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7 big questions out of the Oracle-Salesforce lovefest

Sorting through the playback of Thursday’s conference call co-starring Oracle (s orcl)CEO Larry Ellison and (s crm) chairman and CEO Marc Benioff talking about their new-and-improved alliance, I was struck by the Mac and Tosh politesse they exhibited. It was all “After you, Larry,” and “It’s always better when you go first, Marc.” But, all fun aside, here are my questions about the deal.

1: Oracle professes a new fast, cheap, agile message, but can it change?

Oracle CEO Larry Ellison
Oracle CEO Larry Ellison

If so, that’s the real headline here. Oracle’s message for its scale-up stacks was all about premium functionality and price to match and its sales team drives that home on every call — especially at renewal time. Now, that’s shifted in the cloud era.

What cloud customers expect, said Ellison, is:

“…rapid implementations and economic benefits. Exadata is designed to be the lowest-cost cloud infrastructure in the world and deliver the highest performance. You don’t have to give up one to get the other. I think that’s what makes the Exadata, Oracle Linux, Oracle database combination attractive to cloud providers like Salesforce.”

If you ask most current Oracle enterprise customers if this is how they see Oracle’s stack you’ll likely get a stare of incredulity. Can Oracle change its licensing and pricing structures for ordinary buyers not just the Salesforce.coms and NetSuites(s N) of the world? (Oracle and NetSuite announced another integration pact earlier in the week to integrate NetSuite ERP with Oracle’s HCM applications for mid-market customers.)

And, not for nothing, massive cloud computing to date as exemplified by Amazon Web Services (s amzn) has been dominated by scale-out massively deployed commodity hardware, not the mainframe-like monoliths that Oracle is selling.

2: Is this really a rip and replace for either company?

The message on the call was will run Oracle applications in-house and Oracle will do the same for Salesforce. Totally makes sense to test out the promised integrations. But will Oracle run Salesforce CRM en masse? Of course not.

Here’s a little-known fact: runs Workday(s wkday) human resources software as well as Oracle HCM. Will it dropkick Workday because it competes with Oracle? Not likely.  Will rip out all the standard X86 servers it now runs on in favor of a wholesale forklift to Exadata? Insiders say no.  Ellison said when Oracle buys new companies, chances are they’re running Salesforce CRM, and up until now, Oracle forced a move to Oracle CRM. That will now stop, Ellison said, because Oracle needs to test out its Oracle-Salesforce integrations first hand.

3: Is Salesforce open to on-premises CRM deployments?

Benioff left that door ajar.  He noted that Salesforce is committed to delivering a U.S. government version of its service that runs on dedicated hardware. He said:

“That is an iteration of our stack where we do have a bifurcated infrastructure for the government and for other organizations in the world. If they came to us and said that they wanted to have that kind of capability, of course, we would be willing to discuss that with them. But, it hasn’t been something that the banks, telecom companies, media companies, technology companies that we deal with every day are looking for.”

4: Will these two hyper-competitive companies with hyper-competitive sales forces sell together? 

That’s a no brainer — nope. “Oracle will sell Oracle and Salesforce will sell Salesforce. The applications and integrations will be available from either company,” Ellison said. The design goal is for a user to log on to her Oracle and/or Salesforce application, hit a button and launch the needed integration between Oracle HCM or other app with Salesforce CRM with no muss, no fuss.

5:  Is this really a meeting of the minds of an old-line IT giant and a new-age cloud company?

Not really. Sorry, Marc, but is nearly 15 years old and the difference between it and a traditional enterprise software company is not that big. In the early days, the message from and other SaaS players was: Pay as you go, add and delete users all the time. It’s cheaper and more agile.

But that reality morphed into a world where the SaaS provider wants a year’s payment up front and pushes for three-year contracts. And let’s face it, Salesforce is not at all that inexpensive — the enterprise version is $125 per user per month, billable a year in advance. The higher-end premium version with round-the-clock support is $250 per user per month (also billable a year in advance.) That’s a pretty enterprisey bill.

6: Will Salesforce’s PaaS open up to Java?  

