“She’s stealing revenue from me.” That was one of the complaints from Oracle Executive Vice President Keith Block in a series of email exchanges with a company HR executive that have been made public as part of one of Oracle’s ongoing court cases.
Block was referring apparently to Oracle’s head of Cloud services and his remarks give an interesting insight into some of the tensions inherent in a traditional on premise software vendor transitioning to the new sales model of the Cloud.
Ironically both Block and Cloud were triggers for Oracle unexpectedly announcing its full year financial results on Monday, ahead of schedule after a nervous Wall Street heard rumours that Block - head of North American sales for the firm – had left Oracle and that a major sales reshuffle was underway.
So Oracle brought forward its good news to calm the jitters and announced a 7% increase in profits for its latest quarter. And the Oracle Cloud was centre of attention for a large part of the subsequent discussion with CEO Larry Ellison who declared: “The Oracle Cloud is now open for business.”
Beating the competition
Ellison was widely criticised for over-playing the scale of Oracle’s Cloud business a few weeks ago when he claimed there are over 100 Oracle applications in the Cloud already, but he shows no sign of toning down his rhetoric. “With the addition of RightNow and Taleo, we're already the world's second largest SaaS company, with the bookings approaching $1 billion run rate,” he insisted.
Oracle’s Cloud offerings are beating rivals Salesforce.com and Workday, he added. “When we announced the Oracle Cloud a short while ago, we put up a lot of wins against Salesforce.com, a lot of wins against Workday,” stated Ellison. “Human Capital Management had a great quarter, with SaaS wins over Workday at UBS, Société Générale and Vivendi. CRM also had a great quarter, with SaaS wins at Green Mountain Coffee, Swiss Light and Graco.”
While Block’s email comment hints at tension between Oracle’s traditional on premise sales model and the new subscription demands of Cloud, Ellison pitched having a mixed portfolio as competitive advantage. “Right now, we're the only major application supplier that has a large business in SaaS and a large business in on-premise,” he said. “So we're really completing in both sides of the business. And I think that bodes very well for our future.”
It’s up to the customer to decide which delivery model is most appropriate, he added. “Customers are somewhat self-selecting,” he argued. “They come in wanting a SaaS solution for HCM, we have something to sell them. They come in wanting a SaaS solution for sales force automation or service automation or for that matter, financials, accounting. We have something to sell them. We also, obviously, can deliver that same solution on-premise.
“It just gives us, I think, a terrific competitive advantage, both the breadth of what we sell in applications, as well as the fact that we offer on-premise solutions and in-the-Cloud solutions,” he concluded.
98, 99, 100!
While Ellison was on typically triumphal form over the firm’s Cloud offering, it was notable that there was no mention of “over 100 enterprise-grade applications running in the Cloud” , the boast that was aired a few weeks past and which puzzled many market observers.
Those numbers were revisited by Constellation Research analyst Frank Scavo last week when he received a breakdown of the applications from Oracle. On the basis of what he received, Scavo remains unimpressed by the validity of Ellison’s claim. For starters, the “100 enterprise-grade applications” have become “100+ application services", a notable distinction that lends itself to some creative arithmetic.
Scavo cites the example of Oracle Fusion Customer Relationship Management - Marketing" which is not counted as one product but is divided into "Fusion Marketing Segmentation - up to 500,000 records" and "Fusion Marketing Segmentation - up to 1,000,000 records". Such iterative breakdowns bump up the list of product offerings that Oracle says makes up the total number.
Ellison is also seeking to have his cake and eat it, reckons Scavo, noting that the Oracle CEO dismissed SAP’s Cloud portfolio as one offering, stating "SAP only has SuccessFactors." So, notes Scavo, according to the Oracle worldview, SuccessFactors with all its various modules, counts as one application, but Oracle’s rival Taleo offering counts as 24 applications. It’s the same across the board. For example, Oracle’s RightNow offering is really 15 applications according to these metrics.
In fact the only thing that doesn’t appear to be counted as a Cloud application is Siebel CRM On Demand – which somewhat strangely fails to make it onto the sanctioned Oracle list of 100+ applications at all!
That said, Oracle’s Cloud commitment is clearly on view and expected to deliver a $1 billion revenue run rate this year. “Thanks to acquisitions such as RightNow and Taleo and heavy overall the run rate puts it second to cloud pure play Salesforce.com (heading for a $3bn run rate) and makes Oracle a big player in the Cloud space,” notes Techmarketview analyst Angela Eager.
She added: “Size and influence are different however so it remains to be seen how influential Oracle becomes but it is rarely wise to bet against the Larry Ellison team.”
You can find the full list of Oracle’s listing of Cloud apps here.
