ecommerce

  • November 10, 2010
  • One of the more interesting developments of the last week has been the announced acquisition of ATG (Art Technology Group) by Oracle Corporation.  ATG is one of the leading suppliers of ecommerce solutions and Oracle liked their stuff well enough to plunk down a cool billion bucks for the logo.

    I thought it was a good idea at the time but I am also interested in hedging my bets.  Questioning or being skeptical of Oracle’s acquisitions has not always been a good career move.  I was one of many voices who questioned the sanity of the binge that Oracle went on when it bought up much of the front office industry in the middle of the last decade.

    Several years later the product set that once looked like Marshal Tito’s Yugoslavia still hangs together and Oracle says it is about to release for general availability the new technology stack that will “fuse” it all together.

    Only a company like Oracle or Microsoft or a few others, with deep pockets, could pull off something like this.  In addition to the billions it took to buy the companies, billions more had to go into not only Fusion’s development but also the care and feeding of so many disparate brands during the interval.  I assume the acquired companies have been throwing off enough cash to make the deals palatable but I have no first hand knowledge of this.

    So when I look at the ATG acquisition part of me says, not to worry, Oracle has it all figured out; besides, it’s only a billion bucks.  (In truth, that last bit about the billion bucks makes me blanch.)  The other part of me says this is a lot of money, especially now in this part of the recovery and this part of the front office software life cycle.

    Now, to be sure, ecommerce is really important for a variety of reasons and I can envision scenarios where it continues to gain in popularity.  For example, buying on-line will likely increase in popularity if we see another gas price spike that makes people go to the mall less often.  But I also know that as demand for ecommerce software increases the trend toward commoditization will likely increase.  Ironically, one of the commoditizers in this case is none other than NetSuite, affectionately known as Larry’s Other Company.

    NetSuite’s (NYSE: N) got game—they’re global (just opened a development center in the Czech Republic), they’re all SaaS and their ecommerce functionality is already tightly incorporated with their ERP and CRM.  There’s a lot to like with NetSuite (and they are not a client).  But N isn’t even the only alternate player in the universe.  There are many players in the space starting with IBM and moving through the alphabet to 3dCart, Volusion, and Venda just to pick some names out of a hat.  In addition there is a growing list of open source software to contend with.

    Now, certainly, these vendors don’t all compete for the same business.  A company like Oracle has to have a credible system that it can offer to its Global 2000 customer base, especially when competing with the likes of IBM and many of the smaller vendors chase business in the SMB world.  I’ve recently has some experience with the open source content management system, Joomla! (Yes the “!” is part of the name.)  It’s a good product and they’ve got a robust community of developers and a secondary market of people who implement and sell the product as a download or as a hosted offering.  And it has ecommerce functionality.  Free.

    My point is that the cost of good software has dropped to a very low level.  Companies are making more of their money in services rather than product, at least in ecommerce as far as I can see.  So the idea of paying a billion dollars for an ecommerce software company, even one as accomplished as ATG, seems a little out there to me.

    But maybe Oracle sees something; maybe they see a future in which they sell more services and an ecommerce product makes sense to them as something that fills a need for solutions that sell services.  That might sound crazy but in the last year Oracle became a hardware company with the acquisition of Sun Microsystems.  You might not have been able to see that coming five years ago but there it is.

    So, Oracle and ATG—good idea?  I really don’t know.  If past is prologue then deep pockets might again make a funky strategy into a winner.

    Published: 13 years ago


    Analysis

    The news is that Oracle is buying independent ecommerce software provider, ATG (Art Technology Group) of Cambridge, MA for $1 billion.  I think it’s a good move for both companies.

    ATG is known as a premium provider of ecommerce solutions at a relatively affordable price with more pre-built solutions that its larger competitors who have delivered ecommerce more or less as a toolkit.  However, I also think that the company lacked the size to compete on its own with companies like IBM whose reputation still has a great deal of weight in the board room where decisions about which technology to spend millions of dollars on come from.

    The only other company in a similar position is NetSuite the leading provider of SaaS based ERP which also has a good ecommerce product.  Interestingly, NetSuite’s (NYSE: N) majority owner is Larry Ellison, CEO of Oracle.

    With Oracle behind it and a ready customer base of Oracle CRM and ERP customers—including Oracle CRM On-Demand—it looks like Oracle will recoup its investment quickly.  ATG, meanwhile, will gain a larger audience and Oracle’s backing.  There’s a lot to like in this.

    Market fit

    Oracle may be looking down the road at a world that will be more dependent on ecommerce.  As transportation prices increase due to high-energy costs, there is evidence that consumers may travel less and ecommerce solutions will undoubtedly be called on the fill some of the gap for retailers who will begin to see fewer people in their mall stores.

    Regardless of whether the transportation scenario plays out, it is a reasonable conclusion that if a vendor like Oracle can get behind a company like ATG, which offers lower cost ecommerce solutions, market demand for these solutions will expand because the lower price point brings out new demand.

     

     

    Published: 13 years ago