At last month’s Modern Business Experience event, Oracle shed light on its latest Cloud applications strategy, while dispelling some myths and providing more context on the harsh realities of digital transformation for its customers and partners.
For starters, Oracle provided an update on its Cloud applications growth, which outpaced its overall business by a wide margin. On the surface, Oracle’s total revenues have only risen modestly over the past few years. In reality, the mission of selling Oracle ERP Cloud – its flagship product – has expanded drastically to cover more than 6,000 customers, most of whom are net new wins. In total, Oracle has secured more than 17,000 Cloud apps customers.
Our estimate – based on surveys with our Buyer Insight Master Database covering 185,000+ customers – is that by the end of its fiscal 2019, which ends in May, Oracle ERP Cloud customers could top 6,300. By comparison, it was 37 at the end of Oracle’s fiscal 2013. The 170-fold jump should dispel the myth that Oracle has been a slow-growth Cloud vendor, or one that primarily relies on acquisitions to jumpstart its Cloud momentum. In fact, the projected customer count of 6,300 Cloud ERP customers does not even take into account of thousands of NetSuite ERP customers that Oracle picked up in 2016.
Another myth that Oracle aims to demolish is the rise of emerging technologies like Artificial Intelligence, Machine Learning and other buzzwords from Blockchain to Internet of Things requires special handling or in some cases, a separate breed of vendors to deliver on the promises of digital transformation. Oracle’s position is that it would hide the complexity of delivering such ground-breaking technologies by making them available as part of its Cloud applications stack, according to Mark Hurd, CEO of Oracle.
For example, demos of the forthcoming Oracle Digital Assistant, which relies on AI and ML to automate a slew of business processes, show how filing expense reports or looking up salary information can be done autonomously in the background without requiring downloads of a separate app. In reality such emerging technologies will be embedded and bundled into Oracle ERP Cloud and Oracle HCM Cloud apps. Currently, Oracle Digital Assistant is priced at $1,000 per month covering up to 100,000 requests. What Oracle is banking on is to position its Cloud applications stack with better AI and ML support because of its integrated approach.
With hundreds of new features being added to quarterly updates of its Cloud applications, Oracle is making sure that built-in capabilities such as chatbots and machine learning algorithms are being improved continuously, according to Steven Miranda, executive vice president of Oracle Applications Product Development.
In fact, Miranda challenges the premise that Oracle is a second mover in such markets as travel and expense management and subscription management because of its ability to innovate and leapfrog first movers like SAP Concur and Zuora.
In the Cloud applications market, Oracle has grown to be a power house more than a decade since it started building a new suite of Fusion Applications from the ground up. Our research showed that Oracle has emerged as the No. 1 vendor with a 10% share in the Cloud ERP market in 2018. In 2019 the Cloud ERP market is projected to top $20 billion, up at least 18% from $17 billion last year.
In terms of winning Cloud applications customers, Oracle has also fared well against the competition in such core markets as Cloud ERP for core financials and Cloud HCM for core HR as shown in the following graphics.
What these numbers underscore is the fact all three vendors have grown spectacularly over the past seven years.
From an organic standpoint, Oracle appears to have grown the fastest. In December 2012, Oracle reported 400 SaaS customers, many of whom were those that started adopting its Fusion applications for Core ERP (Oracle ERP Cloud) and Core HR (Oracle HCM Cloud) first launched in 2010. At MBX, it announced a total of 17,000 Cloud applications customers including 6,000 for Oracle ERP Cloud and an estimated 3,000 for Oracle HCM Cloud. That results in a 2,250% spike over a seven-year period, as shown in the table below.
In the case of SAP, the vendor’s home-grown Cloud ERP applications Business ByDesign reached 700 customers in 2012. Today that figure is about 5,675, including 75 running its Cloud-based S/4 HANA. When SAP bought SuccessFactors in 2012, it picked up some 3,500 customers including an estimated 150 for Core HR. Today SuccessFactors has about 3,000 customers running Employee Central and 6,000 running its Talent Management applications. The net becomes 8,675, up 1021% from 850 seven years earlier.
