The transition to the cloud is still taking its toll on Oracle’s numbers, but the firm points to the adoption rate of the Autonomous Database, pitched by CTO Larry Ellison as “the most successful introduction of a product in Oracle’s 40 year history".
For the third quarter of fiscal 2019, total revenues were $9.6 billion, down 1% year-on-year, while GAAP net income was $2.7 billion. Cloud Services and License Support revenues were $6.7 billion, up 1% year-on-year, while Cloud License and On-Premise License revenues were $1.3 billion, down 4%. Combined, that’s flat year-on-year.
CEO Safra Catz referenced the impact of the shift to the cloud on revenues:
Our software business has remained extremely stable and resilient as we have made the transition to faster growing SaaS business that entailed trading non-recurring upfront license revenue for recurring long-term subscription revenue. Through adoption of Autonomous Database and OCI, we are now shifting the focus for infrastructure business to the cloud. As a percentage of our total software business, cloud is now more than double what it was just three years ago and provides us with the ability to accelerate overall software revenue growth as this mix shift continues.
Her co-CEO Mark Hurd provided more insight on the applications business:
In terms of SaaS revenue and bookings, Fusion apps were up 35%…our overall ERP and HCM annualized SaaS revenue is now $2.8 billion. That’s up in the mid-20s. Fusion Apps, 35% up. Fusion ERP revenue was up 47% organically. NetSuite revenue was up 28%. Bookings were up actually even higher in the mid-30s. Our vertical revenue was up 38% and our annualized revenue in the verticals is now over $800 million.
But it was adoption of the Autonomous Database that got the most attention, with Hurd stating:
Our momentum continues to build. We now have 4,000 new trials that were added in Q3 alone. Nearly 1,000 paying customers. We’re adding many new customers and we’re seeing great pull-through, with 20% of our Autonomous Data Warehouse trials also using analytics. We have over 35 reference-able customers and we expect to be greater than 100 soon.
That’s not shown up in revenues yet, he added, but the signs are encouraging:
I’m talking in terms of trials and people testing and now frankly people buying. What we’ve even seen, what’s really nice, people buying something for as much as 15, 20, 25k as their first move into Autonomous Database and even within the quarter making a second purchase…These are really encouraging early signs for us…So as we continue to convert trials into real usage, real usage into expansion, this becomes a core he key driver as we move forward.
There’s another aspect of Autonomous Database that is different to what’s gone before, he added:
We’ve never had a release in the database area where we could actually talk to a CEO about what was in the release and the CEO would go,’I completely get it’. It’s not like we’re talking about partitioning or something like that. When you talk about the fact that this database patches itself, our customers at the CEO level understand what a patch is. They understand why it’s so important, why it’s so strategic. They in many cases have to discuss it with their audit committees…This isn’t something sold five levels down or four levels down in the org. This can be sold at the top of the company, if you will, at the CEO level.
Hurd said that around 20% of customers on the Autonomous Database are “net new to Oracle”, with the remaining 80% being existing users where there’s no competition in the transaction. But in terms of competition, it was left to Ellison to pick up on an increasingly familiar theme in the challenge to and from Amazon in the infrastructure space:
Our infrastructure technology is highly differentiated from AWS. Each one of our cloud computers has a separate security processor and memory, insulate customers from intruding upon each other and it also makes our cloud control code inaccessible by customers. No other cloud services provider offers this kind of protection across their entire public cloud. The Oracle Autonomous Database is the only database that can respond to a security threat automatically. No down time is required. No other database has this capability.
Although none of the 35 reference-able customers were mentioned by name, Ellison provided a little color:
There are several people that are coming in with all new applications in the cloud…Then there are traditional on-premise customers who are simply taking one of their millions of Oracle Database…Then there are customers that are moving, existing big Oracle customers that are moving new development, the new application that’s they’re developing, from developing them on-premise, they move test and development into the Cloud.
He added that the driver for adoption varies:
Some of our customers were stunned that they can get a database up and running in five minutes. We’ve been collecting references and studying the thousand customers and the 4,000 trials and what they find encouraging about the Autonomous Database. Certainly, we’ll call it productivity improvements. The fact they can go from not having a database, not having hardware, literally log onto our cloud. Up and runnings and doing useful things in five minutes is proving to be a shock to a lot of our customers.
So getting things up and running quickly, productivity has been a very big issue. We’ve got one customer who’s done a series of tests, an AWS user. I know we had these ads that promised to cut your AWS bill in half. They found that we were running 11.5 times faster than they were running on AWS and they cut their bill by 80%. These are university researchers. So they’re very, very cost sensitive and they felt it was worthwhile making the move, just because we were much less expensive. Autonomous Database was way less expensive than Redshift or Aurora at Amazon.
Some people they had an existing data warehouse and it was just the compatibility, being able to take an existing Data Warehouse, not spooling up a new one in five minutes but taking an existing Data Warehouse, lifting it and shifting each other. We’re seeing all of those use cases..Productivity, compatibility and cost - all driving the usage of Autonomous Database.
The underlying story here is becoming unfortunately familiar - there is movement among the installed base on the cloud transition journey, but it’s moving at a slower pace than, for example, what Hurd referred to as “the company from Germany”. So despite some good numbers, the share price dipped on Wall Street.
It’s tempting to conclude that when Oracle committed to customers that there would be no forced migration to Fusion, it made a rod for its own back, even if the motivation was commendable in terms of reassuring users about the future. The problem is, an awful lot of customers do still seem rather attached to their on prem apps.
That said, the pick-up in Autonomous Database trials in Q3 does bode well. What’s needed now is for some of those reference-able use cases to be wheeled out to tell their tales.