Oracle consulting layoffs: but what's the number?
Fellow Enterprise Advocate Frank Scavo noticed something odd was happening when his site started getting pinged on the topic. How? The graphic to the left which comes from his Sitemeter, records shows the ping action:
A quick check of my webstats shows a pickup in web referrals today searching under the key words "Oracle layoffs," "Oracle Consulting layoff," and "Oracle layoffs, Nov 2009." (see image on right).
In the past, this type of activity has been a reliable indicator of Oracle's workforce reduction actions.
Frank has been following the ERP layoff story for well over a year. In October 2008 he said:
Oracle's layoffs are baffling. Senior consultants with Oracle experience are reportedly in short supply. If Oracle's sales are as robust as Oracle says they are, they should be hiring such people, not firing them. Perhaps this is an early warning that Oracle sees softness in its new sales pipeline, and without cutting headcount it knows that consultant utilization will fall. In professional services, utilization is the key to profitability.
The current round of layoffs are equally baffling at one level yet eminently understandable. On the LayoffBlog, a person named 'NAC' comments:
OCS needs to rationalize their Billing Rates to survive in this competitive market. Gone are those days when you could charge the Customer @ $250/Hr. Customers these days have become really smart and they can get good quality experienced Resources at a much cheaper cost. Instead of laying off the Delivery Consultants, OCS Senior Management should aim at cutting down the Administrative Overheads such as the Resource Analysts and Admin Assistants who generate No Revenue at all.
Another one bites the dust says:
The long awaited hammer finally dropped on me today. Got my “bonus”, time to look for independent work. The funny thing is, OC price itself out of the market with a single minded goal of “margin”. There is plenty of work out there. Plenty of them I have seen from the PJR that went unfilled because of botched negotiation. time to grab those.
Today is my last day. 11 years with PeopleSoft Oracle and I was on a billable project till April. Go figure!
These comments have a ring of truth about them. I have seen this before in Europe, accompanied by staunch denials or handing off to middle management who couldn't possibly answer the tough questions. It is standard Oracle procedure. Here's how it goes:
- It's coming up to quarter end, the numbers are probably going to look bad, let's give Wall Street something to cheer about.
- Oracle can't lie about the numbers but will avoid bumping up against the WARN Act if it can. I suspect the latter's what's been calculated here.
- Since projects are ongoing and people within those projects are also being RIF'd then I also suspect that at least some of those same consultants will be re-hired as contractors. I saw that in Europe on a number of occasions. There's no reason to doubt it will not happen in the US, especially if the numbers being RIF'd are high and possibly indiscriminately. The short term effect is that Oracle can legitimately call headcount numbers as lower which will please the financial analysts but will mask what's really going on.
- Customers lose out. Pulling consultants off projects mid-way through is disruptive for all the wrong reasons. If Oracle projects are billed on time and materials, then there's always the chance that Oracle can get away for a few weeks at least by having people on the job billed out in the usual manner even if they're really coming up to speed and not being productive. Alternatively, Oracle can offshore the work in the hope that any project delays can be compensated by short term over staffing in cheaper locales while maintaining the outbound contracted billing rate. Customers lose out either through delays for which they pay or substandard work requiring later re-work. Oracle doesn't need to factor in the additional margin immediately as it can provide against the cost leverage it is able to get from sending work to cheaper locations against possible rework. Whichever method of accounting it adopts, it can afford to be cautious and still come up smiling
POV: Once again (but like others in the ERP market) Oracle is squeezing the P&L account. Oracle's masters are the Wall Street analysts. Oracle knows it and plays the game masterfully. It is one reason analysts consistently think Oracle is a winner while SAP is a loser. They are mostly wrong despite Oracle having a brilliant acquisition strategy and execution team.
You can't keep chasing margin at the expense of the two most important communities (customers and implementation consultants) and expect the business will go on producing stellar results forever and a day. It's neither logical nor possible without something blowing up along the way.
While this layoff may be significant, it is too early to tell how customers will be impacted. My guess is there will be short term disruption that Oracle will paper over by parachuting Oracle Aces in where needed.
From comments I've read and people who've spoken with me about Oracle in the past, it seems this is a company that has layers of fat that could be usefully excised. More than one of the commenters to LayoffBlog has said as much. In the past, acquired Peoplesoft staff have told me Oracle represents a relatively comfortable and well paid meal ticket. The fact we are seeing a repeat of the past suggests Oracle is not managing the intermediary layers as well as it could.
More broadly, the combination of the recession, better value offerings from SaaS vendors and an increasingly well informed buyer community able to negotiate better terms is biting hard into the big ERP vendor pocket books. Blended rates are plummeting yet Oracle needs to maintain its margins. More productivity is one answer. Deflecting attention to headcount is another.
Oracle's RIF is just the latest manifestation of an industry that has yet to come to terms with a new reality. For what it's worth, I am hearing repeated rumors of a potential re-organization at SAP planned for January 2010 with another sizable chunk of people due to be RIF'd. There will be many more stories of this kind in the coming months before the recessionary tide turns.
PS - I have sent a request for details on the RIF to Oracle. It's a weekend so I don't expect a response in the next few hours and I am preparing for a long travel day so may not see a response the moment it lands into the inbox. Therefore much of what is being said can only be regarded as reasonably well informed rumor. I will update this post as soon as I see a response or other facts emerge.
UPDATE: Oracle's response is: 'no comment.'