Software giants start pouncing on cloud companies

If Oracle and SAP can gobble up cloud players there will be evolution not revolution, and evolution is much friendlier to the software maintenance model.

Oracle bought RightNow. SAP acquired SuccessFactors. And it's likely a few other cloud-related companies will be coming to a software giant near you.

What remains to be seen is whether these cloud acquisitions really change anything or just ensure the giants keep their stranglehold on the market.

SAP's $3.4 billion acquisition of SuccessFactors, which was announced Saturday, is notable on many fronts. First, SAP paid a 52 percent premium to bolster its cloud efforts. In addition, SAP is taking Oracle's playbook, which revolves around buying companies that could cannibalize their traditional businesses. Meanwhile, SAP is putting SuccessFactors CEO Lars Daalgard in charge of all of its cloud efforts.

Rest assured that SAP and Oracle see the cloud threat and opportunity. The large enterprise software model goes like this: buy the threats and as customers move to the cloud you're set with an offering. If Oracle and SAP can gobble up cloud players there will be evolution not revolution. Evolution is much friendlier to the software maintenance model.

Dennis Howlett noted that SAP's decision to keep SuccessFactors separate was a good move: "Keeping SuccessFactors separate is a very smart move because it keeps the on-premise and cloud businesses in their own worlds. Mostly."

Add it up and the recent cloud acquisitions by Oracle and SAP really revolve around controlled cannibalization. By acquiring SuccessFactors, SAP actually gets a few lost HR customers back.

What remains to be seen is whether SAP and Oracle can retain SuccessFactors and RightNow workers, respectively. Oracle and SAP are buying cloud expertise as much as products and services. Another wild card revolves around whether these enterprise giants will actually do anything with these cloud architectures they just acquired.

There are still cloud revolutionaries--Salesforce.com and Workday-- knocking on traditional enterprise customers' doors, but plenty of software as a service outfits will sell out to Oracle and SAP. This upcoming barrage of cloud acquisitions ultimately be disheartening to IT buyers. The cloud was supposed to break down the enterprise application duopoly. Instead, customers are going to get the Oracle-SAP duopoly for the foreseeable future.

Other voices on the deal:

This story originally posted as "Enterprise software giants start great cloudify effort" on ZDNet's Between the Lines.

About the author

    Larry Dignan is editor in chief of ZDNet and editorial director of CNET's TechRepublic. He has covered the technology and financial-services industries since 1995.

     

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