Partnership

Partnerships Don’t Get Much More Surprising Than This

PartnershipMany eyebrows, mine included, were raised when Oracle partnered with Microsoft and Netsuite. But the partnership announcement that perhaps raised eyebrows the highest was the one with its most bitter rival, Salesforce.com. Oracle-Salesforce is the software equivalent of Yankees-Red Sox and neither company has been shy about telling the world why they’re better than the other.

Has Larry Ellison gone soft? Has Oracle really seen the light and now believes in an open, standards-based world where everyone gets along with one another? Well maybe, but make no mistake, an Oracle-Salesforce partnership is not just good, but great for Oracle.

Oracle is a company that’s struggling. The company missed its Q2 number, and three of the last seven. I’m not sure I ever remember at time where Oracle has missed three quarters in a two-year time frame. This has caused some analysts to speculate that Oracle won’t be a huge beneficiary of the cloud computing era, which is one reason the stock price has been flat for the past two years. So how better to show the world that Oracle will be one of the big winners of the cloud era than by strengthening it’s relationship with the industry’s pre-eminent software-as-a-service (SaaS) vendor? In fact, all three partnerships — Salesforce, Netsuite, and Microsoft — are about highlighting how the database and its tools will enable the largest cloud providers to be successful.

While Oracle has dabbled in many different software and hardware markets, Oracle is one of the industry’s premier database and tools vendors, and any partnership that demonstrates how a fast-growing cloud provider can leverage Oracle tools is great for Oracle. Salesforce has been one of Oracle’s major customers for over a decade and, as a result of this announcement, has signed a decade-long agreement to use Oracle’s DBMS technology. This is a key victory for Oracle as other SaaS vendors such as Google and LinkedIn have grown on other platforms.

The partnership shows that Oracle’s 12c database is a state-of-the-art, competitive platform that any SaaS provider can leverage. The hope would be to use this to jumpstart the business and convince other cloud vendors to standardize on Oracle’s open cloud computing software.

So what about the CRM business? Sure, the two companies compete there but it’s becoming clear that Salesforce has won the war. The Salesforce business will be close to $4 billion this year, and the mighty Gartner has anointed Salesforce the market leader in CRM for the first time ever. So, as they say, if you can’t beat them… join them.

I don’t think Oracle would admit they’ve lost this war, but the partnership is certainly a signal that trying to catch Salesforce has more potential downside risk than the upside benefits of partnering with them. Oracle can put this battle to rest and point its guns now at Workday, who is looking to become a real player in financial applications. Not coincidentally, one of Workday’s biggest advocates had been Salesforce — that is until Oracle stole the financial and human capital business as part of the partnership between the two companies.

So this might be considered a step back with regards to the CRM business but it’s several steps forward when it comes to its cloud, financial, and HR software. Oracle does what’s best for Oracle and, in this case, it meant partnering with long time rival Salesforce.com.

About the author
Zeus Kerravala
Zeus Kerravala

Zeus Kerravala is the founder and principal analyst with ZK Research. He provides a mix of tactical advice to help his clients in the current business climate and with long term strategic advice. Kerravala provides research and advice to the following constituents: End user IT and network managers, vendors of IT hardware, software and services and the financial community looking to invest in the companies that he covers.