In an era of co-opetition, lines between competitors and collaborators often blur, both behind the scenes and in front of customers. As heated rivals, SAP and Oracle, for example, battle each other in court and poach customers at every opportunity, but they also depend on one another for revenue, especially when SAP software runs on Oracle database technology.
Yet, even in a climate known for turning enemies into strange bedfellows, one relationship stands out. Lately, it has been another of Oracle’s potential rivals that has raised questions about the intersection of competition and collaboration. And in this story, it isn’t always clear where loyalties lie.
NetSuite, which delivers on-demand ERP applications to mid-market customers, has lately turned its ammo on Oracle, in October announcing its OneWorld for Oracle software, aimed at divisions of businesses that run Oracle applications at the corporate level. It’s hardly shocking that a software upstart would look to grab market share from a colossus like Oracle, but NetSuite is majority-owned by Oracle CEO Larry Ellison. In conjunction with his family and other associates, Ellison holds more than 60% of the company’s shares, having invested in NetSuite during its fledgling days last decade.
In SEC filings, NetSuite advises its other shareholders that Ellison’s controlling stake “may limit your ability to influence or control certain of our corporate actions. This concentration of ownership may also reduce the market price of our common stock and impair a takeover attempt of us.” And in a statement, the company noted, “NetSuite OneWorld for Oracle has nothing to do with Larry Ellison’s stake in NetSuite. It has to do with enabling NetSuite customers to easily connect with an industry standard like Oracle.”
As NetSuite accelerates its efforts to gain customers within smaller divisions of enterprises running Oracle, the question becomes: When will these allies/antagonists collide?
Not for a long time, according to experts. One possible scenario would be for Oracle to buy NetSuite once it has reached a critical mass of customers, but such talk is premature, says Jim Shepherd, senior vice president at AMR Research.
“Certainly, at this point, NetSuite does not represent any kind of threat for Oracle, in part because NetSuite’s real market is pretty small companies,” while Oracle’s is large enterprises, he says.
Altimeter Group Partner Ray Wang agrees, saying, “For NetSuite, if they keep doing what they’re doing [selling to companies of 50 to 500 employees], they’re going to be fine for some time because there’s so much business” available.
Both men brushed off any suggestion of impropriety. Ellison “is not active in the company, and he doesn’t impact any decisions,” Shepherd says. Oracle declined to comment on the relationship.
The outlook for the two ERP companies may change, of course. Five years down the road, Shepherd says, Oracle may be much more interested in selling SaaS, and NetSuite may have moved up market somewhat. “You could at some point envision some kind of a collision … where NetSuite could become attractive to Oracle. But not right now.”