Oracle closes $28.3b Cerner buy amid warnings of commercial challenges
Database titan 'does not buy companies and then lowers costs'
Oracle has closed the acquisition of Cerner Corporation, a specialist in healthcare software, in a deal set to be worth $28.3 billion.
But as Larry Ellison, Oracle's chairman of the board and chief technology officer, is set to outline Oracle's strategy for its acquisition's role in healthcare in the coming days, Cerner customers are being warned to expect some surprises in renegotiating their contracts.
Last month, Cerner said it secured 331 new, expanded and extended client contracts in first quarter, including Ohio-based Blanchard Valley Health System and Virginia-based Mountain Health Network.
In the UK, the company – which specializes in electronic health records – has won more than $125 million (£100 million) in NHS contracts in the last year alone and was a key player in the country's $11.3 billion (£9 billion) National Programme for IT.
'Oracle does not buy companies and then lower costs' warns licensing advisor
Yet healthcare customers should be aware Oracle will sift through Cerner's contracts to figure out which are the least profitable and look for opportunities to increase its revenue on those deals, according to former Oracle executive Craig Guarente, who is the founder and CEO of software licensing advisor Palisade Compliance.
"Oracle wants to raise your costs. They want you to spend more money with Cerner. Oracle does not buy companies and then lower costs," he warned in a LinkedIn post.
Speaking from decades of experience with Oracle acquisitions, including multi-billion dollar deals to buy PeopleSoft, Sun Microsystems, Seibel and others, Guarente said that Oracle would be looking through Cerner's customer accounts to find the "clunkers."
"Those are the contracts that aren't making any money. If I were Oracle, I would be sending termination letters to those clients saying that we're not going to accept this contract anymore. Oracle would be looking through those agreements for opportunities to get out of them. I don't mean leave customers hanging, I mean creating leverage for Oracle, so that they can charge you more money," he said.
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The compliance expert warned Oracle is also likely to write to Cerner clients, opening a discussion on contract renewals setting out how the process is going to change. "Oracle is a machine when it comes to maintenance and renewals. They're going to do the same thing with Cerner renewals. Whatever the process was at Cerner for renewing those agreements, Oracle's going to make it more efficient: for Oracle, not for you," he said.
Guarente advised customers to review their agreements with Cerner and prepare a plan for when they get letters from Oracle. "Remember, you're really not dealing with Cerner anymore. You're gonna be dealing with Oracle."
EWe have asked Oracle for comment.
When the acquisition was announced, Oracle Global Business Units executive veep Mike Sicilia said Big Red planned to modernize Cerner's systems and move them to the Gen2 Cloud, which he said could be done quickly as some of Cerner's most prized systems already run on the Oracle Database. He also promised changes to the user interface.
"This will allow medical professionals to spend less time typing on computer keyboards and more time caring for patients," he said. ®