Enterprise applications Toolkit

Oracle sheds light on its acquisition strategy

Tags:
Acquisition,
JD Edwards,
ERP

Colin Barker ZDNet.co.uk

Published: 06 Mar 2008 15:59 GMT

Oracle sheds light on its acquisition strategy

In the applications software business, acquisitions are common, but Oracle has taken the practice to an unprecedented level.

Over the past year or so, Oracle has bought some 40 software companies, from small players to very large ones, such as JD Edwards and PeopleSoft (which had already merged before Oracle bought them), as well as Siebel. Along the way, there have been other large purchases, like that of Hyperion, the business-intelligence software supplier bought for £1.7bn in March 2007. Most recently, the company has made efforts to get hold of systems software company BEA Systems.

After its initial bid of $6.66bn (£3bn) was rejected, Oracle came back in January with a renewed bid of £4.3bn, which was accepted by the BEA board. However, Oracle still has other hurdles to overcome before the deal is complete, such as any possible objections from the European Commission.

ZDNet.co.uk sat down with Oracle's senior vice president for applications in the UK, Stuart Turner, to discuss some of the issues faced at a company that is filled with people who are used to working at other businesses, with different policies and strategies.

Q: So, Oracle has been pretty hungry recently?
A: We have been going on with acquisitions, and we are pretty close to 40 acquisitions in 14 months. That is a lot of acquisitions, and it all hangs together. It is a very exciting place to be and there is a lot of growth around. There is a lot of growth from an organic point of view, as well as an inorganic point of view, with all the acquisitions. The important thing is that both are growing.

The size of our user base now gives us a very fertile ground for selling our acquired products, and there is also a lot of cross-sell between the acquired products and the existing products. It does appear to work. It does appear that we are able to increase the gap between ourselves and our main competitor, SAP.

Can you put an estimate on the gap between yourselves and SAP?
We became bigger than them two years ago. The gap has gradually been growing bigger since then, but we haven't run a specific proof point of the size. We are doing that work and we will run some specific news when we have it.

It is obvious that, at some stage... we would want to make the play for replacing SAP

Stuart Turner, Oracle

It must be an interesting time for you because, at one level, SAP is a direct competitor and, at another, a very large customer?
Well, if you picture a big SAP customer, they are at the centre of our attention. Take a typical customer: they are a big customer of ours on the one hand, [but] then, on the side, you find they have PeopleSoft. Then you find that, on the other side, they have Siebel. And they all run on an Oracle technology footprint. Then you find that, even in banking, if we said it was a banking customer, then over the top they have Hyperion.

That is an example of a user where we used to say: "They are 100 percent SAP" and now we say: "Actually they are 20 percent SAP and 80 percent other Oracle stuff".

So now we have to ensure that our products work well with SAP and add value to the customer. You have to be cognizant of that, and some of the products we are releasing, especially around the applications integration architecture, are helping us do that. So now we are building out integration naturally into SAP.

It is obvious that, at some stage, at the right time, when it adds value to the customer, we would want to make the play for replacing SAP. But it must be when the time is right for the customer.

So, meanwhile, you have got this strategy of ring-fencing SAP, wherever they are, wherever they are going to look?
Yes, and it just seems to work.

It is a bit like the database wars, the war between Oracle, Ingres, Informix and Sybase in the middle of the 1990s. People would choose Oracle or they would choose Ingres and it was almost a cultural thing. Once you had chosen one of them, you would never need to cross to another. Now, when you get a bit ahead of the competition in terms of what the software does and the reach, then partners build on top of it, and experience tells me that you get a long way ahead very quickly. It becomes a little exponential.

You must have collected a lot of good people from all the acquisitions. Do you keep them?
What we have found is that a lot of acquisitions involve losing a lot of people. What we have tended to do is keep as many as possible of the technical people, the support people, the consultancy people and the sales people. Normally, when companies go into sales mode, they tend to rationalise sales teams. What we have found is that there are not enough sales and accounts people.

We want to keep as many as possible inside the company, and, in all those categories, we have got a very high retention rate. People have an expectation of Oracle but, once they get inside, they see that we put a lot of support behind...