Recently NetSuite CEO Zach Nelson made a number of comments about NetSuite competitors. The comments, part of the company’s Q4 earnings call, were aimed at convincing the marketplace that both SAP and Microsoft have stumbled in their attempts to move to the cloud. In an interview that reflected on the earnings call generally, Nelson reflected on his criticisms of SAP and Microsoft and glaring lack of criticism for Oracle:
IBD: During the company’s Q4 earnings call you took some shots at SAP and Microsoft about their progress in building a cloud-based business. Why spare Oracle (ORCL), which is also building a cloud-based business?
Nelson: Oracle has made much more progress in the cloud. They have a strategy. We compete with Oracle in various industries.
But Microsoft literally has no strategy and no intention to get one in the ERP space, as far as I can tell. They are never going to bring their ERP products to the cloud.
SAP has done some cloud acquisitions, but these acquisitions are not in areas that SAP is known or valued for.
So I guess in some ways I’m picking on the weaker guys, namely Microsoft and SAP, because they really haven’t executed on a cloud strategy.
IBD: But Oracle CEO Larry Ellison and his family own about 55% of NetSuite’s stock. Is that why you spare Oracle?
Nelson: If and when we compete with Oracle, we play to win. So if customers are looking at us and looking at Oracle and our functionality is better, we are going to win. Oracle’s strategy is targeting very large companies. The sweet spot for NetSuite is the midmarket. I don’t see them coming down or attempting to come down to the midmarket. SAP has attempted and failed. Microsoft hasn’t really made any progress in cloud-based ERP.
Another person who watches this space, Frank Scavo, wasn’t shy in also questioning the motivaation for Nelson playing soft on oracle:
@zachnelson Of course, Mr. Ellison being a NetSuite major shareholder doesn’t have anything to do with your going soft on Oracle right?
— Frank Scavo (@fscavo) March 16, 2013
Larry Ellison is the smartest of business people. His historical smack talking about cloud, while all the while investing heavily in the pace, is the thing of legends. While he backed Salesforce early on but exited from the company when competitive tensions became too great, that is not the case with NetSuite – Ellison provided the initial capital for the company and to this day remains the majority shareholder.
While Nelson is keen to push the story that NetSuite competes as strongly with Oracle as it does with other vendors, the fact is that most people accept an Oracle outright acquisition is simply a matter of time.
I’ve opined upon the fact previously that as soon as NetSuite truly provides Oracle with a compelling story (and with the continuing strength of their “two-tier ERP” story, that day is getting closer all the time) for its customers, the deal will finally be consummated. While we may not like it, NetSuite is, other than the paperwork, an Oracle company-in-waiting. Give it 18 months or so and we’ll see closure on that prediction.