A combination of organic growth and recent acquisitions has propelled Oracle into the top echelon of the Cloud applications market.
This week CTO Larry Ellison is scheduled to kick off Oracle OpenWorld 2016 in a keynote about how Oracle innovations are transforming enterprise cloud computing as he outlines his vision for the future of IT.
Among his announcements, few things stand out.
Oracle Cloud apps strategy is going wide in six markets from CRM to SCM and deep with new industry capabilities including ERP for public sector, tax reporting as well as specific countries like Brazil.
Oracle has also made additional push into Infrastructure As A Service by delivering more lower-priced offerings to better compete with Amazon Web Services, while bulking up its bare metals strategy to help customers lift and shift their VMWare workload to Oracle Cloud.
Another key announcement lies in expanding its reach by staffing up across regions like Asia Pacific in order to win more deals – mostly between $20,000 and $100,000 in annual recurring revenues. In conjunction with the volume sales approach, the channel, which already accounts for 45% of Oracle revenues – will be tasked with implementing such Cloud services. Within the past year, Oracle has signed more than 2,000 resellers under its OPN Cloud program.
Such efforts are expected to sustain Oracle’s Cloud momentum. Last week, Oracle ended its 1QFY17 by posting a 77% jump in SaaS and PaaS revenues, continuing its momentum in the Cloud over the past few years after buying vendors such as Taleo, BigMachines, Compendium, Responsys, Eloqua, Maxymiser, TOA Technologies, RightNow and more recently Textura and oPower.
“This year we are on track to sell more than $2 billion of SaaS and PaaS annually recurring revenue,” said Oracle CEO Mark Hurd during the earnings call as the vendor added more than 750 new SaaS customers during the quarter.
Oracle CX, which includes such products as Oracle Service Cloud (RightNow), Oracle Marketing Cloud (Eloqua, Compendium, Responsys and BlueKai), Oracle Configure, Price and Quote (CPQ) Cloud (formerly BigMachines) and Oracle Social Cloud (SRM) for improving customer experience, remains the volume seller.
|1QFY2017||New Customer Wins||Expansions|
|Oracle CX Cloud||346||488|
|Oracle HCM Cloud||173||69|
|Oracle ERP Cloud||344||135|
Source: Oracle Earnings Call, September 2016
Acquisitions drive Oracle’s Cloud strategy
After buying NetSuite, Textura, oPower and LogFire in 2016, Oracle will have more than 40,000 Cloud apps customer organizations. The collective Cloud applications revenues of the four including Oracle exceeded $2.6 billion in 2015, compared with $2.56 billion for the No. 2 vendor SAP, as shown in the following exhibit.
Exhibit 1: Top Four Cloud Applications Vendors And Their 2015 Cloud Apps Revenues
|Vendor||2015 Cloud Applications Revenues||After Recent Acquisitions||2015 Cloud Applications Revenues|
|Salesforce||5171||Salesforce + Demandware||5271|
|Microsoft||2455||Microsoft + LinkedIn||2959|
Source: Apps Run The World, September 2016
So far Oracle has spent more than $17 billion on these Cloud apps acquisitions. By comparison, Oracle paid $7.4 billion for Sun Microsystems in order to become a major hardware vendor.
Oracle Cloud Numbers
In October 2015, Oracle reported signing nearly 4,000 Cloud applications customers during its fiscal 2015, resulting in a total installed base of about 16,000. Since that time, the total now approaches 21,000. That has driven its Cloud revenues to $1.8 billion in 2015 and more than $3 billion after backstreaming NetSuite revenues by the end of 2016.
|Oracle Revenues, $M: Type/Year||2011||2012||2013||2014||2015||YoY Growth, %|
|Total Revenues, $M||35622||37121||37180||38841||37159||-4.33%|
|Enterprise Applications Revenues, $M||8648||9012||9026||9430||9671||2.56%|
|Cloud Applications Revenues, $M||255||455||910||1244||1837.5||47.71%|
Source: Apps Run The World, September 2016
Over the past two years Oracle has also stepped up the hiring of thousands of salespeople – many of whom fresh out of college – to sell Cloud apps globally. Hired first as business development consultants, they received few months of training before becoming specialized salespeople for HCM, CRM, and Middleware products.
In June 2015 Oracle said after two years of general availability its next-generation Cloud database 12c has experienced 50% faster adoptions than for the 11 version. The 12c could help drive Oracle’s Cloud business to new heights since it serves as the foundation for its Cloud applications for years to come. The development was significant because for decades Oracle has relied on its relational database primarily for on-premise implementation.
