Larry Ellison's two favorite companies: Oracle and its "competition"May 16, 2011: 2:34 PM ET
Oracle and NetSuite go after customers with the same kinds of needs, but they've carved out their own turfs, and are about to get even cozier.
FORTUNE -- Larry Ellison is cheering for Oracle and NetSuite. Not surprising, considering the billionaire tech mogul (and Oracle founder and CEO) is a major shareholder in both companies. But now Oracle (ORCL) and NetSuite (N) have more than Ellison's stake in common -- they're both going after big corporate customers.
Oracle is known for selling large-scale, on-premise hardware and software packages to businesses. But NetSuite has historically targeted small and medium companies with its more affordable cloud-based finance and accounting software, which is delivered on-demand and over the Internet. Last week at NetSuite's SuiteWorld conference in San Francisco, the smaller software company announced a new suite of applications, services and partnerships aimed at attracting larger enterprise customers.
So does this mean NetSuite will soon compete for Oracle's turf?
Not quite, says NetSuite chief executive officer and former Oracle exec Zach Nelson. Although NetSuite is making an ambitious push for larger accounts, Nelson says it's far from winning over any of Oracle's behemoth customers. What's more, the two companies are actually forging an even cozier relationship than they've had in the past.
NetSuite was Ellison's experiment in selling software-as-a-service. He helped found the company back in 1998 (along with Evan Goldberg, who now serves as chief technology officer) and remains NetSuite's largest shareholder. Oracle and NetSuite have always had the Ellison connection, and now the two companies are formalizing their relationship with a technology partnership.
That's why, on Tuesday, Oracle president Mark Hurd appeared at NetSuite's conference to help announce NetSuite's decision to use his company's Exadata servers to run its larger-scale cloud applications. The two companies went even further to show their support for each other. Yesterday evening, NetSuite hosted a party at Ellison's swanky San Francisco house (complete with complimentary valet parking, steak tartare appetizers and awesome views of the Golden Gate Bridge).
"The combination of Oracle Exadata and NetSuite's suite of cloud business applications will transform the way companies run their business and bring the power of our technologies to the broad base of customers moving to the cloud," Hurd, Oracle's president, said in a press release about the alliance.
But while NetSuite CEO Nelson says SAP (SAP), not Oracle, is his big competitor, the day could come when NetSuite starts encroaching on its big brother's territory. That is, of course, if the smaller, cloud-based software company successfully delivers on its promises (like expanding the range of applications built on its cloud platform). NetSuite has already snagged the likes of Groupon and Qualcomm (QCOM) as customers. And it has also teamed up with consulting firm Accenture to help larger customers implement NetSuite's software.
Still, even with the flurry of new partnerships and enhanced products, it will probably be a while before NetSuite -- and other cloud-only vendors, for that matter -- make significant headway against the likes of SAP and Oracle. Lucky for 66-year-old Ellison, he's got his eggs in both baskets.