SAP is more responsible for our leadership position than we are.
It was a combative Larry Ellison who had his German nemesis firmly in his sights as he co-hosted the Oracle Q3 post-results analyst call yesterday.
Indeed at some points it was quite like old times for the more battle-scarred enterprise software watchers among us, many of whom might have anticipated just such a reaction following SAP CEO Christian Klein’s claim in January that:
In the ERP space alone, we have more than 200 wins against Oracle.
That’s not the kind of assertion that’s going to go unanswered by Ellison. He also homed in on a comment made by SAP CFO Luka Mucic to the effect that after checking, he could not find a single customer that had been lost to Oracle. That was too much for Ellison to let pass:
In other words, after personally checking, SAP’s Chief Financial Officer could not find a single example of an SAP ERP customer move into Oracle Fusion on ERP, not one. Perhaps he should have checked a little bit more carefully.
What followed was the Oracle CTO embarking on the 'full Ellison’ - a read through of a list of 100 companies and government agencies which he said have either completely moved off of SAP and onto Oracle Fusion ERP or which are in mid-shift, sub-divided into wholesale moves and currently partial ones (where the client may still have some SAP software installed). To that end, he cited the likes of:
Transit Wireless, a North American telco completely replaced out SAP R/3 with Oracle Fusion ERP and Oracle Fusion HCM. West Sussex County Council, a complete SAP replacement with Oracle ERP, Oracle HCM and Oracle EPM. ERP now, HCM...complete wall-to-wall Oracle at West Sussex County Council, no more SAP.
DHL with an SAP replacement in some countries. So some countries are still running on SAP, but the new implementations going in in other countries, not in Germany as yet, in other countries are Oracle Fusion ERP…Fujitsu Services, a manufacturer in Japan. Again the parent is running SAP financials, but subs all over the world are moving to Oracle Fusion ERP.
Birmingham City Council, complete SAP replacement using Oracle ERP, Oracle HCM. They are the biggest city council in the UK. Metro Pacific Tollways Corporation, a toll road developer in Asia -SAP replacement, got rid of SAP and replaced with Oracle ERP and Oracle EPM.
And more and more. You get the picture.
After around ten minutes of what amounted to ‘reading the charge sheet’ against SAP, Ellison told analysts on the conference call:
The list is actually longer than 100-plus companies. I did read over 100 companies as I’m sure you’re painfully aware of. The list is actually longer than the 100 companies I have just read. Some [of] the most important wins are [the] very largest companies in regulated industries, such as banking and utilities, who are currently in the process of migrating from SAP ERP to Fusion ERP, [which] prefer not to be publicly named on this call for obvious reasons…even though they are often a reference for us - private reference, where people are considering the same move - they don’t want their name on this call, because they want to maintain the best possible relations with SAP, even though they are in the process of transitioning away from SAP.
He concluded with a familiar charge he's made before against Oracle’s rival:
It’s that same 30-year-old code. They never re-wrote their ERP system for the cloud and it’s too late for them to start now…We re-wrote everything for the cloud. SAP, instead, embedded their own database called HANA and focused on this new database and never really rewrote their ERP code for the cloud. I mean, it's just an unbelievable error…they never re-wrote their application for the cloud. It's unbelievable what's happened. And their customers are noticing.
Meanwhile, the numbers
Away from the SAP list, it was back to the business of the Oracle Q3 numbers. Total quarterly revenue was $10.09 billion, up 3% year-on-year, while profit nearly doubled to $5.02 billion. Breaking those numbers down:
- Cloud services and license support revenues were $7.25 billion, up 5% year-on-year.
- Infrastructure cloud services and license support totalled $4.3 billion, up 4%.
- Applications cloud services and license support revenue was up 5% to $2.95 billion.
- Cloud license and on-premise license revenues were up 4% to $1.28 billion.
- Hardware revenue was $820 million, down 4%.
- Services came in at $737 million, down 5%.
- Subscription revenue now accounts for 72% of Oracle's total revenues.
- Autonomous Database was up 55%.
- Including Autonomous Database sales, cloud infrastructure revenue was up over 100%.
- Oracle's Fusion Cloud ERP saw overall revenue increase by 30%, while NetSuite Cloud ERP revenue grew 24%.
CEO Safra Catz commented:
The Oracle database remains very strong and what's good about the Oracle database is you can also bring your own license to the cloud. So it's both on-premise and in the cloud [it] can be used there. And it remains very, very strong. The installed base of the Oracle database continues to grow. And that is of course our central piece.
She added that Oracle expects to invest heavily in Oracle Cloud Infrastructure in this quarter to meet increased demand it is seeing. For his part, Ellison is predicting “a lot of database acceleration starting next year which we're a quarter away from”, arguing:
Autonomous Databases is growing pretty rapidly, but we expect it really to explode next year. And I really do mean very, very rapid growth next year. I'm not really ready to disclose our plans as to why I think it's going to suddenly spike, but we expect very, very rapid database growth next year.
For a moment or two during the analyst call, if I closed my eyes I could have been back in a San Francisco conference room in the 1990s as Larry Ellison unleashed hell on his competitors. Back then, he might have added the likes of Ingres, Informix, Sybase, Siebel and PeopleSoft to his ‘to do’ list, while new targets, such as Salesforce and Workday, were then yet to come. But the one name that endures is SAP and yesterday was like a blast from the past for long-term company watchers as Larry went 'full Ellison' on his longest-standing rival.
Away from that main attraction, the quarterly numbers were solid and better than Wall Street had been expecting, although investors were a tad rattled by softer guidance than they wanted to hear. That’s sadly predictable these days. But whatever SAP comes back with in terms of Ellison’s list, the momentum behind Fusion ERP and NetSuite is undeniable, while the ‘teasers’ about OCI capacity demands and talk of “a lot of database acceleration” sets up expectations for continued growth.
Updated - In request to a response for comment, SAP has provided the following emailed statement:
Our priority is driving our customers’ success, not putting them in the middle of a public debate. Our numbers speak for themselves: Our increasing ERP market share is approximately double that of our closest competitor.