Here's Why Marc Benioff Agreed To Make Friends With Larry Ellison Again
We now know that Benioff is getting three big things out of the deal:
1. It'll cut Salesforce.com database server costs "in half," Benioff said on the call.2. Salesforce.com and Oracle apps will be knit together. This could give Salesforce.com an "in" with Oracle customers. "You press a button and suddenly that integration gets loaded and the apps start sharing data and work together," is how Ellison described it.
3. Oracle has agreed to be a Salesforce.com customer, at least as far as acquisitions are concerned. "Virtually every time we buy a company, they are running Salesforce.com's CRM," Ellison explained. "In the old days, we would slide them onto our Fusion salesforce app right away. Now, we'll leave some of those companies on Salesforce.com."
The deal was formally announced yesterday after Ellison spilled some of the beans about it during his quarterly conference call with analysts last week. Oracle was reporting a rare consecutive miss on revenue and Ellison wanted to show the analysts that big deals were in the pipeline.
It's easy to see what Oracle is getting. Salesforce has agreed to buy a whole bunch of Oracle technology, including Oracle's new cloud database known as Oracle 12c; Oracle's Exadata hardware that runs the database; and Oracle's flavor of Linux (which means Salesforce is abandoning Red Hat).
The deal is supposed to run for at least nine years, although Benioff said on today's conference call that it would last 12 years.
At one point, an estimated deal value of about $300 million was bandied about by JMP securities analyst Pat Walravens. (We've contacted Walravens and asked him if he he still thinks the deal is worth this much.)The deal also means Benioff won't be cutting his database costs by ditching Oracle for a free and open-source database called PostgreSQL. It looked like Salesforce was moving that way last year, when it revealed plans to hire an army of PostgreSQL developers last year.