The 12c now offers a secure and high-availability database in a multitenant architecture capable of consolidating hundreds of database instances into one in a simple manner. Along with other data management tools like GoldenGate and Active Data Guard, the 12c could usher in a migration wave for a quarter million Oracle database customers triggering additional Cloud application purchases. Already more than 100 Oracle Cloud services have become widely available contributing to more than $1 billion in subscription revenues for fiscal 2014.
Finally Oracle is putting its packaging spin to ensure maxmium differentiation for its Cloud products by incorporating capabilities such as Endeca for search; Involver, Vitrue and Collective Intellect for social sales and marketing; Fatwire for site management; and Inquira for knowledge management; along with embedded security, analytics and intuitive user interface that make running Oracle in the Cloud a safe and smart investment in the long run.
Oracle buys Textura for $663 Million
In April 2016, Oracle acquired Textura, a provider of construction contracts and payment management cloud services. As of the end of 2015, Textura CPM had been used on over 25,000 projects, representing approximately $274 billion in construction value, by more than 800 owner/general contractor organizations and the more than 80,000 subcontractors that worked on those projects.
On the other hand, Oracle Primavera offers a complete suite of cloud solutions for project, cost, time and risk management. The Oracle Primavera flagship products have been completely re-architected for the Cloud, and the result is a set of cloud services that are growing rapidly as construction and engineering companies embrace digital transformation.
Together, Oracle Primavera and Textura will form the Oracle Engineering and Construction Global Business Unit offering a comprehensive cloud-based project control and execution platform that manages all phases of engineering and construction projects.
Oracle acquires Opower in $532 million deal
In May 2016, Oracle acquired Opower, a provider of customer engagement and energy efficiency cloud services to utilities. Opower’s solutions enable over 100 global utilities, such as PG&E, AEP, Xcel Energy, SMUD, Dominion, Exelon, National Grid, ENMAX Energy, Black Hills Energy, PowerStream and Collus PowerStream, Hawaii Energy, Tenaga Nasional Berhad, to deliver a modern digital customer experience.
Opower’s big data platform stores and analyzes over 600 billion meter reads from 60 million utility end customers, enabling utilities to proactively meet regulatory requirements, decrease the cost to serve, and improve customer satisfaction.
Recently Opower signed a deal with Tokyo Electric Power Company (TEPCO) that will run its software to support nearly 20 million residential customers. Earlier, it secured EnergyAustralia, one of Australia’s largest energy retailers, providing gas and electricity to approximately 2.8 million household and business customers.
The partnership with EnergyAustralia, formerly TRUenergy, will bring Opower’s customer energy engagement platform to 1.5 million homes in Victoria, New South Wales, South Australia and Queensland. Elsewhere Opower signed Mercury Energy, one of New Zealand’s largest energy retailers.
On the other hand, Oracle Utilities offers a complete suite of operational applications and cloud services for global electric, gas and water utilities that automate core operational processes and enable compliance.
Together, Oracle and Opower will provide the industry with a fully integrated cloud platform for the entire utility value chain, from meter to grid to end-customers.
Why NetSuite is coming home to Oracle in $9.3 billion acquisition
In July 2016, Oracle decided to fortify its cloud fortress with the $9.3-billion purchase of NetSuite. Oracle’s decision to acquire NetSuite underscores the growing importance of Cloud applications to its future, or the legacy of its 71-year-old co-founder for that matter. However the benefits of the $9.3-billion purchase for Oracle, NetSuite’s customers and its partners are far from clear.
With another audacious move, Oracle co-founder Larry Ellison, whose family trust owns nearly 40% of NetSuite stock, is coming full circle by turning one of his earliest bets on the Cloud into a full-time preoccupation of his company.
In many respects, Oracle’s purchase of NetSuite serves as the reminder of the impeccable vision of Larry Ellison. The man who helped popularize relational database has always been a believer of the Cloud, even though the path to Oracle’s successes in the Cloud may still be a work in progress.
The NetSuite purchase is a testament to how the Cloud has changed the mindset of legacy vendors like Oracle, which still counts maintenance fees for the bulk of its recurring revenues. The question is when and how such recurring revenues will recede or even collapse because of shifting customer preferences. Oracle’s major Cloud purchases including Eloqua, RightNow, Taleo, Textura and oPower recently, and now NetSuite are all designed to mitigate future losses of those maintenance revenues.
Oracle buys LogFire, a WMS provider to boost its SCM Cloud
In September 2016, Oracle acquired LogFire, a provider of digital fulfillment network that helps organizations of all sizes leverage the cloud to cost-effectively modernize their supply chain execution.
More than 5,000 users worldwide across leading retailers, wholesalers, third-party logistics (3PLs), manufacturers, and ecommerce companies rely on LogFire to solve critical multi-channel warehouse management and supply chain fulfillment challenges. Among its customers are: Carter’s, Costco, Schenker, UPS and many others.
