Just how much skin does Oracle have in the Cloud Computing game? That sort of depends on semantic distinctions between Cloud and other delivery models.
Earlier this month Oracle Co-President Mark Hurd was quoted as claiming Oracle’s SaaS revenues to be in the region of $1 billion and claiming second place in the SaaS rankings. Number one slot would go to Salesforce.com of course, whose CEO Marc Benioff would argue that Oracle’s Cloud play involves hardware and as such isn’t really Cloud at all.
“I don’t know what he’d say and I don’t particularly care,” shrugs Hurd, who goes on to make a distinction between revenues from Software as a Service and revenues attributed to Cloud Computing. “Our SaaS revenue is a billion dollars. If you ask about Cloud revenues, that would be materially bigger. We have many many SaaS companies who are customers of ours, including Salesforce.com, who are using our database, our middleware our Exadata hardware. So our Cloud revenue is very very large.”
Hardware chief
Hurd was brought into Oracle after his turbulent departure from Hewlett Packard and was widely seen as the man to make Oracle’s hardware business – acquired as a result of the takeover of Sun Microsystems – work. It’s a subject of some dispute among market commentators and analysts just how well that it is going, but for his part Hurd is content that the firm is on track.
"If you ask how the hardware business is doing then you are looking a couple of different dynamics," he says. " Inside the hardware business is the business that came over when Sun Microsystems did, which includes products that we OEM-ed and which have no IP from Oracle or Sun, such as various storage products. That revenue is on the decline, but the Engineered Systems business is growing a whole lot even if the Sun server base has been slightly down. So the hardware number is a combination of all that’s there."
Despite the presence of a hardware business at Oracle, the firm has no plans to get into the tablet computing space – ironic since CEO Larry Ellison was among the first to propose a Network Computer device over a decade ago and last week admitted that the firm had looked into the idea of an Oracle Phone. That doesn’t mean that Oracle has no skin in the tablet game, insists Hurd, just that it has no interest in producing the devices.
“Everything we do with our software is iPhone and iPad-ready, but we don’t see much importance in what we do on the device,” he explains. “It’s more important for us to have software that’s ready for that world. If you look at the industry, for the first time the consumer market is bigger than the enterprise market. Consumer spend has changed dramatically. There’s more power in the iPhone than there was in a mainframe in the 1980s and there are kids running around the planet with these devices.
“We don’t dismiss the consumerisation of IT,” he adds. “Look at an HR application. We just bought Taleo and Taloe manages between 15 and 20% of all resumes in the US. You can link that to a recruiting systems. You can integrate that with LinkedIn and look at all my core HR apps. It can be linked to both consumer apps and business apps and works on both environments.”
The Workday factor?
Talk of HR inevitably raises mention of Workday, the Cloud Computing pureplay HCM firm founded by the original founders of PeopleSoft which was acquired by Oracle and is a major plank of its HR offering. Commentators have suggested that Workday has eaten into a large chunk of Oracle’s business and cite an increased focus on HCM with its Fusion next generation applications as evidence that the Workday tail might be wagging the Oracle dog.
“HCM is a cool application,” says Hurd simply. “It’s not driven by any competitor, but by the size of the opportunity. You will see us do the same in the customer service space where we acquired RightNow.”
With HCM and CRM Cloud offerings in play it’s tempting to wonder where a Cloud ERP vendor might be the next Oracle takeover target, despite the likes of NetSuite (founded by Ellison as a personal investment) failing to make a profit or the comments by SAP’s CFO this week that the German giant won’t see a profit from its own Cloud apps.
“Well it’s difficult to make money in the ERP Cloud space if you don’t really have an ERP Cloud,” responds Hurd dismissively of SAP’s efforts. “NetSuite is still in growth mode. When Larry started NetSuite he said it was all about software on the internet which was the future. He was right about that even if he didn’t have the words. The only thing he didn’t have right was the name. He didn’t talk about SaaS or Cloud, but he was right.”
But can SaaS firms go on not making money? “Salesforce.com doesn’t make money,” comments Hurd. “They spend money like crazy but they don’t make a profit. At some point some shareholder is gong to ask them when they will make some money. I don’t know why you’d spend money on a stock that doesn’t make you money.”
Returning to the question of Cloud ERP though, will the next takeover be ERP-flavoured? “We spend close to $5 billion on R&D and what we generally do from an acquisitions perspective is we do things that add to that R&D,” says Hurd carefully. “So with RightNow and Taleo we bought solutions that were not things we were building ourselves. You will see us show up in accounting and finance in Fusion Cloud apps.“
Government growth?
One clear growth market is the public sector where Cloud First is becoming a mantra and where Oracle software has a significant installed footprint.
Earlier this week it emerged that Oracle had lost a lucrative framework agreement with the US government’s General Services Administration, but Hurd states that the firm is seeing Cloud traction within that public sector market. RightNow Technologies, acquired by Oracle earlier this year, had one of the highest security ratings of any Cloud applications firm.
“There have been a lot of moves in the US government to look at more Cloud initiatives,” he argues. “Oracle is an applications provider to the US government and we’re working on Cloud initiatives wherever they make sense. At the same time, the US government is obviously very concerned with security and with ensuring that data is protected, so we are working on both sides. We are doing work on private Cloud architectures.”
