RightNow is on board, now Oracle is on to the next SaaS acquisition. This time it is offering $1.9bn for Taleo, the SaaS-only provider of HR talent management software. We can be sure these two deals are just the initial moves in a new round of SsaS-specific supplier acquisitions now that Oracle has accepted the inevitable and committed to the cloud. Like the RightNow acquisition, Taleo will help Oracle build a SaaS portfolio and provide additional applications to run in the new Oracle Public Cloud.
Having denied the cloud for years, the company has moved quickly since its public conversion at Oracle Open World last October: it now has the Oracle Public Cloud, with the Oracle Social Network, and initial Fusion CRM and HCM applications running on it, plus the RightNow and (in progress) Taleo acquisitions. SAP’s pending $3.4bn purchase of Taleo rival SuccessFactors (delayed waiting regulatory approval) will have added impetus to Oracle’s actions.
The committed and rapid move to the cloud is all the more marked given CEO Larry Ellison’s observations that he struggled to find a profitable SaaS provider. He was making these comments back in 1998 – they reflected reality then and now. Taleo is no different, it reported a loss of $14.5m on revenue of $309m in 2011. But the market has moved on and despite the losses software suppliers simply cannot afford not to have a substantial cloud presence.
Oracle has an enviable record of profit margin achievement, even if recent post-Sun results have tarnished it. It will be interesting to see how it tackles the commercial SaaS/profitability model because Oracle does not like non-profitable segments. We expect it will sacrifice profits in order to rapidly gain market share and rejigging the commercial model will be phase two of its cloud strategy. With its hardware capability it could bring a new dimension to the SaaS supplier profitability discussion. TechMarketViews subscribers can see our latest thoughts on what is happening around SaaS pricing here, in HotViewsExtra.