Workday, on the other hand, reported 340 customers in 2012 when it went public that year. Since then, it has grown to 2,600 in January 2019, translating into a 765% increase.
Number of Cloud Apps Customers For Core Financials and Core HR
Source: Apps Run The World, March 2019
As shown in the following table, it has been a long and winding road for Oracle to build out its Cloud applications portfolio and secure tens of thousands of customers along the way.
A Brief History of Oracle Cloud Applications
|2005||Oracle lays groundwork for Fusion Applications after buying PeopleSoft|
|2010||Oracle ships Fusion Applications, its first suite of Cloud Apps|
|Buys ATG with 1,000 Cloud eCommerce customers|
|2011||Oracle Cloud Applications secures 20 customers|
|Siebel OnDemand secures 500 customers|
|2012||Buys RightNow with 2,000 Cloud customers|
|Announces 100+ Fusion Applications|
|Buys Taleo with 5,000 Cloud HCM customers|
|Oracle Cloud Applications customer count hits 400 including 100 live|
|2013||Buys Eloqua with 1000 Cloud customers|
|Buys Responsys with 500 Cloud customers|
|2014||Buys Bluekai with 300 Cloud customers|
|Oracle Cloud Apps customer count hits 3,231|
|2015||CEO Mark Hurd directs plans to hire 10,000 inside sales reps to sell Cloud apps|
|Oracle Cloud Apps customer count hits 6,596|
|2016||Oracle ERP Cloud customer count hits 2,800|
|Oracle Cloud Apps customer count hits 12,500|
|2017||Buys NetSuite with 30,000 Cloud ERP, PSA and CX customer organizations|
|Oracle ERP Cloud customer count hits 3,200|
|2018||Oracle ERP Cloud customer count hits 5,000|
|After President Thomas Kurian’s departure, four product chiefs(apps, cloud service, database and middleware) report directly to CTO Larry Ellison|
|2019||Announces 17,000 Oracle Cloud Apps customers for CX, ERP, HCM, SCM|
|Oracle ERP Cloud customer count hits 6,000|
|Oracle Cloud Apps portfolio covers 1,100+ products|
Source: Apps Run The World, March 2019
Cloud ERP Momentum
To repeat its hyper-growth performance in Cloud applications market will require Oracle to excel in a number of areas.
In the Cloud ERP market, Oracle is bolstering development efforts in user experience, artificial intelligence and industry-specific capabilities. Hillel Cooperman, who spent 10 years at Microsoft mostly recently as Design Director, is now an Oracle senior vice president leading User Experience and Design with heavy emphasis on providing contextual relationship and content across its ERP pillars, while improving enterprise search capabilities to the level of Google search.
Lyle Ekdahl, who has been running JD Edwards for a decade, is SVP in charge of asset-intensive industry applications with an eye toward bulking up Oracle’s presence in the oil and gas vertical. Ekdahl added that joint-venture management applications for oil and gas companies or those in engineering and construction will be among its new offerings.
Clive Swan, another Oracle veteran, is ensuring artificial intelligence in the form of adaptive intelligent applications with smart data and natively-built AI features like optimized payment terms and incentives for strategic business partners will be automatically generated and pervasive within its extensive applications portfolio.
Another avenue for growth is within its installed base of on-premise ERP customers. At MBX, Oracle trotted out a host of customers such as Arcadis, FedEx, Inspire(Arby’s), Orange and RBS migrating from Oracle E-Business Suite or PeopleSoft Enterprise to Oracle ERP Cloud.
Additionally, Hurd said Oracle still has 20,000 EBS customers that have yet to migrate to the Cloud, vowing that the vendor would not abandon them even if they chose to stay as on-premise users for years to come.
