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Oracle delivers solid Q1 as Larry Ellison wants to know where the cloud ERP competition is

Stuart Lauchlan Profile picture for user slauchlan September 14, 2021
Where's the competition in cloud ERP? In IaaS, the answer is clear...

Larry Ellison - laughing

Oracle turned in a solid quarterly report yesterday, albeit one that disappointed Wall Street by missing revenue expectations. Meanwhile CTO Larry Ellison had some old foes in his sights on the analyst conference call post-results announcement.

For Q1 fiscal 2022, Oracle's non-GAAP net income was up 2% to $2.9 billion, while total revenues were up 4% year-on-year to $9.728 billion. Breaking that down :

  • Fusion ERP cloud revenue was up 32%.
  • NetSuite ERP cloud revenue was up 28%. 
  • Cloud services and license support revenues in Q1 were up 6%, reaching $7.4 billion.
  • Applications cloud services and license support revenue was $3.04 billion, up 8%.
  • Infrastructure cloud services and license support  revenue was $4.3 billion, up 5%.
  • Cloud license and on-premise license revenue was down 8% to $813 million.
  • Hardware revenue was $763 million, down 6%.
  • Services revenue was $781 million, up 8%.

Oracle Fusion ERP has over 8,000 customers, while NetSuite ERP has over 28,000, said Ellison, which meant that Oracle is “the overwhelming market leader in the global cloud ERP market”:

We really don't have a lot of competition. That's the understatement of the year in cloud ERP. I'd love to know who the competitors are. SAP doesn't have a product. When we're in a competition with SAP right now…we’re vendor of choice. The big thing was SAP doesn't have a cloud product. They have hosting. They're willing to put a custom computer in Amazon and just build a specialized version for the customer. That's not the cloud.

We update our applications every three months, the entire fleet of 8,000 Fusion customers are updated every three months. The entire fleet of 28,000 NetSuite customers are updated every six months. You get SAP, they install it and then they probably will update it again five years now. It's an on-premise system. They don't have a cloud system. We're winning every deal against them, everyone, and we're taking a lot of their customers away.

Among customers Ellison cited was “a major portion of Bank of America” which went live on Oracle Fusion ERP, consolidating ledgers in 33 separate countries into one global ledger. Macquarie, the largest investment bank in Australia, went live with Oracle Fusion ERP, while Vanguard, the largest global mutual fund provider, went live with Oracle Fusion ERP. Such examples led Ellison to one conclusion:

Oracle Fusion is building a very strong position in the world's largest financial services companies. HSBC, Bank of New York Mellon, JPMorgan Chase, they are all live on Oracle's Fusion applications.

And there’s more to come in this once cloud-resistant vertical, he said, stating that Oracle is working with banking firms to “a new generation of cloud B2B financing and payment systems”. He said:

There are things you can do on the cloud you could never do on premises. There are opportunities in the cloud. If you are the largest ERP supplier, there are opportunities to go into new businesses, like financing and payments, with banking partners that would have been impossible with the old on premises systems. 

Amazonian ambitions

Attention turned from SAP to a newer rival - Amazon in the infrastructure cloud market. Ellison pointed repeatedly to a Gartner scorecard that cited the four global hyperscalers - excluding Chinese regional operators -  as Amazon, Microsoft, Oracle and Google, adding:

Note the order. I was not the one who sorted that list.

Oracle has come a long way in the cloud infrastructure business, he argued:

Our technology is getting really good and very competitive. And, of course, we continue to deliver breakthrough innovations in areas where we have long been strongest, like database. The Oracle database remains unrivalled and running the world's biggest and most critical systems. And our other database, the open-source system, MySQL, is now on a new generation, and it now includes an ultra-high performance in-memory query processor called HeatWave, plus a new set of management tools called the AutoPilot.

What Amazon has done with its version of MySQL does not compare, he insisted:

Amazon took a version of MySQL re-named it Aurora and put it up in AWS. Now, the open-source version of MySQL, the old version of MySQL pre-HeatWave, is very, very slow with query processing. In fact, the way you used Aurora typically in Amazon over the years is, you do your transaction processing in Aurora, also known as MySQL, and then when you do your query processing, you move your data out of Amazon's MySQL onto Aurora and put it into a thing called RedShift, a data warehouse system from Amazon.

Oracle’s new generation avoids all of this, he said:

Customer reaction has been stupendous, simply for the reason that, over and over again, they measure Oracle's MySQL to be 100x faster than Amazon's Aurora for query processing. Now, this was actually not unexpected…What was unexpected is that Oracle MySQL proved to be more than 10x faster than Amazon RedShift or SnowFlake for query processing. So suddenly, there is one open-source database you can do transaction processing on, MySQL with HeatWave, and that same database, MySQL with HeatWave, is the fastest place to run your queries. So you don't need to move your data into RedShift or SnowFlake anymore just to do query.

He added:

We plan to make Oracle MySQL with HeatWave available on other public clouds in addition to the Oracle Public Cloud and compete aggressively where we have huge technical advantages over Amazon Aurora, Amazon RedShift and perhaps most interestingly, huge technical advantages, performance and cost over SnowFlake.

As to that Gartner ranking, that’s clearly something we’ll be hearing a lot about. Ellison said:

I think this is another big step to proving that the Oracle Cloud is part of the Big Four. It's not a Big Three; it’s a Big Four…If we're in the Big Four and virtually every important database application on Earth…the vast majority run on the Oracle Database. If those migrate to the Oracle Cloud, we have a very, very large business and we're seeing people moving more and more things to the Oracle Cloud. 

My take

As noted above, Wall Street seemed out of sorts with the numbers, but overall the news coming out of Oracle was positive. The critique of Amazon by Ellison is becoming an integral part of such occasions, indicative of the importance Oracle places on its position in the IaaS market, both on and outside Gartner rankings.

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