Enterprise giant Oracle (NYSE:ORCL) is finding itself among a more innovative group of software companies than in the recent past. It faces competition from many sides. Not only are small start-ups targeting specific markets that Oracle is in, but also major software players such as Amazon.com (NASDAQ:AMZN) and Google (NASDAQ:GOOG) threaten the company. Oracle, with its heaps of cash and assets, decided that acquisitions are the best way to remain competitive. This is likely one of the smartest moves it can make.
Following the lead of main competitor and enterprise giant SAP (NYSE:SAP), Oracle purchased Vitrue, a cloud-based social-marketing company. Anybody who knows Larry Ellison can roll their eyes, as this is another acquisition of a cloud-based company. Clearly, his outbursts and dismissal of the cloud altogether are more bark than bite.
This move is reactive; Oracle is making sure it doesn't fall behind SAP. In fact, this acquisition happened only a day after SAP made a similar acquisition. To some extent, these two companies are in an arms-race to the top, acquiring any company in the way.
Vitrue will bring new capabilities to Oracle's line-up, as the company gives marketers a tool to manage all their social networks, such as Facebook (NASDAQ:FB) and Twitter, centrally. According to its executive VP, Vitrue will allow Oracle to combine its sales data and analytics with the social marketing brought by Vitrue to "develop more meaningful customer engagements".
The acquisition of Vitrue comes on the heels of the $1.9 billion acquisition of talent management software company Taleo. The Taleo deal occurred in February, but it shows the underlying trajectory of Oracle; let SAP make a large acquisition, and then follow it. In particular, Oracle acquired Taleo only after SAP acquired similar talent management software company SuccessFactors Inc.
There is one recent acquisition that brings optimism, though. Oracle acquired cloud-based ClearTrial, which deals with biopharmaceutical and medical trials. This could be huge for Oracle because it is an industry-specific cloud. With cloud storage being criticized for lack of protection of information, some believe that industry specific clouds will pop up more frequently. If this is the case, Oracle is on the right path.
In general, Oracle does not seem to be much of a leader in the market at this point. It has proven multiple times that it will shell out cash to maintain face, but it still continually follows SAP's lead.
SAP is not the only company Oracle has been after recently, as it has been locked in a legal dispute with Google over the alleged infringement of intellectual property rights to Java. According to Oracle, Google illegally used Java without licensing it, thus infringing on its patents. According to the courts, Google did not. The loss in this trial is a huge blow to Oracle, as it would have received billions from Google in damages. However, Oracle overreached on its charges throughout the case, and to some extent has looked foolish.
This is not the only trial that Oracle is in. It will be sitting on the opposite side of the courtroom soon in a dispute with Hewlett-Packard (NYSE:HPQ), which is suing it for damages incurred due to Oracle ending its support of a specific microprocessor. Needless to say, Oracle will not be winning any popularity contests in the near future. If it can get itself out of the courtroom and focus on where the market is going, maybe it won't need to follow SAP's lead so consistently.
While Oracle is busy keeping up with SAP, new competitors are entering the enterprise market with much success. One strong competitor onn the customer relationship management side is salesforce.com (NYSE:CRM), which specializes in cloud based social enterprise solutions. In a big move, it will strengthen its ties with major IT provider Accenture (NYSE:ACN). This will give Salesforce two main advantages. First, it will help extend its reach and depth of cloud offerings, specifically in the U.S. and Europe. Second, partnering with Accenture will increase its reach in the industry. It never hurts to have a friend, and since Accenture does a great deal of consulting, you can imagine this will give Salesforce a nice bump.
Ellison can dismiss Salesforce all he wants, but it's becoming clear that the company is here to stay.
Another new player in the market is Amazon. In view of the extraordinary reach of Amazon Web Services, Oracle should be concerned. Amazon has proven that it can scale, as it runs its own e-commerce business atop its web services. Additionally, researches at Yale have discovered a new way to place massive databases atop these services for a fraction of the cost of using Oracle databases. According to this research, this breakthrough has the potential to end the dominance of Oracle in the database market.
Not to be left behind, Google is also honing its focus on enterprise customers with its own cloud. Recently, it released new SQL features that allow a business to query massive amounts of data in its cloud. Additionally, similar to Amazon Web Services, it is relatively cheap compared to Oracle.
It is not fair to compare Amazon's and Google's enterprise solutions to Oracle's at the moment, but I believe that many of Oracles traditional customers could switch to these solutions. The enterprise market is being disrupted by the cloud and the low barriers to entry are allowing typical software companies to easily transition into cloud-based enterprise solutions. As its acquisitions suggest, Oracle understands this.
Acquisitions will soften the blow that new cloud based providers will inflict on Oracle. It has made many smart acquisitions, but only after SAP made similar moves. With so many companies looking at the enterprise market and the massive returns that both Oracle and SAP have reaped, I expect many more players to attempt to dethrone these two kings. Don't expect this to happen, but I doubt either company will maintain the tight grasp on the market it currently has. However, you cannot rule Oracle out just yet. It still has mountains of cash and is willing to use it.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.