) signed its third partnership this week after it teamed up with
) to deliver cloud-based human resource ("HR") and financial
solutions to mid-size businesses. Early this week, Oracle signed
NetSuite offers enterprise resource planning ("ERP")
applications to mid-size businesses and it had so far been
Oracle's competitor in the ERP segment. However now, the
partnership will see Oracle and NetSuite working together to
extend services and products to small and mid-size businesses as
Report from Gartner suggests that global ERP spending is
expected to reach $34.3 billion in 2017 from an estimated $26.03
billion in 2013, with a CAGR of 7% (2012 - 2017). Thus, the
current partnership puts Oracle in a better position to take
advantage of the growing trend in the ERP market.
NetSuite will benefit from Oracle's portfolio of human capital
management ("HCM") applications that it had acquired through
various acquisitions (PeopleSoft, RightNow and Taleo to name a
few) over the years.
Thus, the partnership is mutually beneficial for both the
companies going forward. However, the deal will particularly help
Oracle, as the partnership not only removes a competitor, but
also creates a cross-functional sales opportunity over the long
Market research firm IDC predicts that the cloud computing
market will jump 130%, reaching $43.0 billion in 2016. Further,
Gartner predicts that around $677.0 billion would be spent on
cloud services within the 2013-2016 timeframe.
In such a scenario, the partnerships with Salesforce,
Microsoft and now NetSuite are expected to provide a significant
boost to Oracle's cloud-computing endeavors. Moreover, the
partnerships will significantly add to Oracle's competitive
strength against established players such as SAP and Amazon as
well as against new entrants such as Workday.
Oracle is a late entrant in the cloud computing market and is
relying on strategic partnerships and acquisitions to gain
traction in the cloud computing market. However, we believe that
the synergies from the partnerships will take some time to impact
In the meantime, Oracle needs to improve top-line growth in
order to boost investor confidence in the near term. However, the
continuing macroeconomic weakness and stiff competition will make
execution difficult in the near term.
Currently, Oracle has a Zacks Rank #4 (Sell).
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