NEW YORK – To understand why Oracle Corp. agreed to buy Micros Systems Inc. for $5.3 billion last week, take a peek inside one of New York’s top restaurants, Le Cirque.
Inside the hushed, white-tableclothed establishment that is frequented by socialites and businesspeople, the hostess seats customers for Le Cirque’s $165 six-course dinner depending on whether a reservation came through OpenTable Inc.
If the booking was through the online system, the hostess seats patrons at a table assigned by OpenTable’s table-management tool.
Then from the moment the diner sits down, Micros’s point-of-sale service kicks in, collecting orders and other information until the final credit-card swipe. Selections are relayed to the kitchen and bar, where chefs and bartenders get busy preparing appetizers and cocktails.
It’s all part of a push starting five years ago by Le Cirque’s parent company, Le Cirque International, which owns about a dozen fine-dining establishments worldwide, to embrace technology – a trend Le Cirque plans to extend, co-CEO Carlo Mantica said.
The restaurant industry is a laggard in technology adoption, Mantica said. We’re at a brink of a disruption, and technology will see greater and greater adoption in the next five to 10 years.
Restaurants like Le Cirque and their growing appetite for technology are now helping to spur a deals boom for providers of software and other services to the market.
Oracle said it was buying Micros – which counts restaurants as key customers – in its biggest acquisition since its $5.7 billion takeover of Sun Microsystems Inc. in 2010.
This month, Priceline Group Inc. agreed to buy OpenTable for $2.6 billion to add restaurant bookings to its travel business. Google Inc. last month brought on the staff of Appetas Inc., a startup that helps restaurants build better websites.
The activity is ramping up as the opportunity for technology providers with restaurants is set to grow.
More than half of fine-dining operators plan to spend more on customer-focused technology such as mobile applications this year, with half of casual-dining operators and 41 percent of family-dining establishments expected to do the same, according to a 2013 survey by the National Restaurant Association.
The total point-of-sale software market in the United States has also expanded 3.3 percent annually from 2009 to a projected $1.3 billion this year, according to Ibisworld.
As a result, more technology companies are rushing to position themselves with offerings for restaurants. NetSuite Inc. sells financial software to restaurants such as Australia’s Guzman y Gomez Mexican dining chain. Intuit Inc. markets its QuickBooks small business accounting software to restaurants.
Others have developed specific tools for dining companies. G4Technologies Corp.’s AccuBar beverage-tracking system helps restaurateurs figure out when they need to order wine or stock up on liquor.
It’s still a very untapped market, said Dave Grimm, founding partner of G4Technologies, of the restaurant industry. That’s set to change, he said, as technology is such a part of everyone’s lives, people are going to wonder how they ever ran a restaurant without it.
For big technology companies such as Oracle and Priceline, buying a restaurant-specific business also helps widen the door for them to sell other parts of their product lineup to the establishments. Oracle has acquired several retail-specific software companies in the past few years to build up its offerings to restaurants, hotels and other hospitality providers.
The Micros deal was also a relative bargain at 17 times Micros’ earnings before interest, taxes, depreciation and amortization, compared with the median multiple of 22 for Internet and software acquisitions, according to data compiled by Bloomberg.
We anticipate delivering compelling advantages to companies within the hospitality and retail industries with the acquisition of Micros, Oracle co-President Mark Hurd said in a statement about the deal.
Oracle bought Micros with this potential in mind, said Christine Dover, a research director at IDC. Oracle could create a platform that integrates services – including software for accounting, point of sale, workforce scheduling and inventory management – into a single solution, she said.
Oracle, based in Redwood City, California, declined to comment beyond its statement. Micros, headquartered in Columbia, Maryland, didn’t respond to a call for comment.
Slow to adopt
Restaurants have been slow to incorporate new technology, partly because the dining market is fragmented and filled with mom-and-pop operations that buy from suppliers at their own pace.
In addition, some establishments have resisted the cost of new software. Almost 75 percent of dining operators described implementation expenses as the biggest factor preventing them from adding more consumer-facing tools, according to the National Restaurant Association’s 2013 survey.
Small business owners are not tech-savvy, and they’re not necessarily coming from a tech background, said Daniel Bohlen, owner of East Village Asian Diner in San Diego. I think there’s a lot of missed opportunity by not offering reasonably priced services for small businesses.
Yet the attitudes are changing now as more restaurants deal with the impact of mobile applications such as GrubHub Inc. and other food-ordering services and technology, said software providers and restaurateurs.
Restaurant companies are realizing that it may seem like the oldest of the old-school industries – you buy some ingredients and cook them – yet all of these industries are getting disrupted by the cloud, said Andy Lloyd, manager of commerce products at NetSuite.
The shift is set to accelerate, said Melissa Autilio Fleischut, CEO of the New York State Restaurant Association.
Compared to 10 years ago, when the only technology being used was a POS system, now we see a majority of restaurant members using online ordering and social media with some early adopters exploring mobile payment applications, scheduling software and bitcoins, she said in a statement.