Not only is the company transforming nearly everything it sells to the cloud (from Exadata servers to applications to Oracle database on-demand), Larry Ellison now clearly and eloquently describes the cloud and its business as a "utility." Just as we expect the phone and electric company to invest in capital and then charge us for per-usage services, so Oracle defines itself the same way.
Oracle invests in hardware, database, middleware, and applications - and businesses simply rent it.
This is a huge change in Oracle's business model, and the company is taking the transformation very seriously. Every major product is being transformed by the cloud, including the way the sales force operates. Oracle sees this transition as its next major growth opportunity - telling analysts that organic growth will come from integration and redeployment of products in this new way.
Fusion: Oracle's Cloud Applications Strategy
Fusion is the name for all of Oracle's new set of cloud-based applications, and I attended several sessions where legacy customers running PeopleSoft, JD Edwards, or Oracle applications were migrating to the cloud. In each case the progress is steady and customers are biting the bullet.
In the Human Capital Management area, Oracle sells Fusion HCM (which competes with products like Workday). I had the opportunity to meet with four new Oracle Fusion HCM customers and sit through several Fusion HCM sessions. Oracle now has 25 live customers on Fusion HCM, more than 125 licensed customers, and some huge wins such as UBS, Elizabeth Arden, Brocade, Hitachi Data Systems, Shutterfly, and others. I expect many more to come.
We talk with clients every week, and many large organizations are evaluating Fusion as an upgrade path for its PeopleSoft or other applications. Is Oracle as "cloud-based" as Workday (IPO next week) and Salesforce? Certainly not yet, but Larry Ellison quickly dismisses these companies as "niche players," and makes some very good arguments.
Oracle, unlike the other fast-growing competitors, sells business software for every possible application - from financials to project management to HR to manufacturing. So Oracle's Fusion applications are like one giant business suite, all running in the cloud. Supporting this infrastructure the company offers cloud-based database, social networking, analytics, and even a new social networking analysis service. And under the covers Oracle owns the hardware, database, middleware, and applications - so the company can presumably deliver service in a more integrated way and at a lower cost than competitors.
Adding to Oracle's case, the company argues that Oracle's cloud service is open (fully standards based). You as a customer can use SQL and standard tools with Oracle applications, and the environment is secure (you can query, integrate, and backup the cloud at the database level, not the application level). Other vendors (ie. Salesforce.com, Workday) use proprietary database technologies which provide great degrees of flexibility, but lock you into their applications.
(One of my favorite Larry Ellison quotes was the statement that 'Salesforce.com is the roach motel of cloud systems. You put your data in but it never comes out.') The argument has some truth to it - try to write code in Apex, Salesforce's proprietary programming language. It's expensive and skills are rare, compared to Java and SQL.
In other words, Oracle is "all-in." If you are ready to run your business on cloud applications and databases, Oracle has it all. Every application can integrate with every other, and you have common interfaces and database technology to tie it all together.
It's not all quite there yet, but have faith, Oracle is committed to delivering on this dream. (This is the same argument IBM used for many years during its dominance of the corporate computing market, and IT managers bought it.)
Despite Pressure, Relational Databases are Alive and Well
Thanks to the huge demand for analytics and BigData services, relational database software is alive and well. Yes, companies are rapidly moving to no-SQL parallel systems, but 95% of corporate apps still use SQL.
As I stood in the analyst area awaiting a meeting, I overheard a poor DBA yelling into his phone "You mean the backup failed? Well you have to recover it and start again! If we can't get it working I'll get on a plane and come home." Ah the good old database industry. (I used to be part of it.)
If you've ever worked with relational databases you know they're quite complex and often slow. Oracle has now "engineered" the database into the Sun hardware (Exadata X3) and this week launched an in-memory database which is 10-100X faster (I've heard this story for years) and a new version of the database (Oracle 12c - c="cloud") which lets organizations create pluggable databases which can be backed up in clusters, to serve the needs of SaaS application providers.
The vision is well conceived. Everything Oracle sells is now part of the Oracle Cloud.
What about Workday?
Through its acquisition of PeopleSoft and Taleo, Oracle became one of the world's leading providers of HR and Talent Management software. And that space is being greatly impacted by many innovative companies, particularly Workday (which is going public in a week or so).
In the halls of HR IT there is already a lot of buzz about Workday's "new architecture" ERP and HRMS. Many Oracle customers are now comparing Workday to Fusion), so the clarity of Oracle's message is particularly important. And quite frankly Workday is well ahead of Oracle today, with more than 200 live customers.
While some companies will definitely chose Workday because it is "new," Oracle can definitely say the Fusion HCM is "new and improved" also.
A major bank I talked with told me they decided on Oracle's strategy because they had such a huge business relationship with the company and they can afford to bet on Oracle's long term strategy. Plus Oracle has an entire suite of applications, while Workday focuses primarily on HRMS.
The company still has work to do. For more than 20 years Oracle has been selling software and consulting, and delivering below-average customer support. Most Oracle customers just "deal with it."
One PeopleSoft client I talked with today glowed about their seamless HR transformation, powered by PeopleSoft's software. When I asked him about Oracle support, he grumbled and said "we just built our own expertise, because when we call them its never clear whether they'll solve our problem or not."
So the biggest challenge Oracle now faces is not just building cloud-based products, but actually learning how to go to market as a "service provider," not a company that sells software and charges for maintenance.
In the HCM market many companies will choose Workday, largely driven by its architecture and snazzy user interface. And Workday, unlike Oracle, was built around a culture of service. Our friends at a major integration firm told me they're flush with business doing Workday implementations. So the company will do well, but they've definitely awoken the sleeping giant. Oracle (and SAP) now "gets" the cloud, and the company is doing everything it can to win cloud business.
Oracle Deserves a Lot of Credit
As far as Oracle goes, I give the company a lot of credit for reinventing itself from top to bottom. This is a company that shrewdly moves into new technology markets at a commanding gait. Yes the company is dragging along millions of lines of code written over the last 20 years, but Oracle, unlike almost any other company, understands IT architecture and is about as competitive as they come.
We are entering a hot season of news and information in HR Technology. Next week is the annual HR Technology Conference and we will be launching new research on the learning management and talent management systems market.
Stay tuned.
You can follow Josh Bersin to stay up to date on trends, research, and news in all areas of HR, leadership, and talent management on twitter at @josh_bersin.
