Oracle-NetSuite deal benefits users, strengthens vendors

According to experts, the Oracle-NetSuite partnership fills an HR gap for NetSuite and gives Oracle a foothold in the midmarket.

When the Oracle-NetSuite partnership to offer cloud services to midsize business customers was announced earlier this summer, Martin Hitch, CEO of NetSuite customer Bossa Nova Robotics, wasn't quite sure what to make of it. But after mulling the news over, he decided the deal was ultimately a good thing for his Pittsburgh-based company, a Carnegie Mellon spinoff formed to commercialize robotic technologies. Now that the dust has settled...

a bit, experts are also predicting that the deal will benefit users and might give both vendors a leg up.

Under the alliance, Oracle's HCM Cloud, the vendor's human capital management software, and NetSuite's cloud-based enterprise resource planning (ERP) application will be integrated to connect HR and finance systems for midsize customers. According to R "Ray" Wang, principal analyst and CEO of San Francisco-based Constellation Research, this arrangement fills a gap for NetSuite.

"NetSuite has been looking for an HR partner for quite some time and has tried different partnerships," Wang said. "Now NetSuite won't have to focus on dealing with HCM and HR; it can go back to [concentrating on] what it loves, like matrix commerce, manufacturing [and] building out core ERP capabilities."

In addition to strengthening NetSuite's position, experts also said that the Oracle-NetSuite deal will help Oracle gain traction in the midmarket and leverage in the cloud.

Oracle-NetSuite partnership benefits NetSuite users in search of HCM

NetSuite and Oracle are marketing this partnership as a valuable arrangement to companies that have subsidiaries and branch offices, Wang said. For instance, some Oracle customers that run NetSuite in their subsidiaries could benefit from having a unified HR system, while still being free to run an assortment of financial or manufacturing systems of their choosing in their subsidiaries. This is a plus, according to Wang.

Charles King, principal analyst at Pund-IT in Hayward, Calif., also cited benefits for these types of businesses. "Companies with subsidiaries can use NetSuite to support ERP functions in those locations and reduce the need to have IT staff on premises," he said.

That's precisely one of the reasons NetSuite works so well for Bossa Nova Robotics. Its financials system has to support two subsidiaries -- one in the U.S. and one in Hong Kong -- transacting business in different currencies, Hitch said.

Hitch explained that the company uses NetSuite OneWorld, which includes modules for inventory management and customer relationship management, and the ability to run multiple locations. "The primary use for us is a basic accounting system, what you would consider classic ERP, for anything that's finance-related," he said. Additionally, when the company first implemented NetSuite about two and a half years ago, it was also manufacturing children's toys, so NetSuite allowed Bossa Nova Robotics to automate purchasing and production planning while keeping costs low, he added.

For customers like Bossa Nova Robotics that are using NetSuite financials, the deal means they'll have a tie-in back to HR, Wang said. And they won't have to worry about linking the two systems on their own, because consulting firm Deloitte has stepped in to handle integrations.

"If you're using NetSuite financials software or ERP system, you're now going to have the opportunity to have a fully integrated HCM suite provided by Oracle in the same cloud format. So it's really bringing a lot of benefits to the NetSuite side, which has been traditionally weak in HCM," said Tyler Wilson, senior ERP consultant at Panorama Consulting Solutions in Denver. "NetSuite is filling in some of its weak spots, and Oracle is increasing its presence in the cloud."

Bossa Nova Robotics' Hitch said he thinks the Oracle-NetSuite deal could potentially benefit his company down the road on both the financials and HCM side.

"If [our] business scales to the point where [we] need to move into something bigger, the close relationship gives us an instant way of scaling into the Oracle suite -- and to maintain it in the cloud -- as smoothly as possible," he said. "Oracle brings its HR piece, and that adds even better capability. We don't have enough headcount at the moment to justify that, but I'm sure that [in the future] it will make sense to look into an Oracle HR system."

Deal puts pressure on competitors to offer integrated HCM and financials

But what does the Oracle-NetSuite partnership mean for the overall market?

In addition to trying to gain clout in the cloud and add more midmarket companies to its customer list, Oracle is attempting to leverage NetSuite against SAP and Workday, according to Wilson. Traditionally, when major players partner up, they really jump ahead of some of the other competitors, he explained.

"I think we'll see that midmarket space explode with even more NetSuite products," he said. "Traditionally, Oracle focuses on larger companies, but it's going to gain traction in the midmarket with a cloud option."

More on integrated HCM and finance systems

Find out how running HCM and financials software on the same platform benefits HR analytics

Read a case study on a Workday HCM and Financials user

He added that competitors that are lacking in the HCM area will have to step up their game and find ways to create integrated offerings in the wake of this partnership.

"NetSuite is making its portfolio a little bit larger, and it will really have a full-service offering," Wilson said. "Typically, a midmarket company operates in two different courses -- it will have its core financial or ERP system, and an HCM system. And there hasn't been any integration between those two, but now NetSuite is going to be able to offer that."

And if NetSuite continues to scale up and work with larger and larger businesses, it's going to start bumping up against some of the traditional players in enterprise ERP, like SAP, according to King.

"If this partnership succeeds, the companies could be running into engagements where SAP would be the natural competing vendor," King said. "However, I don't think that NetSuite will go in and begin stealing customers from SAP unless the financial incentives were pretty substantial [to those customers], because that would make it difficult for NetSuite to make a buck."

Still, King said there's no doubt that this scenario has an upshot for enterprise-size companies. "The additional competition could make life pretty sweet for businesses that are planning to upgrade their ERP."

About the author:
Linda Rosencrance has written about technology for more than 10 years and has been a reporter for more than 20. A former Computerworld reporter, she is a freelance writer in Massachusetts and also an author of several true-crime books.

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