RightNow buy opens Oracle's SaaS gambit

Oracle has made clear today that its Public Cloud will be populated with acquisitions of the SaaS industry's old guard, clarifying the true battle lines against cloud rival Salesforce.com
Written by Phil Wainewright, Contributor

When Oracle announced its new Public Cloud earlier this month, it promised a "complete suite" of applications ranging across financials, human capital, supply chain, procurement, CRM and much more. At the time it seemed the applications would be from Oracle's existing portfolio, but today a new strategy became clear. With the acquisition of early SaaS pioneer RightNow Technologies, Oracle has signalled its intention to build out its Public Cloud offering with what will likely become a string of acquisitions of second-tier SaaS vendors. I'm in total agreement with my ZDNet colleague Larry Dignan that the official press statement was "basically shorthand for 'Oracle is going cloud shopping'."

The choice of RightNow sends further signals about the kind of cloud vendor Oracle will prefer to acquire. Over the years, RightNow has had more than a few critics of its SaaS model, which has been much closer to Oracle's notion of hosting customers in clustered 'pods' of servers than more purist definitions of multi-tenancy (of which there are many). RightNow's variety of SaaS model is more prevalent than you'd believe from listening to the hype that comes from the industry. There are large numbers of vendors with similar architectures, and it's a tough path they've chosen. As time goes on, I suspect they'll find it harder and harder to compete against more technologically and economically agile vendors that more effectively leverage true cloud architectures.

Thus it makes sense, from several points of view, for Oracle to start hoovering up these vendors while they're still winning market share. I'd expect the shopping list to include public companies including Taleo and several others in the talent management sphere, along with ServiceNow.com in the IT service management space and various less well known names from other sectors. Oracle is well placed to know which are in the frame since they already use either Oracle's own RDBMS or MySQL. I don't expect the list to include names that others have suggested today, such as SuccessFactors and NetSuite, because they have neither the right technology profile nor Oracle's preferred kind of customer.

I should add that I'm not saying RightNow (or any of the other potential acquisition targets) is an ailing vendor in any sense. My takeaway from attending its EMEA user event last year was that it had completed an infrastructure overhaul and was about to begin a strenuous sales push, and over the past year it's been maintaining a respectable 25% year-on-year growth rate. People sometimes mistakenly categorize RightNow as an also-ran to Salesforce.com but, as I wrote last year, that overlooks its strong focus on a clear market niche:

"Rather than competing for the volume business of sales automation, RightNow chose to specialize in customer service. It now prefers to call itself a customer experience vendor and it has narrowed its focus to concentrate on large consumer brands. It helps them interact with their customers across all channels, from social media and online to email and traditional telephone call centers."

As such, RightNow will nestle snugly below the high-end enterprise focus of Oracle's existing Siebel CRM offering once the larger vendor has finished taking it under its wing. Any notion that this is supposed to compete head-to-head with Salesforce.com's recent Assistly acquisition (which I've read in some of today's coverage) is a complete misapprehension of any of the vendors involved. Assistly is chalk to RightNow's cheese and the contrast between the two vendors is a good metaphor for their new parents' respective strategies. Oracle is rounding up the SaaS old guard. Salesforce.com is aligning itself with the next generation.

Coincidentally, I recently accepted an invitation to next week's RightNow EMEA user event [with paid travel and accommodation: see disclosure]. At the same event last year, CEO Greg Gianforte regaled the assembled analysts with an excoriating account of Oracle's licensing practices and its failure to understand the SaaS business model. Since then, of course, Oracle CEO Larry Ellison has moderated his view of cloud computing. Perhaps Gianforte has similarly changed his perspective on Oracle's SaaS credentials. I'll be sure to ask.

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