Oracle believes the current enterprise cloud wars are being fought at the application or SaaS level. This is an arguable position given that some commentators believe that Amazon dominates the cloud world by some orders of magnitude. More on that in a later story but for now I'm concentrating upon the momentum Oracle is gaining based upon the presentations we saw at Oracle Cloud World last week.
Oracle's SaaS journey is now more than 10 years old. If that seems like a lifetime then you'd not be wrong but it gives an indication of just how hard it is to build well formed enterprise class applications. For its part, Oracle has faced numerous challenges but from what we saw and heard from customers, it is well on the road to fueling the all important pipeline that replaces the on-premises revenue with cloud subscriptions. This is far from trivial. Mark Hurd, co-CEO Oracle pegs the company's SaaS revenue at 95% of all cloud revenue.
As we have come to expect, Steve Miranda, EVP Application Development at Oracle was bubbly and confident, bringing on customers who spoke freely about their experience, detailing developments and discussing the momentum behind Oracle SaaS apps.
In full disclosure, Oracle shared with us a number of items under non-disclosure so if you think there are gaps in my understanding then it is most likely down to not revealing proprietary information. OK - let's get into it. Here's Miranda's opening remark:
At this stage we have hundreds of customers live on our systems. SaaS is not about repackaging. It is not just about taking away your systems admin or DB administrator. The single biggest differentiator is our ability to deliver innovation to an application customer and I'd now say it is unmatched.
In the past, it wasn’t uncommon for customers to upgrade once every five or three years and sometimes decades. That was supplemented by customizations. SaaS is enabling true innovation. We’ve gone from measuring in years to weeks and months.
OK - so what's the reality? Try these number on for size:
We can certainly give Oracle kudos for talking volume but the company readily acknowledges that much of its momentum is coming from mid-sized customers a good number of which are net new.
We met with one which evaluated a slew of solutions but ended up choosing Oracle, initially for HCM, because it felt that Oracle offers plenty of flexibility and product depth. That customer also has an eye to the future and believes Oracle can help them incrementally when they choose to add further functionality that is pre-integrated. That in itself is a powerful message and one that creates problems for other SaaS vendors where the customer is looking for a single throat to choke.
Under the hood
The SaaS architecture is clearly having an impact on how Oracle develops. According to Miranda, the accelerated release timeframe - 3 to 4 per annum - coupled with a direct feedback loop to the development teams means that Oracle can quickly deliver to customer requirements than was the case in the past. You have to temper that with an understanding of what's on the roadmap and which enhancements are prioritized. In addition, Oracle isn't standing still on user experience. Check this slide to see how the Oracle SaaS UI is evolving.
Those taking note from seeing other vendors will quickly realize that Oracle has taken cues from the consumer internet and the work Workday has done in recent years. Altogether it is a pleasing start and, I can tell you from having road tested some of the solutions, that the simplified design has been carried through to transactional screens wherever that makes sense.
What about the applications themselves and the claims to completeness? Try this slide:
Last year, the biggest disappointment was SCM where the gaps were such that potential customers had to give it a pass. Things have moved on apace and now, Oracle is hoping to carve out a good chunk of business in the manufacturing space with the latest upgrades. There are still gaps to be filled elsewhere but from what we are currently seeing, Oracle has enough and 'good enough' functionality for it to compete in the mid-market.
Large enterprise and future adoption
What about the large enterprise? Miranda is understandably circumspect. He sees Fortune 500 line of business leaders regularly dipping their proverbial toes into the Oracle cloud. That was borne out in a conversation with a division of GE where the company is testing Oracle cloud in the context of an already well established implementation methodology that gets GE business units up and running very quickly. In short, there has been no 'all-in' momentum other than in a few spot cases like Oracle and HSBC.
The question on everyone's mind is this: when will we see a tipping point such that the much larger on-premises customer count swaps to cloud? Nobody knows and quite wisely, Oracle prefers to talk in terms of customer choice. This is a long game so anyone anticipating a sudden swing will be disappointed. Also, Oracle needs to get to grips with the balance between volume and margin. On-premises deals are way more profitable than SaaS in the year in which the deal is done. But for the long haul, SaaS should be more profitable since the combination of functionality, continuous improvement and a general lowering of TCO encourages greater per seat adoption than we see in the on-premises world.
Where is all this leading and how does it dovetail to the modern need for wrangling data? Aft well, ERP replacement isn't exactly top of mind unless you have a decades old system that's running out of steam? Here check this slide:
As my colleague Vinnie Mirchandani put it in Hurricane Oracle:
Another reason to move more application customers to the cloud is to seed its newer Data as a Service offerings. Today, the offering revolves around the BlueKai CRM data but Oracle’s vision is to have similar offerings around HCM, SCM and other towers. Today most of that data is locked up in its on-premise apps. Sure you can export and ingest into the cloud, but the permissions and the transport are gating factors.
This will be an increasing focus of Oracle's development attention because in the real world, it is what's driving investments. You can see that with by the extent to which IBM for example, has ramped its digitally focused business units.
What is perhaps less well known is that Oracle provides much of the analytics firepower for Facebook. You can scoff all you wish at Facebook recommendations but the data Facebook sifts through to present those ads is crunched by Oracle.
It is still early days and the team responsible for building algorithms that can be productized are cautious in talking about product availability. But you can quickly see how transactional history patterns, machine and deep learning coupled with predictive analytics opens up an entirely new way of looking at the world. Oracle's pitch is that can all be done in an integrated fashion from its Adaptive Intelligent cloud based offerings.
Oracle's SaaS applications are maturing rapidly and while there is still a long list of To-Dos on the various product roadmaps, (I've got them if anyone is interested) Miranda and his team have achieved plenty of which they can take pride in a job well done. More important to customers, there is both a completeness of vision coupled with a practical view of what the near term future holds.
Those conversations are all wrapped up in business language. So while there is of course talk about ML, DL, IoT and other favorite analyst TLAs, that's not what Oracle is pitching. It is one of a very few vendors that understand the shift in buying patterns to the line of business first and IT second.
More important, Oracle's cloud business is firmly focused on customer success. In customer conversation, the most frequent thing I hear, and especially as it relates to green field sites, is that Oracle places much emphasis on customer success. The days of doing the deal, throwing a stack of CDs over the wall and running like hell as the check was collected are over. Oracle gets that and is behaving like a good SaaS citizen.
The next step needs to come in the shape of more complete customer stories where there is evidence of much broader adoption scope that reflects the desire to bring answers to modern business questions. Maybe next year at Oracle Cloud Summit 2018?