When a report surfaced this week that Oracle was looking into acquiring professional services giant Accenture, some characterized it as an early April Fools’ Day joke and discounted it out of hand.
They shouldn’t.
Over the past few decades, Oracle (ORCL) has made a series of bold and expensive acquisitions to shore up parts of its business where its executives see gaps. Accenture (ACN), the giant IT consultancy and systems integrator, would give Oracle a much bigger presence in IT services, and not incidentally, help customers move new or existing applications to the cloud, a key consideration for Oracle, which is looking to fend off incursions by Amazon (AMZN) Web Services and other cloud-first companies
Rivals like IBM (IBM) have huge services businesses, bolstered by their own acquisitions. IBM pumped up its own cloud services business with the acquisition of Bluewolf Group, the largest service partner to Salesforce (CRM), which competes with Oracle in sales and marketing software.
Patrick Moorhead, founder and principal analyst Moor Insights & Strategy, agreed that a deal could happen. “Given where Oracle is in the cloud this is a distinct possibility. I would see this as Oracle waving the white flag on its own deliverables and relying on a services model to work with everyone’s solution.”
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The initial report—by British tech news site The Register— says Oracle (ORCL) has hired consultants to look into a possible deal. It quoted one unnamed source saying that if this were a 100-meter race, Oracle was 10- to 15-meters into it, so a lot could still happen—or not happen.
An Oracle spokeswoman initially declined comment on Saturday but the following day issued a categorical denial: “The Accenture rumor is completely untrue. Never even considered it,” the spokeswoman, Deborah Hellinger, said via email on Sunday. An Accenture spokeswoman said the company does not comment on rumor and speculation.
If there is an acquisition, it would be pricey. Accenture has a market cap of just over $74 billion and trailing 12-month revenues of $33.7 billion. It employs about 400,000 people worldwide.
Skeptics point out that since Accenture is already a long-time Oracle partner, it’s not certain what benefit it would derive from acquiring it. “Why buy the cow” if Oracle already gets the benefits of a partnership, asked one analyst according to Investors Business Daily.
Doubters also point to the fact that Accenture partners with almost all the major tech companies, including Oracle rivals, and that Oracle ownership could threaten that. However, similar arguments were made when IBM bought the PwC Consulting business years ago, and IBM’s services group appears to have kept its vendor agnostic worldview.
Going back in time to 2003, when Oracle launched a $5 billion unfriendly bid to buy PeopleSoft for its business software expertise and closed that deal two years later for nearly $10 billion, no one thought the company would within a year offer nearly $6 billion for Siebel Systems, another business software company.
That was all part of Oracle’s then-chief executive Larry Ellison’s strategy to make his company—which already led the market in selling databases to Fortune 500 companies—an equally powerful presence in financial services, sales, and human resources software used by those same companies. The purchases gave Oracle heft against both SAP and Microsoft.
Fast forward to last year when, to beef up its presence in cloud-based business applications, Oracle dropped $9.3 billion on NetSuite, even though both companies offer similar inventory and manufacturing management software.
So if Ellison, who is now chief technology officer and executive chairman of Oracle, and co-chief executives Safra Catz and Mark Hurd think the company needs more professional services and consulting help in its cloud quest, Accenture makes sense.
Note: (April 1, 2017 5:33 p.m.) This story was updated to add input from the Accenture spokeswoman.
(April 2, 2017) 1:20 P.M. This story was updated to add Oracle’s denial of an Accenture deal.
