Oracle and Salesforce.com – blowing up the cloud?

SUMMARY:

Oracle and Salesforce are new BFF. Armchair quarterbacks will be disappointed at the detente between the two companies but there is a serious intent behind the announcement of a deal which see Salesforce.com implement Oracle Fusion HCM and Financials along with strengthening its ties on the database front. This post looks at the implications for the applications landscape.

Dynamite Deadline Time Showing Urgency Or ExplosionThe drip feed of news from Oracle continues. Hot on the heels (sic) of the Oracle and Microsoft tie up for infrastructure, Oracle and Salesforce.com jointly announced that:

Salesforce.com plans to standardize on the Oracle Linux operating system, Exadata engineered systems, the Oracle Database, and Java Middleware Platform. Oracle plans to integrate salesforce.com with Oracle’s Fusion HCM and Financial Cloud, and provide the core technology to power salesforce.com’s applications and platform. Salesforce.com will also implement Oracle’s Fusion HCM and Financial cloud applications throughout the company.

Technology names aside, this is very big news for any customer or potential customer considering the cloud as a future deployment option. The announcement also raises many questions.

Turning the clock back a few hours, Phil Wainewright said of the Oracle/Microsoft alliance:

Yesterday’s announcement, therefore, is all about maintaining control as enterprise workloads move cloudwards. Oracle knows that its own managed private cloud offering only suits a restricted, loyal core of the market; its broader strategy is to keep as many workloads as possible on its own database platform.

This latest announcement reinforces that strategy, adding some of the halo effect of being cloud savvy that Salesforce.com has enjoyed for several years.

There will be little immediate market impact because the announcement talks of futures rather than the present. However, it is thought that once the HCM and financials implementations are complete, Salesforce.com will represent one of the largest deployments among Oracle’s user base. That of itself will be a powerful reference and potential validation for Oracle’s cloud credibility which, to date, has been difficult to assess.

Workday and SAP under the gun?

More to the point – what impact does this have on Workday? Frank Scavo says:

If there is a competitive target in this announcement, it has to be Workday. SFDC will implement Oracle’s HCM and will integrate its Sales Cloud with Oracle’s HCM and also with its Fusion Financials product. This puts Workday in an awkward spot in that Workday leverages Force.com for its platform-as-a-service capabilities. It will be interesting to see how Workday reacts to this détente between Oracle and Salesforce.com.

Here’s your answer. In a call with Aneel Bhusri, co-CEO Workday, he said that he didn’t anticipate any impact. Hardly a surprise but then in calls with others, we see no signs that Workday is losing out to existing PeopleSoft shops that are looking to replace with a cloud solution. It will become a talking point in future investor calls at which time we will know more.

One thing’s for sure, we will need to see large named customers to continue feeling comfortable about Workday’s momentum in both HCM and financials applications.

Scavo describes Workday as the ‘odd man out.’ He adds:

While the use of Oracle Fusion within SFDC doesn’t mean much to SFDC customers, it does give bragging rights to Larry Ellison against Workday. Interestingly, NetSuite’s CEO Zach Nelson was recently taking pot-shots …at Workday … At the time, I took it as a sign of Workday’s competition with NetSuite in financial applications. Now I see it as part of a wider competitive alignment. Both Zach Nelson and Marc Benioff [CEO Salesforce.com] are Oracle alumni and both have close ties to Larry Ellison. The three now seem to be joining in solidarity against Workday and validating that Workday is a threat to all three.

I partially disagree. Workday claims that it never sees NetSuite in deals, or rather where it does then one of them is in the wrong deal. As a sidenote, we anticipate there will be a further announcement this week concerning NetSuite. Oracle and Salesforce.com still have SAP as mainstream competition with Salesforce.com enjoying more success against SAP than Oracle. This alliance may yet provide Oracle with a better route into SAP shops. In order to achieve that, Oracle will have to make Fusion implementations simpler and faster than they are at present. They will also need to make partners’ lives easier. This from Amy Richardson:

However, from what we see, SAP is consolidating its dominant HCM position with SuccessFactors.

Where I agree with Scavo is on his point about this being good for customers:

Customers are not well-served by vendors sniping at each other, and the verbal tiffs between Benioff and Ellison over the past few years, frankly, have become annoying. Hundreds of customers have interfaced Oracle Applications with Salesforce.com’s cloud apps. But until now they have done so without the explicit support of Oracle. Customers will be pleased if the two companies can cooperate in providing standard integration. Hopefully, both parties will start acting like adults and doing what is in their joint customers’ best interest.

Reinforcing his words – what’s good for customers should be celebrated.

Final thoughts

The joint announcement was surprisingly short and provided little detail. The language from Salesforce.com’s Benioff was unusually restrained. There was no scheduled conference call which, given the potential some of us see, seems odd. It is possible that there is very little to see beyond ‘bragging rights.’  It could be that this is the first step in Oracle’s much rumored view of Salesforce.com as a potential acquisition target. If nothing else, it is an implicit admission that Oracle CRM is not up to Salesforce.com’s snuff in the marketplace. It finally puts to bed persistent long run rumors that Salesforce.com plan to come off Oracle database.

Endnote: my colleague Stuart Lauchlan will pick up on the database element of this story tomorrow.

Disclosure: at the time of writing, SAP, Oracle, Workday and Salesforce.com are premier partners.

Image credit: © Stuart Miles – Fotolia.com

 

    Comments are closed.

    1. rod11 says:

      So…. is Oracle aiming to buy SalesForce?

      1. says:

        rod11 If they do then SFdC just made the downpayment for them. 😉

        1. rod11 says:

          dahowlett rod11 They have to be paying SFdC something for this.   Who announces that they are going with only one vendor for the next X years with out some kind of incentive.

          1. says:

            rod11 dahowlett deep discounts…

          2. sumner says:

            dahowlett rod11   Benioff likes to throw partners under the bus.  This marks the death of any realistic partner strategy and puts in a nail in the platform play outside of CRM.

    2. freebalance says:

      These announcements remind me of my favourite line from humourist Stephen Leacock: “he rode off in all directions at once.”
      It’s clear that cloud has combined with social media, BYOD, open source, big data and mobility to disrupt the status quo. This means an improvement in efficiency and effectiveness for customers. The failure of Oracle to meet expectations over the past 2 quarters combined with the fear that Salesforce growth might be unsustainable means hedging bets.
      There can be a huge gap between corporate intentions and the reality of implementation. Oracle may or may not play well with Microsoft or Salesforce (or both). My sense is that Oracle recognizes the increasing commodiization of middleware and that their middleware sweat spot is at high volumes. This gives them a competitive advantage in the cloud space. Microsoft and Salesforce recognizes the scalability problem. Oracle also recognizes the need to be a top 2 player in their business model. (No ‘niche’ markets for Oracle.)
      With big apps running on big clouds with big middleware, I wonder whether this opens up a competitive space for niche vendors who do not need to support Amazon/Oracle/Google scalability.

    3. 123mdv says:

      I thought it was interesting that Oracle is going to deploy Salesforce for its own use!! So much for Siebel, Oracle CRM, Fusion CRM and, to a degree, Fusion in general, if this is how commited they are to all their Fusion Applications. Surely, this is another sign that Oracle is just planning to buy Salesforce in the end, so why don’t they just get on with it?

      1. says:

        123mdv The market needs to get used to the idea. A straight acquisition now would not work and present far too much disruption for both companies.