December 5th, 2006
Poll: Will Larry let go of NetSuite?
I'll be meeting Zach Nelson, CEO of NetSuite, on one of his visits to the UK tomorrow night, so I thought why not present him with the results of a special ZDNet readers' poll? The topic: whether NetSuite's planned IPO will ever go ahead. To cast your vote, see below.
NetSuite, founded in 1999 with seed capital from Larry Ellison, CEO of Oracle, has been preparing for an IPO for most of the year, and first reports suggested it would come to the market before the end of 2006, which hasn't happened. Whenever it does come, there's no doubt it would be the most talked-about IPO of any SaaS vendor since Salesforce.com's IPO in 2004. Word on the Street now, though, is that March-April next year is more likely. There's nothing odd about a delay of that scale. IPOs are a bit like packaged software upgrades — they always turn out more complex and long-winded to finalize than you expect to start off with, especially in these days of Sarbanes-Oxley and other compliance requirements.
But there's a persistent rumor circulating in Silicon Valley, which suggests another explanation for the delay. It says that Ellison, who still owns a majority 60% stake in the business, would much rather fold it into Oracle (in which Ellison holds a 23% stake). According to the rumor, therefore, the purpose of the delay is to allow time to prepare the acquisition.
Proponents of this line of thinking argue that acquiring NetSuite would give Oracle a ready-made solution with which to go after the SMB market — one that its rival SAP is due to target aggressively with a new solution of its own next year. (For some background, check out a couple of blog postings from earlier this year by fellow Enterprise Irregulars Jason Wood and Zoli Erdos).
On the other hand, Oracle might well feel that it already has good penetration of the midmarket through its JD Edwards products. It's true that it lacks a decent SaaS offering — its Oracle OnDemand hosting unit is more of a SoSaaS play and the CRM OnDemand unit that it inherited with Siebel now runs on the same infrastructure and is increasingly being positioned as an adjunct to Oracle's core ERP suite — but then SAP is equally mired in the SoSaaS model.
Moreover, NetSuite tested a marketing alliance with Oracle a few years back, when it was sold rebadged as Oracle Small Business Suite in a licensing deal. The company found the Oracle brand held little sway among small businesses and Nelson quietly buried it in favor of a marketing strategy that positioned NetSuite as the SMB equivalent of SAP.
There's also the consideration that Ellison is on record as saying he wants to see Salesforce.com's stock (in which he has about a 4% holding) go to nothing. Staying independent — especially with the receipts from an IPO to draw on — would bolster NetSuite's status as a leading SaaS vendor and thus as a competitor to Salesforce.com.
So there's the evidence. I frankly have no idea either way, which is why I thought it might be interesting to ask the opinion of ZDNet's readers. What's your view? Cast your vote below (and post your reasons in Talkback):
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Phil Wainewright is a commentator and strategist on emerging software industry trends. See his full profile and disclosure of his industry affiliations.
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