Oracle Enhances Cloud Offerings with RightNow Acquisition

Larry Ellison continued with his early Christmas shopping spree this week when he announced that Oracle will pay about $1.5 billion for RightNow Technologies. RightNow Technologies is a leading provider of SaaS-based call center automation, sales force automation (SFA) and customer relationship management (CRM) services.

RightNow is viewed as the second place market solution among the CRM offering.trailing Salseforce.com by a large margin. It is noteworthy that Salesforce.com was started 15 years ago by a former Oracle Sales Executive Marc Benioff.

Oracle said the acquisition adds “a leading customer service cloud offering to the Oracle public cloud.” Oracle is paying $43 per share, a 19.6 percent premium over RightNow’s closing price of $35.96 on Friday. RightNow’s board unanimously approved the deal, both companies said.

This acquisition comes within a week of Oracle’s purchase of Endeca, a big-data analytics company.

Strategically for Oracle the acquisition will bring some customers to Oracle for cross-selling opportunities, but more importantly it will bring a mid-market CRM solution to Oracle. 

RightNow is based in Bozeman, Montana and has an installed (rather a subscibed customer base of about 2,000).  RightNow's primary product helps companies manage customers' questions and complaints. RightNow’s suite of applications includes multi-channel service, sales, marketing, customer feedback management, voice automation and analytics.

Some analysts think the purchase will lend needed cloud computing credibility to Oracle.

Oracle has been viewed by many as being slow to adopt a scalable cloud computing solution as it was initially counter productive to their business of selling large relational database systems licenses.

The RightNow acquisition will bring Oracle access to small and medium accounts that are used to purchasing cloud based services. The strategy ( and hope ) is that as these accounts grow they will need to purchase more cloud services from Oracle.

Oracle's current CRM solution was purchased previously from Siebal Systems. Siebal is available to customers in both locally hosted as well as a SaaS model solution. The main problem with Siebal as a CRM offering  is that it is expensive and typically installed as an enterprise class CRM solution.

Oracle CEO Larry Ellison disclosed plans for an Oracle public cloud at Oracle OpenWorld and this acquisition at goes a long way to fulfilling that promise.

Does this acquisition make sense for Oracle?

 SaaS is a software delivery method that enables data access from any device with an Internet connection and web browser. In this web-based model, software vendors host and maintain servers, databases and the programs that constitute an application. This is a significant departure from the on-premise software delivery model.

SaaS has grown in importance in recently in the IT organization due to the increasing adoption of cloud computing.

According to market research firm Gartner, sales of online software were $10 billion in 2010 and are expected to  more than double to $21.3 billion in 2015, much faster than traditional software. Customer Relationship Management continues to be the largest market for SaaS, with revenues estimated to reach $3.8 billion in 2011, up from $3.2 billion in 2010. The RightNow purchase will therefore perfectly position Oracle to increase their revenues in these growing application markets.

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