In HCM, Oracle is expected to automate routine tasks like vacation accruals, status of payroll deposits and continuous performance feedback, transforming these self-service options through what it calls conversational HCM by extensively using Oracle Digital Assistant.
Coupling that would be the delivery of intelligent services for career planning, approvals automation and employee fraud detection, all driven by a slew of AI and ML-based technologies, according to Chris Leone, Oracle senior vice president of HCM Development.
While Oracle has done an admirable job attracting net new customers to its Cloud ERP applications, its Cloud HCM offerings have been up against stiffer competition. According to our continuous survey of Workday customers, nearly 20% of them came from Oracle especially those from PeopleSoft. In response, Oracle has made a concerted effort to win back these customers. At MBX, Oracle has introduced a number of customers including staffing firm TrueBlue that used to run Workday HCM and now adopting Oracle HCM Cloud.
MBX speakers including William Tincup, president of RecruitingDaily.com, said the tide is beginning to turn in favor of Oracle HCM Cloud, citing increased dissatisfaction among Workday HCM customers especially those that find a lack of functionality and usability with Workday’s talent management applications for recruiting.
In Supply Chain Management, Oracle has secured about 1,000 Oracle SCM Cloud customers. However it faces the same challenge as its rivals in migrating their customers because of regulatory, compliance as well as global trade management and operational issues that prevent many companies to embrace the Cloud right away. At MBX, customers like Hormel said they often prioritize Cloud migration of their SCM systems the last because of those issues, especially when rolling out new supply chain processes in China and India. In addition to our SCM market sizing report, I would also suggest looking up what our content partner Supply Chain Matters has written on Oracle’s Cloud SCM strategy.
Our estimate is that Oracle has about 8,000 Oracle CX Cloud customers, including 3,500 that it picked up from acquisitions of Eloqua(1,000), Responsys(500), RightNow(2,000) and a string of smaller ones like Bluekai, Vitrue and Grapeshot since 2012.
SAP has about 17,500 Cloud CRM customers, many of whom are recently acquired including CallidusCloud(6,000) and Qualtrics(9,000). The newly branded C/4 HANA has about 2,500 Cloud CRM customers, including Cloud customers from its acquisitions of Hybris in 2013 and Gigya in 2017.
Salesforce, on the other hand, continues to tout over 150,000 CRM customers on its website, not too different from the 125,000 that it announced back in 2012. Our estimate is that Salesforce has deliberately understated its customer count because some of its customers are being invoiced by its strategic partners like FinancialForce, Veeva, Xactly, and others. These ISVs pay Salesforce for the use of its CRM platform while layering their own IP on top of it with solutions for professional service automation, clinical data management, and incentive compensation.
Adding another wrinkle to the Cloud CRM applications market is the entry of Amazon Web Services. In 2017 AWS unveiled its Contact Center As A Service offering Amazon Connect, which is based on the same contact center technology used by Amazon’s customer service operations for its $200-billion-plus eCommerce business. It kicked off a wave of partnerships, especially among Customer Contact Center vendors like Amdocs and eGain that aim to expand into AWS’ installed base. Now with AWS girding for a big presence in the CRM apps market on its own and through its partners, the heat is on for other CRM providers to respond.
At MBX, three out of five keynotes featured the Modern Customer Experience(MCX) logo. Rob Tarkoff, who joined Oracle in September 2018 to lead its CX offerings after leading Lithium for six years, has wasted no time to demonstrate Oracle’s ability to wrest control of the CX market from Salesforce.
First, Oracle’s recent acquisition of Datafox would enable its CX users to have real-time access to company reports on the financial health and status of their business partners, an AI-driven database that covers records on 2.8 million businesses with 7,000 new ones being added daily.
Second, the new Oracle CX Unity will add considerable contextual data, insights and relevant information to companies that aim to refine their ways to target and improve customer experiences. Both efforts are consistent with Oracle’s direction of extending its database franchise – along with Oracle Data Cloud – to help customers sharpen their focus whether they are launching an email campaign or simply do a better job serving up more personalized and dynamic content to their website or mobile visitors.
