You had to believe this day was inevitable. Oracle announced it was buying NetSuite a cloud ERP provider with over 30,000 customers worldwide for about $9.3 billion. Oracle founder, Larry Ellison also had a large part in founding NetSuite including being one of its top investors. I have always looked at it as Larry’s experiment in cloud computing and I think that is key.
Eighteen years ago, when NetSuite got going, Oracle was already a very big company dominating the relational database market as well as the market for enterprise business applications. Oracle’s challenge then was best summed up in Clay Christensen’s book, “The Innovator’s Dilemma,” though it never mentioned Oracle or NetSuite explicitly. The dilemma being when should a successful company consider cannibalizing its own business to avoid enabling new entrants to the market to do the honors.
The dilemma stems from the fact that successful companies had, until the last 20 years, been loath to change their secret sauce, the thing that made them successful. But a series of disruptions initiated by cloud computing pioneers like Salesforce, showed that standing pat was as dangerous as playing with matches around your balance sheet.
So that was Oracle’s dilemma and you could see it unfolding as then CEO and founder Larry Ellison carefully launched what was then called NetLedger under the leadership of trusted lieutenants Evan Goldberg, CTO and founder, and Zach Nelson, CEO. NetSuite was a lifeboat strategy intended to provide a safe place to pour customers, cash, and expertise if the need ever arose.
As a startup NetLedger morphed into NetSuite and had far less overhead and bureaucracy to contend with than an established company like Oracle and so its innovation cycles were quick and nimble. Taking no chances, Oracle plunged ahead into cloud computing building its own platform and applications, which would eventually displace its traditional products. It also bought a slew of other cloud companies too because buying companies is less risky than trying to fund a similar amount of development in house.
So in this regard, buying NetSuite can be seen as just another cloud company acquisition by Oracle but it’s much more than that. It’s the culmination of long-game thinking—precisely the kind that few public companies can invest in today given the short time horizons of quarterly earnings reporting.
This long game approach is what critics lament is no longer practiced in the Fortune 500. But today, one of the founders of a Fortune 500 company (#77 if you are counting), a brash, fast talking, America’s Cup winning, technology industry showman, pulled a rabbit out of his hat. This shows that planning and execution still count for a lot in business if you know how to adapt.
(Cross-posted @ Beagle Research Group)