Oracle predicts ERP business will continue to accelerate despite the macro-economic climate

Stuart Lauchlan Profile picture for user slauchlan June 14, 2022 Audio mode
Summary:
While there's inevitably a lot of focus on healthcare, Oracle's racked up some impressive customer wins and go-lives in its most recent quarter.

Ellison

Oracle turned in strong Q4 and full year numbers yesterday with CEO Safra Catz and CTO Larry Ellison bullish on ongoing growth prospects and, of course, the potential of the healthcare opportunity.

Total revenue was up 5% year-on-year to $11.84 billion for Q4, while cloud services and license support revenue rose 3% to $7.61 billion. Net income was $3.19 billion. For the full year, revenues were up 5% to $42.4 billion with net income of $6.7 billion. Cloud services and license support revenues were up 5% to $30.2 billion.

Much of the analyst call following the results announcement trod a lot of the same ground as last week’s briefing by Ellison on the post-Cerner healthcare strategy for Oracle, although there was more of a reference to the wider non-US potential for the plans:

The scale of the opportunity is gigantic…people think of it as a national opportunity. It's a global opportunity. Every country. I mean, if you look at Western Europe, the Western Europe budgets are dominated by healthcare. If they can save lives and save money by putting in modern information systems, they'll do it and they'll do it quickly. It's clearly going to be our largest business.

Coming off the back of closing the Cerner acquisition, customer examples cited by Ellison inevitably kicked off with the healthcare sector::

We’ve got a very strong position in healthcare with the providers, including Kaiser, Mayo Clinic, Cleveland Clinic, Mount Sinai, Northwell Health, Tenet, HCM Health, Highmark Health, Humana, Cigna and many others.

In Q4, we closed United Healthcare, a win over SAP. We won the NHS, the UK’s second major move to the cloud. We won New South Wales Ministry of Health in Australia for ERP and SCM. We won WellSpan, a regional provider in Pennsylvania with eight hospitals. We won Abcam, a UK life sciences company, increasing their footprint in ERP and SCM.

Going live in Q4 were the Cleveland Clinic with ERP and SCM, UC Health for ERP and SCM, Pfizer on enterprise performance management, UK Health went live, Atrium Health went live, all in Q4.

Outside healthcare

Ellison also focused in on Oracle’s other major vertical focus, financial services:

We have a very strong position with the money center banks with ERP. Bank of America uses Fusion applications. JPMorgan Chase uses Fusion applications. So does Santander, Bank of New York Mellon, HSBC, Lloyds, Macquarie, Credit Suisse, UBS, Credit Agricole, SMFB, TD Bank, Societe Generale, Vanguard, State Street…In Q4, we won at Citibank, a big ERP win against SAP. We won at Chubb. We won at PNC, the sixth largest bank in the United States. We won at SMBC, the largest Japanese-owned bank in the United States. We won Oversea China Banking Corp. We won Mizuho, the third largest bank in Japan. TIAA, Desjardins, Mitsui Sumitomo also in Japan. GMP, one of Mexico’s largest financial services company.

Meanwhile in retail, Lowe’s, Albertson’s, Sherwin-Williams and Abercrombie & Fitch were among Q4 wins, while go-lives included Macy’s, Next Doors, and Co-op Stores. And the public sector offered up some significant competitive wins, said Ellison:

In the public sector, we had a major win at the State of Missouri, wall-to-wall at the State of Missouri, ERP, SCM, HCM. That was a win over Workday, SAP and everybody else. We won at the Scottish Government. We won at the UK Home Office. We won a State of Switzerland, Vaud. We won General Organization for Social Insurance in Saudi Arabia. We won a deal with the police department in the State of Victoria in Australia.

ERP growth

While the ongoing crisis in Ukraine and Oracle’s withdrawal from Russia are likely to have some impact on the bottom line moving forward, Ellison and Catz both believe that ERP growth is set to continue. Ellison argued:

Cloud systems cost a lot less than on-premises systems to run and they give you much better information. They allow you to control expenses better. They don't cost that much to implement because you pay for them over time. Let's take a look at NetSuite, which is the low end of the market. You [would] think those would be the companies to be most affected by the recession.

It's not [like] JPMorgan Chase - they'll keep building, they’ll keep putting in new systems. But some smaller entrepreneur-led companies, you’d think that the recession [would get] them.

Not so, he said:

We got the most revenue we ever got from NetSuite this past quarter. and the highest growth rate that we've ever gotten from NetSuite this past quarter. They are accelerating into the recession because we think the benefits are enormous and it equips the companies to compete more effectively. And again, we don't see that business slowing down. Quite the contrary, we see our ERP business both Fusion and NetSuite, accelerating. 

Catz added:

I think people don't realize how exorbitantly expensive it is to run those large SAP systems. They have data centers associated with them. They have hundreds, sometimes thousands, of technicians to run them. They're old, they're clunky and moving to Fusion ERP, it’s just a totally different world. The costs are tiny in comparison. I think people sort of forget that. And this applies really to all on-premise systems, but even more so to those old SAP systems.

My take

A strong set of numbers against the current backdrop of economic uncertainty that has hit some other tech firms so badly. As noted in my earlier report on the healthcare strategy outlined by Ellison, a lot of attention will be paid to how that delivers over the new fiscal year, but the ERP growth numbers are also worth keeping in mind. Catz and Ellison made a compelling case for why organizations of all sizes will continue to invest. The ongoing macro-environment is certainly going to put their thesis to the test.

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