LogFire, whose supply chain management applications are based on the Oracle platform, recently expanded in the Latin American market with the 2016 opening of new offices in Lima, Peru.
In May 2015, LogFire announced that more than 30 million order lines were received and shipped through the company’s cloud-based digital fulfillment network in the first quarter of 2015. LogFire grew its revenue by 60% year over year in the first quarter in 2015. This underscores the demand for cloud-based supply chain execution solutions and that global, marquee brands are ready to make the switch from on-premise solutions.
Oracle Among the Top 10 Software Vendors
Under our Taxonomy, Enterprise Applications cover 16 functional areas from analytics and BI to treasury and risk management, in addition to those designed for 21 verticals from aerospace & defense to utility.
For each of these 37 markets our global team of researchers are updating them every quarter with win/loss analysis of the latest software purchases within that specific market. All of these quarterly data can be found in our Enterprise Applications Buyer Insight Customer Database.
Based on our research, Oracle has scored well in a number of enterprise applications markets including the following:
Oracle’s BI strategy revolves around Big Data Discovery, Big Data Preparation, Big Data Cloud, and Big Data SQL, all of which are tightly coupled with its database and hardware strategies in order to optimize the entire Oracle technology stack.
Oracle’s focus has shifted from its Collaboration Suite to Documents and Sites Cloud Service and its 2014 acquisition of LiveLook has added visual collaboration for co-browsing and screen sharing.
Oracle’s WebCenter Content Management (ECM) is becoming Oracle Sites Cloud Services as part of the vendor’s growing portfolio of PaaS and SaaS offerings.
Oracle continues to post robust results with its CX Cloud, securing thousands of CX customers including 834 in its latest quarter.
Flagship eCommerce products include ATG as well as its growing set of CX apps for optimizing customer experience.
Oracle has trumpeted its EPM Cloud Service a key differentiator over other ERP vendors because of easy on-ramp, lower IT resource requirements and accelerated time to value. Oracle has over 1000 Oracle EPM customers including Racepoint Global, Western Alliance Bancorp, Moda Holding, Bukhatir Group, and Baxters.
Over 2,560 customers – with more than 500 in production – have turned to Oracle ERP Cloud in recent months including Adventist Health, Family Health, Presbyterian Medical Services, Southern New Hampshire Health, Athenahealth, Australian Finance Group, Boise State University, Evite, Irving Materials, Lumosity, and Tower Ventures.
Oracle ERP Cloud customer breakdown by region:
|Oracle ERP Cloud Customers||Count|
Source: Oracle OpenWorld 2016
In the first quarter of 2016, Oracle reported over 1,000 Core HR customers in the Cloud with 600 live. It also has thousands of Taleo customers for eRecruiting in the Cloud.
Oracle is transforming its PLM offerings – formerly from Agile – into Product Value Chain Cloud, Innovation Management Cloud and Product Development Cloud.
Oracle’s Primavera P6 expanded its reach with enhanced Facilities and Asset Lifecycle Management capabilties. The 2016 purchase of Textura for construction companies will fuel P6’s growth further.
Oracle offers eProcurement applications through its E-Business Suite, PeopleSoft Enterprise and JD Edwards Enterprise One apps.
Oracle’s SPM strategy helps extend its E-Business Suite as well as incentive compensation applications from its 2006 acquisition of Siebel.
Oracle SCM Cloud covers a range of use cases including planning, manufacturing, order management, all done without physical software implementation by its clients.
How Oracle is Performing in the vertical markets with its Industry-Specific Solutions:
- Oracle Among Top 10 Aerospace & Defense Software Vendors
- Oracle Among Top 10 Automotive Software Vendors
- Oracle Among Top 10 Banking and Financial Services Software Vendors
- Oracle Among Top 10 Communication Software Vendors
- Oracle Among Top 10 Construction and Real Estate Software Vendors
- Oracle Among Top 10 Consumer Packaged Goods Software Vendors
- Oracle Among Top 10 Distribution Software Vendors
- Oracle Among Top 10 Education Software Vendors
- Oracle Among Top 10 Government Software Vendors
- Oracle Among Top 10 Healthcare Software Vendors
- Oracle Among Top 10 Insurance Software Vendors
- Oracle Among Top 10 Leisure & Hospitality Software Vendors
- Oracle Among Top 10 Life Sciences Software Vendors
- Oracle Among Top 10 Manufacturing Software Vendors
- Oracle Among Top 10 Media Software Vendors
- Oracle Among Top 10 Non Profit Software Vendors
- Oracle Among Top 10 Oil and Gas Software Vendors
- Oracle Among Top 10 Professional Services Software Vendors
- Oracle Among Top 10 Retail Software Vendors
- Oracle Among Top 10 Transportation Software Vendors
- Oracle Among Top 10 Utility Software Vendors