Is Oracle’s Cloud focus damaging their foundations?

Oracle house of cards damaged

Oracle’s recent messaging seems to be Cloud-obsessed and indifferent to their legacy customers; our latest blog questions whether their profitable past is enough to hold up their optimistic future?


In the ERP market, it seems to be impossible to escape the Cloud. SAP’s SaaS product S/4HANA, AWS, Azure Container Service, Google Container Engine – we’re starting to see as many Cloud software offerings and variations as there are actual clouds in the sky.

But it seems that Oracle may have had their heads in the Cloud for so long, in fact, it’s become all they can see, and all that they seem to care about.

Oracle’s Cloud-first business strategy

We have suggested that Oracle have their head in the Clouds before, but their fixation on Cloud-based products can no longer be denied. Especially given recent comments from Oracle CEO, Larry Ellison:

“We’re focused on our star products, and our star products are now driving our top line higher.”

Larry Ellison, Oracle CEO

For reference, Oracle’s ‘star products’ include their Autonomous Database, its Fusion ERP and Human Capital Management Cloud applications, and the NetSuite Cloud application suite. So, Oracle are very much on-board for a Cloud-based future and dedicated to their increasing list of Cloud products.

The compromise to forging ahead though, is what’s left behind. As new products grow, ‘legacy products’ (older versions, i.e. the ones you are using and growing your business with) shrink.

Not that Mr Ellison is in any way bothered by this. His vision is a Cloud-based one, where customers are either with him, or are somebody else’s problem:

“You have these very modern businesses…growing very rapidly, taking share, clear #1s in the overall marketplace…and you have these other businesses that are melting away, and we just don’t care.”

Larry Ellison, Oracle CEO

However, having their heads so deep in the Clouds makes us wonder: have Oracle lost sight of their own stability?

Are Oracle undermining themselves in order to grow?

Oracle may consider Cloud to be where the future market is, but most of their current revenue comes from their ‘legacy’ products. Yet, rather than supporting and developing this source of income, that same revenue is being put into developing their Cloud products and other new technologies, such as Autonomous Databases.

Imagine this as Oracle building a house of cards:

  • The bottom levels of cards represent the customers and revenue they have from their older products; the likes of Hyperion, and Siebel – software that may now be going out of support, but still providing Oracle with the majority of their income and stability (their cash cows).
  • The newer top levels of cards represent their latest products, the new Cloud software which they are investing in and trying to move customers towards (their rising stars). These products are the future of the company, and given time, should become the new stable base for another tier of cards (products) to go on top of.

The problem in this analogy is this: Oracle are not using fresh, new cards to build the next tier of their house of cards – they are taking cards from the bottom to place on the top!

Oracle are taking the revenues from their older products (mostly made up from support fees) which they claim to use for R&D and support, then investing this money into their Cloud products, and not their ‘legacy’ products.

This has angered their general customer base, given that:

  • Oracle’s high support fees are intended to provide support and innovation for the product you are paying them for
  • Oracle’s Cloud products are largely not ready for their own customer’s use-cases

If Oracle insist on taking their legacy product’s revenues, purely to build their new products, they risk damaging the on-premise side of their business entirely. An unstable strategy; undermining themselves at a time when they are under increasing pressure from an increasingly competitive market.

Oracle claim to be fighting a war, not a battle

So, is Oracle’s strategy working? Has Oracle’s riskier addition to the Cloud offerings revolutionised the market, or is their hurried input too little too late?

Gartner described Oracle throughout 2018 and 2019 as a “niche infrastructure cloud provider” – and across other reports by the likes of McAfee, the three main contenders are recognised as AWS, Azure and Google.

This hasn’t deterred them, however. Oracle, rather than try and fight the existing Cloud market, instead have set their sights on the horizon. Their take on it is this: keeping on the back foot has allowed them to learn from any lessons and mistakes of the first-generation providers. As the Cloud eventually develops and expands into the second generation, Oracle will be in a better position. If they can’t win this battle, they plan to get a head start on the next one and win the whole war.

In the meantime, Larry Ellison has been continuously bashing AWS – for example, commenting that no ‘normal person’ would move to AWS. In fact, Ellison has a habit during keynote speeches of criticising AWS, rather than prioritising discussions around emphasising Oracle products.

This fits into their “we’ll get it next time round” mentality; if they can’t overtake Amazon just yet, they’ll settle for belittling them at every opportunity until they can get ahead.

Whether that will happen remains to be seen. Their mentality of letting legacy products die away seems definitive now; all the while their house of cards continues to wobble. Oracle can hardly keep building up, if the bottom levels keep being knocked away.

Where does this leave Oracle’s on-prem product customers?

Unsupported, and in need of an expensive upgrade if they want to get Oracle’s support back again. If your software is out of maintenance, Oracle will not provide active support for any system issues.

But, as expressed by the Oracle CEO himself, Oracle don’t care. The Cloud is their priority, their driving force, their money-maker; and anyone not joining them shall be left to “melt away”. Oracle are indifferent to the legacy customers they’re leaving aside; and the security, time & resourcing concerns their potential customers will have to overcome, in order to move to the Cloud.

Rather like SAP and their 2025 deadline, Oracle think they’ve left their customers with only two choices: upgrade with them to their Cloud services or be left without support on legacy products.

However…

We’re seeing Oracle and SAP push their customers onto the Cloud more and more, even though for most organisations, this isn’t a viable option. We’re pleased to offer customers an alternative and let them take back control of their support; ignoring the vendor’s upgrade demands and exploring how to get the most out of their current software – including migrating to the Cloud

Mark Smith, CEO of Support Revolution

Join our Support Revolution

Oracle shifting focus onto Cloud-only is yet another example of them concentrating on what it means for them. Not what it means for their customers. You should never feel pressured or bullied into making a decision which may negatively impact your organisation.

That’s why we’ve written a report on available support choices, so you can make a change. And not just because Oracle are forgetting you or forcing you onto their Cloud.