But is it true cloud?

Former cloud pariah Oracle claims stronger cloud sales

Oracle, which ramped up its cloud marketing and product rollouts over the past year, touted some encouraging signs for that business in its second quarter, ending November 30.

Revenue from [company]Oracle[/company] cloud products — which fall into what the Wall Street Journal called a “catchall category” — was up 45 percent year over year to $516 million. (Total Oracle revenue was up two percent to about $9.6 billion, from about $9.3 billion last year.)

Revenue from SaaS and PaaS sub-segments of cloud were $361 million, up 41 percent year over year, while IaaS revenue was $155 million, up 62 percent, CEO Safra Catz said on the company’s earnings call Wednesday night. (SeekingAlpha has the transcript.)

And, as usual, you can get a glimpse into what rivals [company]Oracle[/company] is most worried about by the comparisons company execs threw out. Said Catz, for example:

“Overall our cloud results were better than expected as we are clearly growing faster than [company]Salesforce.com [/company]and were more than three times the size of [company]Workday[/company].”

This was Oracle’s first earnings call since company founder Larry Ellison stepped down as CEO in September, ceding that slot to Catz and Mark Hurd.

Oracle 2Q FY 2015 earnings

Ellison, who is now chairman and CTO, sees more good things ahead:

“In Q2 we booked more than $170 million in new SaaS and PaaS annually recurring revenue or ARR. In other words, we sold over $170 million of new SaaS and PaaS annual subscriptions this past quarter.

In Q4 of this fiscal year, we expect to sell more than $250 million of new annual SaaS and PaaS subscriptions. That means, during our next fiscal year we will sell well over $1 billion of new SaaS and PaaS annual subscriptions.”

Later in the call, Ellison said the company expects to see “well in excess of $1 billion in new annual subscriptions … which is about what Salesforce[.com] will be selling in their next fiscal year. I think they are at $1.1 [billion] or something like that, best as we can estimate.”

Nomura Securities analyst Rick Sherlund was cautiously optimistic in a research note, which pointed out that the company still faces “a long transition period to the cloud.”

About 5 percent of total Oracle revenue currently come from those cloud businesses. He wrote:

“We  view this as an encouraging step along the way, but there are still risks of ongoing execution, margins are lower in the cloud, cash flow may be dampened by the need for higher capex to build out data centers as the cloud business scales up, and on-premises license revenues are likely in secular decline. But with stronger growth potential in the cloud, the risk/reward looks favorable to us”

Oracle’s got products, but are they cloud?

A nagging problem for the company, which is the leader by far in on-premises databases and is a giant in enterprise applications, is that many still don’t see Oracle’s cloud products as real cloud products. And here is why:

Oracle DbaaS price chart

Yes, Oracle offers its DbaaS by the hour, if that’s the way you want to purchase it. But, once you hit that “Buy Now” button, you have to make a phone call before you can set up an account. That doesn’t seem very self-service-y.

oracle dbaas slide2

Once the account is set up, presumably things get easier. Maybe this is a distinction without a difference, but I’m betting that people used to buying cloud resources would be shocked to encounter the screen above.

 

This story was updated at 11:49 a.m. PST to correct my assertion that Oracle DbaaS is not available by the hour. It is, as documented by the chart inserted above.

3 Responses to “Former cloud pariah Oracle claims stronger cloud sales”

  1. The problem is that their definitions of “cloud” are completely opaque and when you look at their cloud website, it’s clear they are not really offering the same kind of products in the same way as the likes of Amazon, Google or Microsoft who you would normally associated with “cloud”.

    The practice of lumping revenue into a generic category such as “Other” (Amazon) or “Software and Cloud Revenues” (Oracle) makes it very difficult to know what that actually means. Offering hourly pricing does not automatically mean your product should be rightly called “cloud”. Equally, just installing and managing an instance of your legacy “on-premise” product should also not be rightly called “cloud”. It’s just a managed service in disguise.

    Rearchitecting old, on-premise products to be truly called “cloud” products is a big job and is the classic problem of enterprise inertia because the majority of revenues still come from their old product lines. Yet if they do not change, they are quietly being disrupted by startups and companies like Amazon and Google who do offer true cloud products.

    Think about an Oracle database running on AWS vs Amazon’s Relational Database Service. The former could run anywhere (on-premise, EC2, Google, Oracle Cloud) whereas RDS is a proper cloud service – managed MySQL (or others) with self service, scalability, APIs and deployment across multiple zones/regions.

    Until these kind of announcements are properly broken down, we have to treat them with skepticism, especially when the revenue figures are so high, so quickly.