SuiteWorld 17 – Oracle's plan to preserve NetSuite's cloud DNA

One of the big questions in any acquisition is, what happens to the DNA? Very occasionally, the acquirer explicitly sets out to infuse new thinking into its own organization — we've seen this play out in recent purchases of pureplay cloud integrators by established SIs, most recently Wipro's acquisition of Appirio.

But in most cases, the acquirer gets to impose its culture and mindset on the purchased organization. Unfortunately, this frequently neutralizes the essence of what made the acquisition an attractive proposition in the first place, and within a few years the acquired business has left no trace.

Many NetSuite watchers — including customers and partners — will have been pondering such questions in the runup to this week's SuiteWorld conference, the first since Oracle completed its acquisition of NetSuite in November last year. The answers they heard today may not have been what they were expecting.

Transfusion of resources

Based on what's been said by NetSuite and Oracle executives in the past 24 hours, Oracle's acquisition of NetSuite aims to avoid both of the outcomes mentioned above. Oracle intends to provide a transfusion of resources that will strengthen NetSuite's hand and quicken its growth, but without changing its culture or direction. Oracle CEO Mark Hurd was surprisingly candid about shielding NetSuite from some of the less desirable characteristics of an organization of Oracle's size and history:

Our strategy is to give NetSuite all the benefits of Oracle's scale without giving it any of the problems of Oracle's bureaucracy. Scale's a beautiful asset, until it's not.

So the emphasis will be on business synergy. NetSuite will be kept busy over the next year or so digesting the benefits of Oracle's scale as it expands its geographic reach and adds new vertical capabilities, at the same time as continuing to move its product forward.

Keeping DNA sharing to a minimum

Meanwhile, any other sharing of DNA will be kept to a minimum. Oracle isn't going to attempt to reshape NetSuite's approach to SaaS, but nor is it planning to change its earlier SaaS acquisitions to follow more of a NetSuite model, despite Hurd's praise for its achievements:

Each one of those companies did a few things a bit differently. NetSuite is I think maybe the best of those companies in terms of how they think about customer acquistion and the lifecycle of support, post-sale. NetSuite's renewal rate is unbelievable — it's extremely high.

There will be tighter integration between NetSuite and other Oracle products, but this will be channeled through the existing Built for NetSuite program for integrating third party products, as NetSuite Executive Vice President Jim McGeever explains:

Built for Netsuite is a very specific program about how you develop, test and manage a product and do upgrades. Oracle products fit right within that. They'll be uber-Built for NetSuite, but that's very consistent with our message.

Similarly, Oracle engineers will prioritize integration from its other products to NetSuite, says Hurd:

NetSuite gets the home quarter advantage of integration in our development organization. We'll clearly prejudice our engineers to do deeper, quicker NetSuite integration.

A single platform

For many NetSuite customers, having everything on a single platform is most important, says co-founder and CTO Evan Goldberg, whereas Oracle customers are more likely to have different applications in different departments.

In smaller and mid-size companies, having the whole business system using one set of data works incredibly well.

The Oracle applications are more modular.

You can't build one product to satisfy every size business. We have the best solution for fast-growing mid-size businesses and Oracle has the best solution for large enterprises — and they're different.

You have very large divisions that are making decisions. They choose an architecture where the data is coupled but the applications are modular. Small business have much more entanglement among functions.

Which product works for which customers will depend case by case, says Hurd.

I'm trying to avoid these bright red lines. We wsnt to accentuate where each product is a perfect fit, but there are going to be times where there's going to be a mix and match opportunity and we're going to do what the customer feels is best for their company.

Although the two companies say that 1,000 employees is the typical customer size that should be thinking about Oracle rather than NetSuite, Goldberg said that decisions to upgrade to Oracle will be driven by functionality not scalability.

It will more be around functions and capabilities, and verticalization. It's not about ability to scale. Just because you have more transactions is not the reason you would move off NetSuite.

My take

Talking informally to NetSuite executives, I detect a general sense of relief that acquisition by Oracle hasn't brought more fundamental change. There's a lot of hard work ahead to deliver the planned growth, but not so much heartache because the overall strategy remains similar to what it was pre-acquisition.

At the same time, while there's clearly respect on the Oracle side for NetSuite's cloud pedigree, I don't see any signs of eagerness to import its DNA into the rest of the Oracle organization.

All that may change in the future, but for now nobody wants to rock the boat until the expansion plans outlined today have been put into practice. That's reassuring for customers, who wouldn't want the disruption of a battle for the soul of NetSuite. If the objective today was to calm nerves about the impact of the acquisition, that's certainly been achieved.