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Is Oracle’s Cloud obsession damaging its foundations?

Oracle’s recent messaging is Cloud-obsessive and indifferent to its legacy customers. Our latest blog questions whether its profitable past is enough to hold up its optimistic future.

In the ERP market, it seems to be impossible to escape the Cloud. From SAP’s SaaS product S/4HANA and Amazon’s AWS, to Microsoft’s Azure Container Service and Google’s Container Engine, it feels like 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 its head in the Cloud for so long that it’s become all it can see, and all it seems to care about.

Oracle’s Cloud-first business strategy

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

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

Larry Ellison, CEO of Oracle

For reference, Oracle’s “star products” include its Autonomous Database, Fusion ERP, and Human Capital Management Cloud applications, as well as its NetSuite Cloud application suite. So Oracle is very much onboard for a Cloud-based future and dedicated to its increasing list of Cloud products.

The compromise to forging ahead is what’s left behind. As new products grow, so-called “legacy products” (older versions, the ones you are using and growing your business with) shrink.

Not that this bothers Mr Ellison. 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 number ones in the overall marketplace…and you have these other businesses that are melting away, and we just don’t care.”

Larry Ellison, CEO of Oracle

However, having its head so deep in the Cloud makes us wonder: has Oracle lost sight of its own stability?

Is Oracle undermining itself in order to grow?

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

Imagine this as Oracle building a house of cards:

  • The bottom level of cards represents the customers and revenue it has from its older products – the likes of Hyperion and Siebel – providing Oracle with the majority of its income and stability (its cash cows).
  • The top level of cards represents its latest products, like the new Cloud software which it is investing in and trying to move customers towards (its 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).

The problem in this analogy is this: Oracle is not using fresh, new cards to build the next tier of its house of cards. It’s taking cards from the bottom to place on the top!

Oracle is taking the revenues from its older products (mostly made up from support fees) which it claims to use for R&D and support, then investing this money into its Cloud products, and not its “legacy” products.

This has angered its general customer base, given that:

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

If Oracle insists on taking its legacy products’ revenues purely to build its new products, it risks damaging the on-premise side of its business entirely. An unstable strategy; undermining itself at a time when it is under increasing pressure from a very competitive market.

Oracle claims to be fighting a war, not a battle

So, is Oracle’s strategy working? Has Oracle’s riskier addition to the Cloud offerings made revolutionary changes to the market? Or is its input too little too late?

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

This hasn’t deterred the vendor, however. Oracle, rather than try and fight the existing Cloud market, has set its sights on the horizon. Its take on it is simple. Keeping on the back foot has allowed it 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 it can’t win this battle, it plans to get a head start on the next one and win the war.

In the meantime, Larry Ellison has been continuously bashing AWS. He has commented 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 Oracle’s ‘we’ll get it next time round’ mentality; if it can’t overtake Amazon just yet, it’ll settle for belittling the Cloud giant until it can get ahead.

Whether that will happen remains to be seen. Its mentality of letting legacy products die away seems definitive now; all the while its house of cards continues to wobble. Oracle can hardly keep building up if it keeps knocking away the bottom levels.

Where does this leave Oracle’s on-premise customers?

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

But, as expressed by Oracle’s CEO himself, the vendor doesn’t care. The Cloud is its priority, its driving force, and its money-maker. Anyone not joining it shall be left to “melt away.” Oracle is indifferent to the legacy customers it’s leaving aside, and the security, time, and resourcing concerns its potential customers will have to overcome, in order to move to the Cloud.

Rather like SAP and its 2025 deadline*, Oracle thinks it has left its customers with only two choices: upgrade with Oracle to its Cloud services or go unsupported 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 the Support Revolution

Oracle shifting focus onto Cloud only is yet another example of the vendor concentrating on what it means for Oracle. Not what it means for its 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 is forgetting you or forcing you onto its Cloud.

*SAP has since pushed its deadline to 2027. See here for more information.

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