Furthermore, Oracle CX Cloud is counting on expanded partnerships with ISVs like Slack to help sales and customer service professionals improve collaboration and increase productivity with new integrations in sales and service applications.
While SAP aims to buy its way into the Cloud CX market, Oracle is challenging Salesforce, AWS and others by throwing down the gauntlet and declaring better data remains the key to better customer experience.
Not surprisingly, Oracle customers are excited. “Every channel has its own nuances. It’s difficult for us to assimilate all the information about what’s happening with consumers, measure it, and understand the ramifications of those measurements. We’re looking for Oracle to help us on that journey,” said Craig Clark, Director of NRM & Data Analytics, at Pet Supplies Plus.
The whole premise of MBX underscores Oracle’s mounting interest in aligning CX, ERP, HCM and SCM applications with the Cloud centralization and standardization efforts that are at the heart of many digital transformation initiatives under way at many of its customers.
Dutch consultancy Arcadis, for instance, standardizes on Oracle ERP Cloud, CX Cloud, HCM Cloud along with other Oracle Cloud products to deliver a single version of truth in order to drive collaboration across its 27,000 employees, while delivering better customer service and support.
When facilitating Cloud-first strategy at customers like that of Arcadis, Oracle has more than 100 developers working on REST API alone to make sure its Cloud applications are delivering fully integrated value from back office to customers on the front end.
Realities of Digital Transformation
Still, harsh realities intrude as Oracle has gone out of its way to create a three-day event dedicated to its Cloud apps, something that it has not done since 2001.
While the MBX keynotes were filled with testimonials of customers including Adventist Health, Avis, Caesars Entertainment, Hormel, Mary Kay, Motorola Solutions and others, some like Adventist have been vocal about the need to have a higher degree of customer support to ensure project success. Others like Hormel, which has embarked on a multi-year project to transform its operations to run the full stack of Oracle Cloud apps for HR, Financials and Supply Chain Management, embodies the challenges for any multinational to achieve Cloud successes in short order. The implementation of Oracle Cloud ERP for financial management at Hormel is a 21-month project.
An Oracle system integrator suggested that the recently launched Oracle Soar, which aims to compress the time of Cloud migration project to as little as five months, has vastly underestimated the complexity involved for many Oracle ERP customers to migrate to the Cloud.
Another Oracle system integrator echoed the sentiments that Oracle’s integrated value – whether it’s onpremise or Cloud – also implies that the vendor exerts firm control over what goes underneath the hood for every project. That in turn creates heavy burden on its partners to seek help from Oracle despite all the investments they have made in getting their consultants certified by Oracle. Unlike AWS and Microsoft Azure, “Oracle keeps all the code to themselves,’’ the integrator said.
In order for Oracle to scale out its Cloud applications strategy further, it faces the stark choice of either retaining control over massive customer implementations and their experiences, or allowing its partners to lead those projects.
Rondy Ng, senior vice president of Oracle ERP Cloud, said the vendor is creating a new organization to accelerate lighthouse projects with top experts in change management, configuration setup, and overall best practices for Cloud apps deployment. The new initiative is expected to complement its Cloud ERP partners, said Oracle executives.
CEO Hurd said the vendor is well-positioned to grow its Cloud apps business further after adding more than 10,000 inside salespeople including many dedicated to Cloud apps, while managing to keep churn rates low among its base of more than 17,000 Cloud apps customers.
During his earnings calls, Hurd has said repeatedly that what’s remarkable about Oracle’s extensive Cloud apps portfolio is a robust attach rate. At MBX, customers such as Caesars Entertainment, Camden Property Trust, Caesars Entertainment, Hormel, Mary Kay, HomeServices of America, Sportable Scoreboards and TrueBlue have all purchased multiple Cloud applications from Oracle across CX, ERP, HCM, SCM and other pillars. The high double-digit attach rate between Oracle ERP Cloud and Oracle HCM Cloud, for instance, will also help mitigate any unforeseen customer attrition.
