Oracle Buys Cloud-based Customer Service Company RightNow For $1.5 Billion
Oracle this morning announced that it has acquired RightNow - both companies are listed on NASDAQ - for $43 per share or roughly $1.5 billion net of RightNow's cash and debt. With the acquisition …
Context & Ripple Effects
This is the second consecutive fall that Oracle has spent roughly a billion-plus dollars on a NASDAQ-listed cloud application vendor: after buying eCommerce software maker ATG for $1 billion in November 2010, it is now paying $43 per share — about $1.5 billion net of RightNow's cash and debt — for a cloud-based customer service company.
The move lands in a combative month for Oracle, which had just pulled Marc Benioff from his scheduled Oracle OpenWorld keynote amid escalating tensions with Salesforce, making an explicit purchase of cloud customer service software read as a direct answer in that rivalry rather than a routine tuck-in.
First-order effects
- RightNow shareholders receive $43 per share in cash, and Oracle immediately gains a hosted customer service suite it can sell alongside its existing applications portfolio instead of building one from scratch.
- Oracle's sales force now has a subscription revenue line in customer service, shifting part of the company's mix from license deals toward recurring cloud contracts.
Second-order effects
- Salesforce and other SaaS customer-service vendors face Oracle competing head-on in their category, with the added threat of bundling service into broader Oracle account relationships.
- Mid-cap public SaaS companies become more expensive targets: Oracle has now paid premiums for two listed cloud application firms in twelve months, tightening the supply of independent candidates.
Third-order effects
- If the pattern holds, large enterprise software incumbents acquire their way into cloud applications rather than re-engineering legacy products, concentrating the application layer in fewer hands and pushing remaining independents toward sale or niche specialization.
The trend: Enterprise software giants are buying established public SaaS vendors to enter cloud application categories faster than they could build them organically.