The Game Called Enterprise Technology, and the Master called Larry

What can I say...I am really excited after reading through the article on Oracle/Salesforce Alliance. Its perhaps one of the master moves by a master class CEO - Larry J Ellison. In the game called Enterprise Technology, the Sun Tzu had made his master move - Make your best enemy your best friend.

Clearly, the Cloud computing systems have had its effects on enterprise companies in the last couple of years. Mammoth firms are/were hunting for niche-players, either to improve their market share or to dissolve the competition. Oracle - a giant in enterprise technology - was no exception and it certainly did see the impact of cloud based SaaS applications. Purely from a financial point of view, Oracle missed the sales estimates on two consecutive quarters, an event that had never occurred in the last decade. These are signs of changing market structure, and Industry participants are sensing the change and making the moves.

Oracle has the best-of-class technology stack for cloud computing environment. From infrastructure to  database to Middleware - its on par or better than most other competing products. The computing power provided by exadata systems and the analytical prowess of the exalytics are the need of the hour for many SaaS providers.

On the other hand, Salesforce has been a dominant player in Cloud environment and the acquisitions that Salesforce has made in HR, Marketing space should allow the company to compete in the really competitive Cloud environment. It is projected that cloud computing systems market will be around 210+ billions by 2016 (Read Cloud Market). Its time that the companies make the right moves to take their share of pie.

Salesforce has long been a user of Oracle products for database and other infrastructure requirements. However, this new cloud alliance will open up immense opportunities to place Oracle-based products on top of Salesforce. Its a perfect win-win situation for both companies, although I believe Saleforce will gain much more than an equal share. First, Salesforce does not have to worry about the immense R&D spending required for building ultra-performance systems. Second, it will allow Salesforce to increase its application product portfolio and thus increasing the customer base and market share. From an Oracle's point-of-view, it will help the company to sell its solutions to wider user-base through Salesforce. Second, Oracle does not have to radically change the brand image. Oracle can "buy time" to move from licensed-solution provider to subscription-based solution provider.

The alliance certainly seems to be a sustainable relationship as both companies can thrive and fend-off the competition from SAP, IBM, and the likes. In my opinion, forming such an alliance far better approach than acquiring smaller niche firms. The smaller niche firms are very expensive and its quite a task to integrate and realize the value in quick time. The acquisition activity that goes in the market now is akin to a Price War. My take - Alliance/Partnership is the way to go for realizing value.

 (Note: One acquisition strategy is to leave the acquired firm as a subsidiary rather than integrating with the parent firm - E.g. SAP & Success Factors.With Parent-Subsidiary, the parent firm can be relieved from integration problems and financial targets can be easily captured/determined.)


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