Oracle's master stroke: Boxing, locking Salesforce in

Summary:Oracle got everything it wanted including a marketing pitch via its cloud partnership with Salesforce. Meanwhile, Salesforce has some serious strategic items to worry about.

Oracle CEO Larry Ellison loves ads in airports touting industry wins and big customers. Rest assured that Oracle already has its best airport ad already written following the Salesforce cloud partnership. The punch line: Salesforce runs on Oracle apps.

benioffandellison-wrestlers
If you listen closely you can almost hear Ellison holding Benioff's head over the toilet and threatening to flush as the two negotiate a nine-figure software deal

 

In a stunner, Oracle and Salesforce rolled out a nine-year partnership focused on applications, platform and infrastructure. To wit:

  • Salesforce will use Oracle's Linux OS;
  • Exadata engineered systems;
  • Oracle's database;
  • The Java middleware platform;
  • Salesforce will integrate its services with Oracle's Fusion HCM and Financial Cloud;
  • And the real kicker is that Salesforce will implement Oracle's Fusion HCM and Financial cloud apps throughout the company and trump Workday.

Marc Benioff, Salesforce CEO, called the partnership "the best of both worlds." Ellison said it's important Salesforce and Oracle work together well. Parker Harris, executive vice president of Salesforce, said deploying Exadata engineered systems will cut costs and make the company more efficient.

orclcrm062513
Oracle is a wee bit happy about putting Salesforce on its red stack.

 

Earlier: Oracle-Salesforce partner: 10 (mostly shocked) reactions |   Is Salesforce building on Oracle's next-gen database?  |  Salesforce's Oracle database dependence: Can it open source its way out?

If you listen closely you can almost hear Ellison holding Benioff's head over the toilet and threatening to flush as the two were negotiating a nine-figure software deal. Oracle got everything it wanted including a marketing pitch.

Meanwhile, Salesforce has some serious strategic items to worry about. Consider:

  • How can Salesforce say that Oracle's apps aren't up to snuff when it runs on them?
  • Salesforce is now officially locked into Oracle information and has the maintenance, license and hardware concerns just like other large enterprises.
  • Salesforce won't be able to position Oracle as a non-cloud play.
  • Workday, a key Salesforce partner, is now alienated.
  • It's unclear whether standardizing on Oracle's stack makes any sense for nine years when Salesforce increasingly will have to mine big data insights.

Peter Goldmacher, an analyst at Cowen & Co., summed the give and take on the deal:

We get Salesforce standardizing on Oracle Server Technology and Exadata; they are a committed Oracle infrastructure customer, and buying the entire stack makes sense. While we continue to believe salesforce.com must upgrade its core technology to more contemporary data management programs to optimize its longer-term opportunity, that option just got set back nine years. The integration story likely formalizes a relationship that has been in place de facto for years as CRM customers continue to integrate data from a variety of sources, especially as enterprise penetration continues. We view this as an admission on Oracle's part that its Salesforce cloud offering can't compete (not news to Wall Street) and that if you can't beat 'em, join 'em...

While we are sure Salesforce will try to position itself as a close partner with both Oracle and Workday, the decision to move towards Oracle, as today's press release indicates, won't be well received at Workday. It could also negatively impact Salesforce's positioning in the field vis-a-vis Oracle as CRM poster child for bad software is now one of its biggest and most important apps providers.

Deutsche Bank analyst Nandan Amladi was a bit more positive. Amladi said Salesforce gives Oracle on major reference customer on multiple fronts, but may also enable Benioff & Co. to land more customers. Amladi said:

A tighter integration with Oracle’s HCM and Financial Cloud products simplifies adoption of Salesforce.com’s products by Oracle’s customers, leading to quicker implementation times and incrementally faster path to revenue recognition.

Amladi may have a point, but in the early going Oracle looks like it got the best of the Salesforce partnership.

Topics: Software, Cloud, Oracle, Salesforce.com

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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