$AIN
With news that EFG chose NetSuite + Rippling, the market’s mainstream reaction was, “Traditional ERP has landed another deal; Oracle’s cloud transformation is on solid ground.” But I believe this news actually exposes Oracle’s structural anxiety in the SMB ERP market, rather than signaling a victory. There are three reasons: First, EFG also chose Rippling for HR/payroll, suggesting the customer doesn’t trust NetSuite’s all-in-one capabilities. Oracle has been forced to accept the reality of being “split across vendors”—the opposite of its public narrative about a “full-suite cloud offering.” Second, NetSuite’s growth in recent years has lagged behind Workday and SAP S/4HANA Public Cloud. SMB customers increasingly prefer a “best-of-breed” combination over a single vendor, so EFG’s choice confirms a trend rather than being an exception. Third, together with Gundlach’s comments today about avoiding AI’s “blast radius,” the market is reassessing the payback period for AI capital spending. As a major AI-themed holding, Oracle’s valuation has already priced in too much of the “cloud migration windfall,” while deals of this size make only a limited marginal contribution to revenue. Options data show that ORCL’s put/call ratio has risen recently, suggesting that smart money is hedging. A historical precedent is Oracle losing a large number of NetSuite customers to Workday in 2019—the same pattern is repeating. What do you think? Feel free to share a different opinion in the comments.
With news that EFG chose NetSuite + Rippling, the market’s mainstream reaction was, “Traditional ERP has landed another deal; Oracle’s cloud transformation is on solid ground.” But I believe this news actually exposes Oracle’s structural anxiety in the SMB ERP market, rather than signaling a victory. There are three reasons: First, EFG also chose Rippling for HR/payroll, suggesting the customer doesn’t trust NetSuite’s all-in-one capabilities. Oracle has been forced to accept the reality of being “split across vendors”—the opposite of its public narrative about a “full-suite cloud offering.” Second, NetSuite’s growth in recent years has lagged behind Workday and SAP S/4HANA Public Cloud. SMB customers increasingly prefer a “best-of-breed” combination over a single vendor, so EFG’s choice confirms a trend rather than being an exception. Third, together with Gundlach’s comments today about avoiding AI’s “blast radius,” the market is reassessing the payback period for AI capital spending. As a major AI-themed holding, Oracle’s valuation has already priced in too much of the “cloud migration windfall,” while deals of this size make only a limited marginal contribution to revenue. Options data show that ORCL’s put/call ratio has risen recently, suggesting that smart money is hedging. A historical precedent is Oracle losing a large number of NetSuite customers to Workday in 2019—the same pattern is repeating. What do you think? Feel free to share a different opinion in the comments.
