Oracle announced plans Monday to acquire RightNow Technologies, a provider of Web-based customer service software, for $1.43 billion, in a move that will expand the technology giant’s footprint in the cloud.
The acquisition, Oracle’s largest since its $7.4 billion takeover of Sun Microsystems in 2010, is part of a larger push by the company to build out its so-called cloud-based software services, which are available remotely via the Web.
Historically, the enterprise market has been dominated by installed software, which typically involves large up-front fees and recurring service expenses. But in recent years, more companies, large and small, have started to migrate to the Web to manage their businesses and customer relationships at a potentially lower cost. Adam Holt, an analyst with Morgan Stanley, predicted that corporations will increase their use of cloud-based services by at least 50 percent or more every year, for the next three years.
The shift has prompted many of the established technology players, including Oracle and Microsoft, to build or buy their own cloud offerings.
“This is the first time Oracle has made an acquisition of a bona fide software-as-a-service cloud company,” said Steven Ashley, an analyst at Robert W. Baird. “It raises the prospect that others, like SAP, will be more active.”
As competition intensifies, analysts say the sector could see more deal-making. Already, prices are rising. On Monday, Workday, another cloud-based software service, raised $85 million, a deal that valued the company at nearly $2 billion, according to a person close to the company.
The acquisition of RightNow may also signal that Oracle’s appetite for acquisitions is strengthening once again.
Earlier this year, Oracle’s chief, Larry Ellison, said he was restraining his checkbook and focusing on organic growth because assets were “wildly overpriced.” While the company has made several acquisitions this year, it has focused on smaller, privately held companies, mostly in the under-$1 billion range.
Then last week, the company purchased Endeca Technologies, a business intelligence software company that also offers products to help online retailers improve customer service. Although the size of that deal was not officially disclosed, Oracle paid up to $1.1 billion, according to The Boston Globe, which cited documents and people with knowledge of the deal. Under the terms of the latest deal, Oracle will pay $43 per share for RightNow, nearly 20 percent above Friday’s closing price.
“Oracle is moving aggressively to offer customers a full range of cloud solutions including sales force automation, human resources, talent management, social networking, databases and Java as part of the Oracle Public Cloud,” Thomas Kurian, Oracle’s executive vice president of development, said in a statement on Monday.
The cloud is becoming increasingly important in Oracle’s lineup.
Earlier this month, Ellison unveiled what the company called the Oracle Public Cloud, a broad platform for enterprise services, marking the company’s first, formal entry into the market.
“We felt we had to move to a new generation, the next generation of technology,” Ellison said at the product launch.
In addition to focusing on customer service via the Web, RightNow’s technologies also provide social media management, application development and search. If adapted to work with its existing software products, Oracle would be able to provide more robust solutions for companies, including offerings for databases, personnel and sales. It also puts Oracle in more direct competition with Salesforce.com, one of the leaders in cloud-based sales management software.
“If you look at what Oracle has done organically as well as through acquisition, it’s building out a complete suite for customer experience management,” said Holt of Morgan Stanley. “It’s a dynamic and rapidly growing space; there’s no clear leader, and Oracle is uniquely positioned to take advantage of the market.”
Quentin Hardy contributed reporting.