Update: The final three months of Q4 saw Oracle make some significant acquisitions. This included enterprise cloud platform Iridize, artificial intelligence solutions provider DataFox, and SD-WAN (Software-Defined Wide Area Network) specialist Talari Networks. While our predictions for the next move to be either cloud or data / AI-focused have rung true, the purchase of Talari Networks in November 2018 could be seen as a curveball. In a statement, an Oracle spokesperson said:
"The addition of Talari's technology is expected to complement Oracle Communications' leading Session Border Controller (SBC) and network management infrastructure by adding high availability and Quality-of-Experience (QoE) connectivity and cloud application access across any IP network with the reliability and predictability of private networks."
So, there you have it. A cybersecurity-conscious, customer experience-focused, and cloud-based system. Perhaps, that buy isn’t too much of a shock either. In this article, it is argued that the buy for Oracle has multiple benefits, including moving into the potentially high growth SD-WAN market by making a relatively inexpensive purchase while the market is still growing and underdeveloped in EMEA. Acquiring Talari Networks also provides a ready pool of enterprise customers for SD-WAN in more established market, resulting in a safety net should growth not live up to expectations. It will be interesting to see what further acquisitions Oracle makes in 2019.
The tech M&A market has screeched to a grinding halt. Stunned into stillness through regulatory uncertainty in the wake of the Trump administration (once hoped to boost M&A activity through tax cuts), an escalating China-US trade war, data privacy distractions and rising valuation expectations, tech acquisitions have all but dried up. According to PwC, in Q2 2018, tech deal activity declined in value by 49% since Q1 2018 – the lowest since 2013 – while volume of activity reduced by 17%. As we move into the second half of Q3, the big question for us is when will Oracle’s dry spell end? And which business will catch its eye? Because if one thing’s for certain, it’s this – Oracle can’t sit on its accumulating profits forever.
Oracle has already been very clear about its growth strategy and its intentions to become the number one business for cloud. With its last ‘megadeal’ acquisition (Netsuite for $9.3bn) dating back to 2016, it’s also prime time for Oracle to make another significant buy, especially as the market becomes more saturated. And don’t forget that at the back end of last year Oracle borrowed $10bn from the capital market in one of the year’s biggest bond sales, so – alongside the tax reduction - the business has cash to burn. But is there anything out there that might separate this giant from its jealously guarded hoard?
1. Head in the cloud
Oracle’s 10-Point Plan made it clear just how much value Oracle places in its development of cloud services. While open source solutions provider Red Hat and ServiceNow’s cloud platform are circling the rumour mill for potential acquisitions, the one we’re most interested in is Salesforce. While Oracle calls out Salesforce as a direct competitor in its Plan, the potential merging of the two giants has long been anticipated. After all, Oracle has a long history of snapping up competitors to improve its market share, especially in sectors where its own offering is not considered best of breed. But Salesforce is an uncertain bet. With an impressive track record of beating its revenue growth expectations for twelve consecutive quarters and a 2019 target that would see approximately 30% year-on-year growth, its future as a potential acquisition is looking less and less likely. Instead, we may see Salesforce emerging as one of the tech giants, with its own buying power. The question is – will Oracle cough up the cash to stop Salesforce in its tracks? Facebook didn’t risk it with Whatsapp.
2. Going big (data) and automation
Oracle’s most recent acquisition was Datascience.com, an enterprise data science platform provider, in May 2018. This move signifies Oracle’s intent to step into the artificial intelligence and machine learning arena – alongside many other technology leaders. There’s plenty to go around though; the global big data analytics market is predicted to reach $275bn by the end of 2023. And when you consider that Oracle has high expectations for its PaaS offering to match up to its growing SaaS model, improved automation seems like an obvious destination. It therefore doesn’t seem like too much of a leap to consider that acquiring other data analytics platforms might be high on the agenda in the coming years. While MoffettNathonson analyst Adam Holt points to the likes of Hortonworks, Cloudera, Splunk and New Relic as potential buys, the Gartner 2018 magic quadrant report for data science and machine learning points in a different direction – with Knime, Rapidminer, SAS, Alteryx and H20.ai taking leading positions. Interestingly, the grid is next to devoid of any influence from the likes of Google, Amazon, Microsoft and Oracle. It’s an open hunting ground.
If you need any further evidence, consider a recent statement from founder and CTO Larry Ellison:
"During this calendar year, we expect to deliver autonomous analytics, autonomous mobility, autonomous development and autonomous integration services.”
Seems pretty clear to us which direction he’ll be taking the business in.
3. Safe haven
Oracle will never reach the giddy heights of number one cloud provider if it cannot offer a compelling cybersecurity protection programme. Cybersecurity Ventures has estimated that cybercrime damages will cost the world $6 trillion by 2021 and many of the top players – including Amazon, Microsoft and Google – believe the cloud may offer the solution. Oracle, of course, is no stranger to cybersecurity ventures; it has a robust DNS capability, launched its Oracle Identity Security Operations Centre solution at the back end of last year, and bought up cybersecurity firm Zenedge in February 2018. But it will need to continue beefing up its cybersecurity if it’s to offer clients the promised land of a secure environment that doesn’t hinder operational performance – especially as many of its competitors look to do the same. Check out the CyberSecurity 500 for some of the industry’s leading players (and Oracle’s wish list). Note that this also includes FireEye, whose strategic alliance with Oracle was fortified earlier this year.
Of course, this is all speculation. This wouldn’t be the first time that a tech business has made a surprise venture (with Holt tipping digital marketing) and Oracle may not even choose to invest this year, instead biding its time for a more sympathetic climate and a better choice of business. What we do know is that Oracle is thinking strategically about its purchases and has its eye on the prize – with a booming cloud, data and ML market ahead, maybe the lack of activity is as much due to a comfort as it is to complacency. Only time will tell.