The competition for dominating the cloud-based
software-as-a-service (SaaS) market is heating up as arch rivals
) look to outdo each other on the acquisition front. Recently, SAP
announced its intention to acquire business & commerce network
company Ariba Inc. Almost at the same time Oracle announced its
plans to buy Vitrue, a cloud-based social-marketing software
Although Oracle did not provide any financial details of the
transaction, the company is reportedly paying $300.0 million for
the start-up, which has received more than $33.0 million in funding
from venture capitalists including Scale Venture Partners and
Advent Venture Partners to date.
Based in Atlanta, Vitrue offers solutions which marketers use to
collect and collate social interaction data from
), Youtube, Twitter, Google+ and many other social networking
platforms. With the help of this data, marketers develop campaigns
for the target audience which is eventually delivered across these
social networks and devices. The company boasts a strong clientele
that includes the likes of
We believe that the acquisition will boost Oracle's customer
relationship management (CRM) customer base going forward. The
Vitrue acquisition will also help it to rapidly expand in the
social marketing segment dominated by Buddy Media, Wildfire,
Involver, ThisMoment, and many other small start-ups. Moreover, we
believe that the acquisition will help Oracle to provide an
end-to-end cloud CRM service over the long term.
Cloud Computing: Oracle & SAP Rivalry
The latest acquisitions of both Oracle and SAP reflect
cut-throat competition to gain the top-spot in the Cloud based SaaS
market. SaaS is a software delivery method that enables data access
from any device with an Internet connection and web browser. In
this web-based model, software vendors host and maintain servers,
databases and codes that constitute an application.
SaaS has gained immense importance in recent times due to the
increasing adoption of cloud computing. Demand for SaaS-based
products have been steadily on the rise for some time and is
expected to increase greatly based on some inherent benefits
associated with the platform.
Applications delivered over the SaaS platform not only allow
enterprises to start using them instantly, but are also more cost
effective, as compared to traditional products installed at a
customer's onsite data center.
Moreover, SaaS applications are more scalable and they can be
continuously upgraded as compared to the traditional products.
According to market research firm Gartner, sales of online
software, which touched $10 billion in 2010, is expected to more
than double to $21.3 billion by 2015, much faster than traditional
To gain an upper hand, both Oracle and SAP have been on
acquisition sprees recently. Both acquired companies from different
sectors, which they expected would not only expand their product
portfolios but also provide a competitive edge. However, being a
late entrant in the cloud computing market, Oracle has been the
more aggressive of the two in recent times, in order to catch
Over the last 18 months, Oracle acquired a number of companies
including small start-ups as well as big players from different
fields (clinical trial to Data analytics) such as Taleo (human
resource), RightNow (CRM), Endeca (unstructured data management,
web commerce and business intelligence) to name a few. The latest
acquisition of Vitrue is expected to help Oracle to solidify its
position in the social marketing arena over the long term.
On the other hand, SAP acquired SuccessFactors, a leading
cloud-based human capital management solutions provider to boost
its competitive position. It also announced its intention to
We expect more acquisitions from these two companies that are
likely to be easy to integrate along their respective product
lines. However, we believe that it is very difficult to predict a
clear winner among these two, considering the depths of their
product portfolios and diversified customer base. We expect
competition to intensify over the long term.
We believe that acquisitions in the field of data management and
cloud computing will be beneficial for Oracle over the long term.
We believe that Oracle's strong product pipeline, rapid adoption of
Exadata and Exalogic, and solid growth in the software business
will drive incremental top-line growth going forward.
However, Oracle faces significant integration risks due to the
rapid pace of acquisitions within a short span of time, in our
view. Moreover, stiff competition in most of the markets is
expected to hurt its profitability going forward.
We remain Neutral on a long term basis (6-12 months). Currently,
Oracle has a Zacks #2 Rank, which implies a Buy rating on a
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