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Summary:

IT powers, including Oracle, face big time challenges as enterprise accounts reject old buying models and vendor lockin.

Oracle CEO Larry Ellison

Oracle execs including CEO Larry Ellison attributed the company’s third-quarter earnings miss to a lackluster sales effort that let big deals slip into the fourth quarter, but others see more ominous signs.

For the period ending February 28, Oracle reported earnings of 65 cents per share on revenue of $9 billion, just short of the 66 cents on $9.4 billion in revenue that analysts had expected. Oracle co-president Safra Catz said sales were likely hurt by the prospect of government spending cuts.

“It didn’t help that our quarter ended on the same day as the sequester deadline,” she noted on the company’s earnings call Wednesday night. But, overall, Oracle’s sales people took the fall. “What we really saw is the lack of urgency we sometimes see in the salesforce as Q3 deals fall into Q4,” Catz said.

Oracle, HP, Microsoft tread treacherous path

Skeptics maintain that Oracle faces something much more critical than an unmotivated sales force. Rather, they say it, and other legacy IT players must confront a fundamental shift in how companies buy enterprise IT and a shift in the database mix to more NoSQL products and a similar transition to distributed data stores.

Oracle’s bread-and-butter product remains its market-leading relational database which is entrenched in financial services, healthcare and many government and academic accounts. But that dominance is under fire as more companies see the need to add non-relational database capabilities to the mix.

Many of these same enterprise and government accounts are also sick of paying huge fees for yearly software and hardware upgrades in an era where they can easily move at least non-mission critical workloads to Amazon Web Services or some other cloud provider.

Oracle isn’t the only company affected —  Microsoft, Cisco, EMC, HP, and other legacy IT vendors — will continue to face tough times as these transitions play out.

Sunil Dhaliwal, founder of VC firm Amplify Partners, concur that this is a massive “multiyear” transformation that will shake legacy IT providers to their core as more workloads go to Software as a Service offerings which negate the need for massive in-house server upgrades.

Can the giants shrink-down and speed up?

 

That, and the solid acceptance of open source software is still something the legacy players have yet to deal with, although most of them have made huge acquisitions to bolster their SaaS and open source stories. (Oracle bought RightNow and others as a response to Salesforce.com and Workday, and its acquisition of Sun Microsystems put it into the MySQL and Java business.)

The thinking is that more enterprise players are buying compute, storage, networking and software like they “buy” electricity. While the traditional players see this change coming, it’s unclear if they will be able to adapt fast enough beat lower-cost, younger and more nimble players that were built for this new market.

  1. This is SPOT ON!

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  2. It will be interesting to see how the big vendors adapt to the changing landscape. At this stage it seems as if there strategy is focused more on buying startups and create a hype around “now we also do it” rather than a more customer focused approach as to what will be best for the customer (from a technology and price point)

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  3. Antoine Hepburn Friday, March 22, 2013

    To understand all that goes on behind the scenes at Oracle, I cannot recommend enough an excellent book, “High-tech planet” written by a former Oracle sales executive. It is a funny, terrific and insightful account of what hides behind headlines-grabbing stock and revenue figures. It describes in detail the business atmosphere at Oracle, its sales culture plus a host of shenanigans (financial, fraud, sex etc. ) that will have you shake your head in disbelief unless you work or worked for Oracle. In which case you’ll just nod and say, “wow, this guy is saying out loud what we are all whispering and scared somebody will hear us.”

    I got an education reading this book, as well as an understanding of what Oracle’s future prospects are. I also now have a better grasp of what to do and what NOT to do to manage a business.

    The first few chapters can be sampled for free here: http://amzn.to/czf0qw

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    1. Niall Mc Phillips Saturday, March 23, 2013

      Very interesting article. Add to this the fact that lightweight, agile development is running rings around the traditional heavy development methodologies that surround a lot of Oracle’s applications. In terms of delivering what the user needs quickly and cost-effectively these approches really work well – and more and more companies are realising this.

      Oracle does have one sparkling jewel in this category though – Oracle Application Express. But, of course, Oracle salespeople never mention this because it’s bundled with the database (as in “free”) and therefore doesn’t generate any commissions for them.

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