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Oracle’s Week of Deals

July 2, 2013

This week Oracle announced 3 major deals. Deals of this size would normally be the single biggest piece of news in any typical week, so to get 3 in successive days means that they were lined up and unleashed in a deliberate manner to create the largest splash possible. And it’s certainly got people’s attention, with many analysts penning a series of posts on the matter.

The Microsoft Deal

Oracle and Microsoft announced a deal to make a slew of Oracle products available on the Microsoft Azure platform (their rival to Amazon Web Services). What’s so surprising about this deal is that historically the two companies haven’t been the best of friends and are the two main rivals in the battle for relational database supremacy.

When Larry teased during the earnings call last week that there were some big deals coming – including one with Microsoft – many expected something much tamer, like Microsoft certifying Oracle’s Java within Azure for example. What was announced is much bigger. Microsoft is making Oracle Java, Oracle Weblogic and – amazingly – the Oracle Database available within their Azure cloud.

The Salesforce Deal

Although Marc Benioff honed his craft while under Larry’s wing at Oracle, he’s his own man now and Salesforce and Oracle have been on a collision course for a while. Salesforce currently runs on the Oracle database, there has been some speculation that they were looking at PostgreSQL to help reduce that dependency. This deal not only negates that threat, but ties the two companies very closely together. Salesforce will run on Oracle’s Exadata machines, Oracle Linux OS, Oracle Java and the Oracle database platform for the next 9 years (although Benioff has subsequently said that it’s actually 12 years), and implement Fusion HCM internally (they currently use Workday). Quite a deal.

There are lots of positives for Oracle from this deal, but you have to wonder what Salesforce employees will think. They’ve a daring, charismatic and visionary leader who has taken the CRM market by storm, taking them to become the world’s #1 for CRM and the world’s biggest SaaS company. By aligning themselves with Oracle they’ve lost some of their autonomy, Benioff will often be playing second fiddle to Larry, and this does box Salesforce in to the CRM market – HCM and Financials will be all about Fusion (work.com and FinancialForce.com will presumably not be touted so strongly).

Does Larry also see Benioff as a successor? Larry is only just over a year off of being 70. Although we suspect he relishes deals like this, and his appreciation of Sun Tzu’s ‘The Art of War’ is oft-recounted, there will become a time when he’ll want to reduce his influence – as Bill Gates did at Microsoft.

This isn’t good news for Dell (who previously supplied all of Salesforce’s servers). It’s a real kick in the teeth for Workday though. Extensions to Workday are created in the Force.com platform, Salesforce’s Chatter is integrated with Workday, and the CEOs are frequent speakers at each other’s conferences. It’s safe to assume that some or all of this is going to cease and it’ll be Larry presenting at this year’s Dreamforce instead.

The NetSuite Deal

This is definitely the least surprising of the 3 deals as Oracle and NetSuite have always had a friendly relationship (Larry was a heavy initial investor). The biggest question is what market is the deal aiming at? They’re after mid-sized companies where they’ll deploy Fusion HCM and NetSuite Financials – both SaaS hosted, one would assume as that’s the only model available for NetSuite. To me, this sounds like they’re aiming at Workday.

Summary

Larry has really pulled a masterstroke in getting the whole enterprise software industry talking. He’s created a huge cloud marketplace with some of the industry’s leviathons, and positioned Oracle at the centre of it – at the same time as devaluing some competitors. Larry is – right now – probably the Enterprise Tech industry’s most powerful leader.

The implications of most of these deals will come in time. Big questions remain, however:

  • How much revenue will the Azure tie-up actually bring?
  • What happens to Fusion CRM? When will it be sold in preference to Salesforce?
  • Are Salesforce’s HCM and Financial offerings no longer viable?
  • Will Oracle eventually purchase NetSuite, Salesforce, or both?
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