Unclear. Benioff deflected that question. Of course, the company works with Java and delivers “Java as a service through our Heroku environment,” he said, noting that the company wants to do more there. Ellison pushed it further:

“Hopefully, this is not the last announcement that Oracle and Salesforce do together. We haven’t spent a lot of time talking about the Java part of the platform. We focused on the database part of the platform. But there is a Java part of the platform, and I think there are going to be opportunities for Oracle and Salesforce to work together on the language part of the platform. Making sure that Java and complement each other, and that people can build out — can build those applications in the way they want to build those applications.”

This whole dueling PaaS question has dogged Salesforce since its acquisition of Heroku a few years back and it just hired a new  CEO for Heroku, Tod Nielsen, who will have to manage that situation.

7:  Is this the end of Larry-and-Marc sniping?

We can only hope not. Who didn’t love Benioff calling Exadata a “false cloud” or “cloud in a box” or Ellison bumping Benioff from his Oracle OpenWorld keynote?

Benioff said the fun won’t end but the perceived hostilities might. “We’ve always enjoyed working together and having fun with each other, and hopefully it will be the end to us getting a little too revved up at times, which occasionally has happened.”

7 Responses to “7 big questions out of the Oracle-Salesforce lovefest”

  1. Antoine Hepburn

    The only reason Oracle is hooking up with SFDC and MSFT is because it has missed its sales targets two quarters in a row. Mentioning that Oracle has a cloud-compatible version of its database software doesn’t mean anything. In the cloud, everything (application, operating system, middleware, database) is hosted by the vendor, not the customer, so it is immaterial whether you come up with a database or not (cloud-compatible or not) since the number of database licenses a cloud customer is going to buy from Oracle is simply ZERO.

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    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, especially in the cloud.

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  2. bill bickel

    Skeptically, it seems to me:

    1) From the point of view – they are dependant on the Oracle DB on the back end, and it has served them well in buidling their offerings. They wanted to get a great, cheap, and predictable-over-time price for the DB as they keep expanding their user base. They also likely wanted to avoid the potential to have their price increased dramatically on a renewal of their license and support agreement at any point.
    So I see this as mainly cementing a predictable cost structure for their infrastructure technologies. They made noises and motions about shifting to PostgreSQL, as part of the dance of negotiation with Oracle (hiring key Postres engineers for example). It seems that had a pretty good upper hand in the discussions, but also was pretty trapped into the Oracle DB as the back end for all their solutions. So the reality of switching to Postgres would be ugly and costly for them.
    I am sure does not really want to run Exa-systems or Oracle Linux, and get themselves further locked into more Oracle technologies. Since Exa-systems are the opposite of being able to take advantage of low-cost scale out computing with x86 systems and infrastructure software (mainly open source). But to get the best price, they agreed to tell the world they will use these other Oracle technologies that are lackluster at best.

    2) From the Oracle view – this, and the Microsoft cloud move, are about realizing that they are slipping on many fronts in the modern, cloud computing era. With hardware, middleware, and Oracle apps sales all being very challenged, and some new challengers to their database technologies (Hadoop, NoSQL, NewSQL), they had to do something since people are not buying the Exa-system message or story. So I think they gave the deal-of-a-lifetime on the cost side of the DB to, and they will be able to keep saying uses their database. I doubt will use many of their Exa-systems, or Oracle Linux, or Oracle Java, as the employee antibodies at against doing so, will be hard to change. While Marc B is off trotting around the globe pitching I doubt he will be checking on how the Exa evaluations are going.

    So, I see this as a good win for to get a cheap, key piece of their infrastructure for many years, and Oracle gets to keep saying a hot company uses their DB, and the rest as “much ado about nothing” or “frivolous noise”.

  3. Tim Walsh

    It would also be interesting to consider the motivations further for this deal. Oracle seems to buy credibility in the cloud. Is Salesforce acknowledging that it’s infrastructure has reached its limits? Are they discovering they need a true middleware stack/architecture to play outside their traditional stronghold of Mid-market Salesforce Automation?

    • Cindy Warner

      I think you hit the nail on the head Tim. For the last 6-7 years at a minimum the discussion has been about integration as the means for SFDC to really play in the enterprise. It has been an achilles heel, but this is merely an acknowledgement that companies cannot run SFDC in a silo, non-integrated to their enterprise source data, which low and behold tends to resides in Oracle. Maybe this is the first step to really becoming an enterprise play for SFDC versus a business unit at best in a global enterprise.