As its partners begin to assume a greater role in Cloud implementations, Hurd said it’s inevitable that systems integrators now account for the bulk of its support calls. Ultimately, programs like Oracle Soar and a growing number of best practices and Cloud implementation templates from Oracle and its partners will benefit all the parties involved.
Central to Oracle’s Cloud applications strategy is its integrated value that extends from the back office to customer front-end, a point that was made abundantly clear at MBX, or for that matter the AppsWorld that the vendor created in 2001. Despite the lengthy gap between the two events, their effects were eerily familiar yet remarkably different. Having attended both events, I can vouch for the fact that Oracle seems to have picked up the integrated value messaging where it left off.
This time the question is whether Oracle’s latest revival of the integrated value messaging will resonate with the target audience, a group of customers and partners that have largely stuck with Oracle, but now have to strike the delicate balance between a complete Cloud stack and widely popular heterogeneous online services from Dropbox to Hubspot.
Back then, AppsWorld was mostly about finance, procurement and little else. This time, the proliferation of Oracle’s Cloud applications and how they come together are all geared toward optimizing enterprise software consumption with the help of next-generation user experience, machine learning backbone for advanced analytics as well as AI-driven process enablers to eliminate mundane tasks like consolidating different user IDs. For instance, Motorola Solutions has been able to achieve that by using Oracle Cloud Applications to generate a single ID in order to deliver better user experience across its 20 commerce sites.
Now with the race toward digital transformation, a multidimensional show like MBX that caters to a diverse audience responsible for CX, finance, HR and supply chain functions may well be the perfect venue for busy decision makers to cut to the chase – how to quickly transform without skipping a beat.
MBX drew more than 4,000 attendees including customers, partners, and more than 100 financial and industry analysts as well as the press. To illustrate the work involved in the making of MBX, Jeff Henley, its vice chairman and former CFO of Oracle, showed up to present an award to General Electric for achieving financial excellence in a digital transformation project done through KPMG. Multiple divisions of GE were present at MBX talking about their use of different Cloud apps from Oracle. In other words, Oracle was leaving no stones unturned in order to use MBX to crystallize the synergy of its growing portfolio of over 1,100 Cloud applications.
Hence, the decision to revive AppsWorld in the form of MBX represents an opportunity to differentiate itself especially when chief rivals like SAP, Workday and Salesforce are still being burdened with the task of folding their recent major purchases(Qualtrics, Adaptive Insights and Mulesoft, respectively) into their operations.
integrated value of Oracle Cloud Applications will be strengthened further with embedded, bundled and autonomous features that normally would be considered a point solution or add-on by its competitors. Oracle may end up taking an all-you-can-eat approach to selling a suite of Cloud apps all readily available and updated continuously, rather than charging extra for every single AI, Blockchain, IoT or ML feature that it releases quarterly.
At MBX, Oracle made clear of its positioning that these buzzwords will be packaged and sold as part of its Cloud applications stack. That itself may well be Oracle’s intrinsic value many of its customers don’t want to pass up.
“AI and machine-learning are going to be game changers for us—to make things better, cheaper, and faster,’’ said Kristy Simonette, CIO of Camden Property Trust. Added Michael Mann, VP of Transformation at Caesars Entertainment: “Getting to one, integrated Oracle platform will allow us to scale, be more flexible, and support doubling our size in five or six years.”
When I attended AppsWorld in 2001 as a speaker commenting on the rise of eCommerce with highfliers like Commerce One and i2 dominating the headlines back then, Oracle was doing little in that regard. With many of these vendors dropping like flies, Oracle has kept chugging along, now declaring thousands of customers running Oracle Cloud Applications and reaffirming another harsh reality that Darwinism is alive and well in the Cloud.