How the XaaS effect is transforming Oracle's culture

We've written in the past about the shift to XaaS (pronounced ‘X-ass’), in which businesses move away from traditional sales of products and services to a new 'everything-as-a-service' model. For an enterprise technology vendor like Oracle, for example, instead of selling software licenses to its customers, those products become the foundation of a set of services that its customers consume over time.

In Oracle's case, those new services come in several varieties — infrastructure as a service (IaaS), platform as a service (PaaS) and software as a service (SaaS) — and for some people in the IT industry, 'XaaS' acts as a shorthand for all varieties of IT delivered as a service. But at diginomica, we extend the 'X' in XaaS to stand for anything and everything, as businesses across every industry start to harness connected digital technologies to deliver all kinds of experiences, from shaving to elevators. The common theme across all these varieties of XaaS is that, instead of simply shipping a product, the vendor is engaged in enabling an outcome — and that 'XaaS effect' has a profound impact on the whole organization:

The effect of that change in emphasis ripples back throughout the entire business, requiring a fundamental change in how it operates — not only its IT systems but also its processes and people — to deliver results in a far more joined-up, responsive and iterative pattern.

The XaaS effect at Oracle was described in detail last week by Executive Vice President Doug Kehring, Chief of Staff and Head of Corporate Development, in a presentation to industry analysts during a day of briefings on Oracle Cloud. Kehring described three pillars that he sees as the key to Oracle's success as a cloud vendor.

The first pillar, unsurprisingly, is, "the best technology experience." But since other speakers on the day dealt with this in detail, he simply described it as "table stakes." He then went on to spend his time talking about the importance of the customer experience and the employee experience as the second and third pillars. That was music to my ears, as it concurs with our analysis that technology is just the enabler for the XaaS effect:

It’s tempting to imagine that once the technology is in place, the job is done. But that’s just the starting point. The technology fuels new engagement models, delivery models and business models, but these won’t crystallize unless the people and the organization are ready to deliver them.

XaaS and the Oracle customer experience

Oracle's transition from traditional product sales to a modern XaaS model has all the classic hallmarks of any enterprise on that journey.

Kehring is disarmingly frank about the level of customer experience in the old world of on-premise software:

Oracle in the traditional world of on-premise? Great technology. Really hard to do business with.

The on-premise environment creates a "very antagonistic relationship" between vendors and customers, he explains, because the vendors have no control over the environment in which their customers install and use its software. This inevitably creates friction when buyers encounter problems, which may be caused by factors outside of the vendor's control.

That all changes when the software is delivered as a service. The vendor now takes full responsibility for the performance of the software, and the focus shifts from achieving a sale to ensuring the customer has a successful experience:

We're in the service business, we're not in the products business anymore ... Now the way the way we measure is not about how much perpetual license do I sell, but what are my renewals?

The renewal rate becomes the new indicator of success for a company, which means everything that happened between the time that the customer got interested in the technology to when they renew that subscription contract will play into whether we have a successful cloud business.

The pay-as-you-go economics of the XaaS model are such that it's not good business to lose a customer in the first year or two, while the costs of acquisition and implementation are still being recovered. Therefore Oracle is putting a lot of investment into easing the process of getting started as a customer.

One aspect is the accelerated buying experience, introduced two years ago, which now fully automates the contract process for 75-80% of cloud contracts, with another 10% partially automated. Oracle is also looking at automating and improving other aspects of the onboarding process, such as activation, provisioning and training, he says, as well as the renewal process.

All of these elements make the totality of how a customer looks at the experience of Oracle, and will have a very close determinant on whether they renew the technology — let alone obviously expand [their usage] which is something we all want to do.

XaaS and the Oracle employee experience

When organizations transition from product sales to service delivery, they discover that it requires a very different employee culture. In the product world, if a customer contacts you after a sale, it means there's a problem. In the XaaS world, the vendor remains in constant contact with the customer, and its employees have to proactive in ensuring a good customer experience. As Kehring puts it:

We're not in the technology business any more, we're in the service business. If you're in the service business, how your people feel every day, and wake up, and how they [conduct] themselves in front of the customer will determine how the customer feels.

That's been a big change for Oracle. Kehring admits that many of its back-office processes in the past seemed to be run on the principle that "You never got fired at Oracle for saying no ... you were an awesome employee if you just said no." The company has had to change this culture:

Part of this move to this new paradigm is, we spent a lot of time with all of our support people throughout our internal processes saying, 'No, the question you need to ask is, 'How can I help?'

The answer might still be no. But then your objective is to help them understand what the answer is, why it's the way it is and what alternatives are available, so that we can try to bridge the gaps between these problems.

There's also been a new emphasis on employee engagement throughout the global organization. Last July, the company held its first global employee summit, watched live by 35,000 employees, while others have watched on replay. This was a three-hour online event in which Oracle's leaders talked about what it's trying to do as a company and set the tone for that new culture of engagement, says Kehring.

We've all taken it for granted that people understand at Oracle, as an employee, what we're trying to do. But again we realized we needed to engage in order to really educate, inform and interact with our employees.

My take

During last year's OpenWorld event, I was impressed by the language I'd been hearing from Oracle executives and product managers. They were starting to talk like a genuine cloud provider:

One of the most striking features of OpenWorld this week has been to hear Oracle spokespeople talking about what it really means to be a cloud provider. They’re saying exactly the same things I’ve heard from cloud-native and SaaS providers over the past two decades of covering this space, but I’ve never heard it spoken with such authenticity at Oracle.

Kehring's testimony provides further evidence that Oracle genuinely has embraced the cloud model and all the ramifications that follow on from becoming an authentic XaaS provider. As my colleague Denis Pombriant wrote earlier this month, it's a solid pivot:

Oracle has been to charm school and is working to move from being a conventional vendor to becoming a solutions provider.

In doing so it's providing a textbook case study in how the XaaS effect transforms the culture of a traditional product business into a digitally engaged and customer-focused service provider.