As we lead into Oracle Open World, three themes dominate my agenda.
Financials and customer benefit
A strong quarter is always a good way to go into a customer conference, especially when your prime objective is to please Wall Street. You can then go see if customers are convinced that your offering is the nuts. And so it goes at Oracle.
I can't imagine anyone was surprised at the last quarter's results. Larry Dignan has the story but what caught my attention were three snippets:
Hurd also touted Oracle’s R&D spending for the year. At HP, Hurdwas knocked for scrimping on R&D.
The widening of R&D spend as a percentage of revenue from 13% to 15% is telling. The question is: how much represents refactoring and how much innovation?
Analysts asked Ellison whether Oracle needed to buy a services unit. Ellison said that if Oracle does a good job on products and making them easier to install the need for services will go away. “You won’t need as many integration services,” he said. However, Ellison did say that services won’t go away...Ellison also noted that IBM was a great services partner, especially in banking. “Our partnership with these services companies is absolutely critical.”
In recent times I've been conversing with senior staff at certain SIs. It is clear they are in pain as demand for core ERP declines and are struggling to figure the Next Big Thing. As Martijn Linssen points out, SI margins are thin enough (compared to software vendors) despite charging premium time and materials rates. When SIs position Oracle in deals, customers are suspicious of what the stack proposal means for maintenance. Despite being relatively quiet on this story, fact is that customers are keenly aware of the potential to be locked into a maintenance cost cycle that sucks money away from innovation and pulls them closer to a vendor that insists on getting full price list related maintenance rates. In some deals, I am hearing that customers are ripping out Sun boxes so they can insulate themselves form what is a perceived financial threat. That's a radical step for any company to take but is a measure of the lack of trust that exists between Oracle and its customers.
The question for Oracle is simple. If it is touting lower cost then please show the numbers. Please show how a customer will clearly benefit when all the pieces are in place and on a like for like basis. Show how SIs will confidently position Oracle as the best solution in given circumstances and still have them make a living. If Oracle means what it says then this is a must do agenda item.
Unfortunately I don't hold out a lot of hope. Check out Ptak and Noel's analysis of Oracle's recent $10 million database challenge. (PDF) It is hardly complementary, pointing out that the rules of the game, while perfectly legal, are heavily slanted in Oracle's favor. You can argue this is marketing banter but in my experience, marketing tone gets reflected in field sales activity. From numerous conversations I get the sense that customers are tired of this approach and becoming increasingly suspicious. That doesn't bode well for trust relationships.
[Safra] Catz [Oracle president] added that comparisons for Sun’s revenue and prior results are meaningless. “We’ve ended numerous reselling agreements for Sun,” said Catz.
I don't buy this. I'd fully expect Oracle to apply its accounting expertise to excising doubling up of resource and other operational inefficiencies. They're good at that. The counter argument must be: how much of Sun cost fell out of the financial equation and what does the reshaped profile look like? That's not too difficult to answer if Oracle chooses.
Why should anyone care? Surely this is a question for Wall Street rather than customers? Yes and no. The more that customers understand about the inter-related cost play between hardware and software the easier it will be to do the solution math. As an aside, it wont stop negotiators asking the same questions and beating Oracle down in deals. Pricing complexity alone won't prevent attention to the fine detail.
The HP and Hurd questions
As expected, the keynote agenda has changed and Mark Hurd is providing introductory remarks on Monday 20th September. Surprising to me, Ann Livermore, EVP HP enterprise business is still slated to appear on the same platform as Larry Ellison and Safra Catz, Sunday 19th. I expect this to be an electrifying session. All eyes and ears will be tuned to catching any nuances that reflect the HP v Hurd lawsuit.
My colleague Vinnie Mirchandani discussed this recently when he said:
Well, they [Enterprise Irregulars] accurately called HP. Today acting [HP] CEO Cathie Lesjak goes:
“At the end of the day business will prevail. Ultimately we’ll go back to being good partners. I believe HP is important to Oracle and Oracle is an important partner of ours,”
Are you kidding me? Have they learned nothing from how Oracle has twisted and turned its “important partner” SAP in that lawsuit? If you want to go after Oracle (oh wait, HP says it is suing Mark, not Oracle – yeah, right) you need a Churchill, not a Chamberlain.
You need a street fighter like Rimini Street's Seth Ravin, CEO.
No-one expects Ellison to be anything other than ebullient and bellicose in equal measure. But I wonder whether he and the company might have over reached themselves. It is one thing to be the entertaining 'bad boy' of Silicon Valley. It is quite another to be in a position where you could become an anti-competitive force and still maintain a position that some consider is now that of bully boy.
While little is said in the public domain, it will only take Ravin one small victory along the litigation path for others to take heart. Trust me when I say there are plenty in the wings looking for a Churchill to follow. Oracle is counting on that person or company to remain in the shadows. Somehow I don't see that happening. At least not in the shape of Seth Ravin.
So again - the question has to be: what is Oracle's position - even hypothetically - if RiminiStreet prevails? I already know the PR answer but many want to understand the reality.
Fusion reaction or a fizzle?
I am not as close to the Fusion 'stuff' as colleagues but I hear that Oracle will finally talk serious and deep detail on Fusion across multiple functional domains. It would be unrealistic to expect customers to commit much before 2012 but the fact I am seeing an across the board opening of the spending spigot implies there are spend dollars to be had now. Much of that seems to be going towards opex rather than capex which leaves Oracle with an interesting set of problems:
- Exadata is clearly top of mind for the company but Fusion needs a push as well - will it get equal billing and marketing input?
- Will Oracle be in a position to situate savings of the kind it talked about in the quarterly earnings call in conversations around Fusion?
- Where does it expect the more immediate uptake to occur? There's a lot of chatter around HCM, a topic that has been a poor relation in business suite discussions but which is currently getting a lot of attention?
- What barriers does Oracle expect to see in (for example) its PeopleSoft user base? The tech may be dated but it is still reasonably well loved.
A final speculative thought
The last few months have seen much talk about business analytics. SAP continues to bang the BOBJ drum and IBM is seeing plenty of demand for analytic and reporting solutions that support fast close. By which I mean 2-4 days after period end and at a much higher degree of accuracy than is usually tolerated. That of course is only part of the story.
Again, from Vinnie:
It would be nice during OOW to hear from customers – and Oracle about its customers – about adjustments they have made to their analytical framework, data sources, talent etc since 2008, not just about more speeds and feeds.
Oracle has most of the technical moving parts to help customers turn from using data to report via the rear view mirror to operating with a firm view through the windshield. Will they articulate that story in a convincing manner? If so then I will walk away satisfied they've done more than simply present us with smoke and mirrors.