Micros Will Extend Oracle's Reach Into Hospitality and Midsize Accounts

G00267264

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Summary

Acquiring Micros Systems will give Oracle a foothold in the hospitality industry and help bolster its midrange market share. But it is imperative that Oracle sort out the overlap between the two companies' product sets.

News Analysis

Event

On 23 June 2014, Oracle announced it has agreed to acquire Micros Systems, which provides integrated solutions to the hospitality and retail industries, for approximately $5.3 billion, the equivalent of $4.6 billion net of Micros' cash. Oracle expects the deal to close in 2H14, subject to customary approvals.

Analysis

Services represented 67% of Micros' 2013 revenue across all verticals, compared with 21% from hardware or 12% from software; thus, this was likely more of a pure revenue play than a strategic technology acquisition. But Micros will also enhance Oracle's vertical industry portfolio — which spans retail, financial services, health sciences, communications, asset-intensive businesses and utilities — by expanding its opportunities in the hospitality vertical and the midsize retail market.

Micros hospitality offerings include property management solutions, which handle room inventory and assignment, reservations, and checkouts and check-ins, as well as solutions for sales and catering, and restaurant and supplier management suites. The technology underlying Micros' cloud-based Micros Commerce Platform for the hospitality space, which integrates local content and e-commerce, fits well with Oracle’s cloud strategy. A key factor in this deal is Micros' hotel and food and beverage (F&B) units, which represented 76% of its revenue. Oracle can now sell its enterprise solutions into Micros' large global hospitality customer base. It could also combine Micros' hospitality and industry-specific applications with Oracle's business applications, technologies and cloud portfolio to create an integrated platform for the hospitality industry, including CRM, ERP, point of sale (POS), property and operations management.

Retail is the lesser of the two verticals in which Micros specializes; it derived just 24% of its 2013 revenue from retail. Oracle could use Micros’ retail solutions to extend its reach in midsize greenfield retail accounts, especially in emerging markets. But overlap between the retail product sets of the two vendors is not inconsiderable:

  • POS: Oracle’s Point-of-Service POS solution and Micros’ X-Store and Retail-J POS solutions all target Tier 1 multichannel retailers (those with annual revenue of at least $3 billion).

  • CRM: Like Oracle, Micros offers loyalty, marketing, campaign and offer management solutions. However, the Micros CRM portfolio offers little extensibility to Oracle’s CRM offerings, particularly for Tier 1 retailers. Many Micros CRM retail implementations are within Tier 2 and Tier 3 retailers. Oracle can upsell core cloud-based ERP and CRM to high-end overlapping Micros accounts.

  • ERP: Micros order management, merchandise/supplier management and analytics products are to be found in midsize implementations. Oracle merchandising solutions have a strong presence in the Tier 1 retail market.

  • Digital commerce: The established Micros platform OCP overlaps with ATG-based Oracle Commerce; both are more predominant in the Tier 2 midsize market.

Recommendations

Oracle customers:

  • Evaluate complementary Micros hospitality offerings, but expect no short-term changes. Watch for technological synergies in 12 to 18 months.

Micros customers:

  • In the short term, expect Oracle to focus on preserving Micros' installed base. In the medium term, watch for contracts to move to Oracle, which could change licensing terms and conditions.

Customers of both vendors:

  • Watch for new hotel, F&B and midsize market retail solution bundles to emerge. Seek out opportunities to rationalize contracts and fee structures.

  • If your organization is a large multichannel retailer, push for Oracle to articulate a road map for both retail product sets after 90 days.

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