach every company on the planet and have humans [employees] in all of those places, and that’s super exciting.
There are still a lot of questions that haven't been answered to date. NetSuite formally delists from the New York Stock Exchange (NYSE) next week (18 November). More organisational details are likely to emerge after that. For now, Nelson will only argue that he's confident NetSuite will have a positive impact on Oracle and its wider cloud strategy:
When the all-company meeting happened with Mark Hurd and Safra Catz [joint CEOs of Oracle], I got up and said to the people in the room, 'We have probably one of the largest employee bases with perhaps the deepest experience in cloud of any [company] on the planet'. We have 6,000 employees.
We were the first cloud company. And so I actually believe Oracle’s going to behave more like NetSuite in the future than NetSuite’s going to behave like Oracle. Every company wants cloud DNA. It’s the only DNA we have. I think we’re going to have enormous influence on the Oracle side of the house.
As noted, there's a lot we still don't know about how the Oracle-NetSuite combo is going to work in practical terms. The devil, as they say, will be in the detail.
While this was Nelson's first public outing since the deal closed, there was inevitably a limit on how much he was going to be able to say, although the setting out of NetSuite's cloud credentials as one of the founding fathers of the industry is a point well made. While it's tempting to think in terms of the 'tail wagging the dog' sort of analogies, there's a ton of cloud expertise and experience within NetSuite that Oracle has acquired with this deal and can leverage beneficially.
The undiscussed elephant in the room is of course the future role for Nelson himself. No comment was made formally, but it's common in this sort of situation for the acquired management to be tied in for a fixed period at least, often a year. An Oracle alumnus, along with NetSuite founder and CTO Evan Goldberg, will this be a long term return to the alma mater? And if so, in what capacity? Or will there be a new entrepreneurial venture ahead? There's still a lot more to come on this. For now, at least the deal is done and closed and we await more answers.